Loving that Performance

"But, tell me, why should your leader—why should you all—spend your money and risk your lives—for it is your lives you risk, Messieurs, when you set foot in France—and all for us French men and women, who are nothing to you?"

"Sport, Madame la Comtesse, sport,"

The Scarlet Pimpernel, by Baroness Orczy

The performance improvement world now possesses some myth-busting evidence and fascinating case studies about what it takes for anyone to do something really superbly well.  I've been spending time researching this subject, and reviewing its application, and will cover it in a series of forthcoming posts.  As a pre-view, a simplified how-to-be-excellent list from this research is as follows:

1.  Challenging standards, which are constantly reviewed to be achievable but not too easy or difficult
2.  Focus only on relevant actions and outcomes that are within your control
3.  Constant feedback and measurement of performance and progress
4.  Honest diagnosis of what is and isn't working: what works best, and what to change
5. Removal of everything else that distracts, and support systems that allow you to do this
6.  Relentless continual mindful practice or application, intensively, for hours and hours and hours

As you can imagine, in order to pursue this relentless, repetitive process, you really do need to love what you're doing.  This apparently ethereal issue is what I want to cover here – let’s talk about love.

Here’s what I don’t mean by love of what you’re doing.  I don’t mean the pursuit of a lofty goal.  I don't deny there's a part of each of us that feels the need to do something worthwhile; and I’ve no doubt that rousing ideals provide genuine motivation.  But, by themselves, they don’t make us good at whatever we’re doing.  We’ve all heard the jaded inspirational anecdote about a sweeper at NASA saying he’s putting someone on the moon.  Was he a satisfied sweeper?  Was he actually any good at sweeping?  The anecdote runs out of steam on those points.  Anyway, for many of us it's pretty hard to find the ultimate external benefit in much of the work we all do, to understand how everything comes together in the multifaceted interactions of society.

When I talk about loving what you’re doing, I mean the love of doing the thing for its own sake; the total absorption in process that you see in a great cook, scientist, bike mechanic, musician, orator, or athlete.  Racking my brains, it’s hard to think of any examples of human excellence that don’t display this absorption.  Neither does it seem to be confined to celebrated, world class performers; in my world, that same absorption is a hallmark of the top performing individuals and teams with which I have the pleasure to work.

So how do you or I access this love of doing something for its own sake, which underpins all this excellence?  There's a received wisdom that stage one in becoming excellent and satisfied is to "follow your passion"; simple as that.  Taken in isolation from the reality of what your friends, customers, team mates, and family all value, I think this advice is downright dangerous and destined to end in tears most of the time; but that’s a subject for another day.  My point for today is that the world is not so linear: passion doesn’t just lead excellence, it also follows.

Even casual everyday evidence seems to show that our enjoyment and passion in doing something emerges and grows from excellence and application – the better we get at it, as long as we’re improving, the more we enjoy it.  Did Tiger love golf the first time he swung and missed with the giant plastic golf club his dad bought him before he could walk?  Did Becks immediately love curling in free kicks at the local park; or was that swerving, match-saver against Greece a bit more satisfying than the early ones?  Did Tolstoy get passionate about prose in his first one-pager about his family cat; or did his passion become a little stronger with the development of an art that produced Anna Karenina?  At a lower level, watch any celebrities-have-a-go-at-new-skill type show, and see how much they’re enjoying themselves in their first class or test, compared to the end of the series when they’ve developed a degree of mastery.

So my view is more emergent than the "start with your passion, something that stirs your loins, and watch good things follow" view of excellence.  Fair enough, it’s smart to start with something that we enjoy, which works for both us and the others we care about commercially and socially.  The key step for me is the next one: do all the things that it takes to do the thing really superbly well, and immerse ourselves in the process.  With that, we’ll see the passion grow with our growing excellence, and we’ll enjoy the sport.

Some relevant links:

A simple experiment showing that performance increases with relevant challenge, and that enjoyment increases with performance, even in the most apparently meaningless task.

http://cres.usc.edu/pubdb_html/files_upload/685.pdf

Alain de Botton talks with Russ Roberts about people’s absorption in the process of their jobs.

http://www.econtalk.org/archives/2010/09/de_botton_on_th.html

The Scarlet Pimpernel

http://www.gutenberg.org/files/60/60-h/60-h.htm

 

Copyright Latitude 2010. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

So How Do I Improve Service Then?

In my last post (here), I showed that, all else being equal, better service equals higher growth and bigger profits.  One implicit, but counter-intuitive, element of this is that improving service regularly results in lower costs.

The obvious question that comes to mind for the practical person is, “So how do I improve service then?”

The temptation is to dive straight into benchmarking, systems and process improvement, and incentives.  However, there are three steps I’d advise taking first, which will save an awful lot of work and waste down the line.

Customer Service Performance - I’ll cover it one word at a time.

1.    Customers

Your customers will not be one homogeneous group.  You’ll have different types, which have different levels of value to you, different performance requirements, and will rate your service accordingly.  One simple way to improve your service and profit performance is just to focus on your profitable, amenable customers.

To start, you need make your definition of customer groups as relevant as possible.  Sometimes the obvious splits (small/medium/large, sector, etc) are valuable.  But additional thought about how you group your customers can make the exercise much more insightful.  For example, you could segment by who the decision-maker is: purchasing professionals usually care much more about total cost at specified service levels, whereas people with operating roles care most about service support at a competitive price.

If you look at the value of the different groups (the value of their contribution over their lifetime less the cost of acquiring them – a very different and more relevant number than monthly profitability which ignores acquisition cost and loyalty), you’ll see who values you most.  Chances are that you’ll have different groups that have very different value, and in each group you’ll have a range of service performance and profitability.  You’ll have a series of undemanding high value groups.  You’ll also have some groups of very unprofitable or hard to please customers.

Your first decision comes now.  Which groups do you want to focus on?  Can you turn around the profit and service performance of the nightmare group? Should you – is it worth it?  If you drop a group, does the cost of serving the rest go up or down? Many of our clients have turned around their entire service and profit performance by making some hard-headed decisions at this stage, ditching certain customer groups that were just too hard to acquire and serve profitably, and whose demands caused service problems across the entire edifice.

2.    Services

If you have multiple service or product lines, this is the same exercise as the one for customers above.  Again, the key insight here is to look at the value of a product or service over its lifetime including development costs, and not the regular monthly margin analysis that already appears in Board reports.

Again, you need to make some decisions on unprofitable service lines, and products that diminish your service reputation.  However, service line decisions are generally less clear cut than customer decisions.  Early stage products commonly have poor service performance and poor profitability, some apparently profitable products give you such a bad reputation that your word-of-mouth marketing is negative, so you need to think through the full strategic impact before getting out the hatchet.

3.    Performance

Now we’ve got a handle on how service level and profit differs by customer and product, and have decided who we want to serve with which services, we can now ask the more operational question of “what do we mean by performance?”, and identify customers’ most important concerns.  The key customer service concern in each of our last five engagements for clients has been completely different: active account management, short waiting times, access to technical expertise, personalised offers, and up-time reliability. 

Finding this concern is generally a matter of talking to customers and listening to what’s important to them – you ask a broad question about “service”, they will respond by talking specifically about what’s important to them.  One of our favourite ways of cross-checking this is to ask a series of customers about our client’s strengths and weaknesses, and counting up the mentions for both – the important issues for customers generally find their way to the top of both lists.

Unless you are highly-diversified, there will generally be one big thing to get right that addresses all the major concerns, and if you do this to a level of excellence, then everything else follows.  The big thing for a famous airline service turnaround was making sure the planes took off on time; the big thing for one of our tech clients was 100% server availability. 

This approach of focusing on the one big thing has an additional benefit of automatically deprioritising wasteful or unvalued activity, which is the flip-side of the same service improvement coin.

If you can find time to take these three steps before diving into operational improvements, then you save yourself a mountain of unnecessary work down the line.  To give you an idea of how valuable it can be, I’ll relate the experience of a client of ours.  After the customer assessment, they decided to drop a previous focus on very large customers whose size, complexity and purchasing structure made those customers expensive to acquire, expensive to serve, and very disloyal.  They dropped a product line whose gross profit looked very attractive, but whose customer acquisition cost made it value-destroying, and whose performance was damaging the company’s reputation.  They then focused their service performance turnaround on the key issue of account management, which enabled them to more effectively address other customer concerns about accessing technical expertise and designing bespoke solutions.  In one year, they have doubled total profit and are currently the industry’s service and profit leader.

With these high-level decisions made, the other steps of process improvement, systems support, incentives and devolved decision-making responsibility are much simpler and well-targeted.  I’ll save those for a future post.



Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

Does better service really lead to bigger profits?

There's some strong received wisdom that better service is somehow financially a good thing. But the piecemeal data around that supports this view is unconvincing, it is often put together by vested interests, such as consultancies that charge fees to help improve customer service, or by idealists who just want it to be true.  It's easy to point to high service companies that generate outstanding results.  But this is a biased and self-selecting exercise, because the opposite is also true - there are lots of inconvenient examples that show low service companies making outstanding returns.  Would you say that Ryanair has better service than BA?  No? So how come it makes more money then?  Service clearly isn't the be-all-and-end-all.  Companies have different business models, different customer bases, different competitors, regulatory environments, sources of economic rent, etc, etc, all of which also affect their financial performance.

To get anywhere on this, we've got to start by comparing like with like.  Here (below) is the most unpolluted evidence I've seen.  This company rents out white vans, and does this through a series of local rental companies.  They're of similar sizes, they all do the same thing, for very similar customers, with the same fleet, and the same rate cards.  But if you look at the performance of the different rental companies, you see two striking things.  First, the ones with better service have better growth rates.  Makes sense.

Here's the more interesting chart.  The ones with better service also have better profitability.

So the ones providing better service, providing more value to their customers, at the same price as the poor service providers, are the ones that also make more money.  And in case you’re wondering about causality – when the worst performer addressed its service problems to climb up the chart, its costs went down as growth went up.

We can speculate all day about the reasons.  Here are a few common explanations:

• Word-of-mouth marketing: happy customers recommend you for free, and reduce your sales or marketing costs.
• Better customer retention: there's good evidence that better service leads to higher loyalty (repurchase) - Lexus is commonly perceived to be the highest service car provider in the US and has repurchase rates of 63% versus 30-40% for most other brands.  
• It could be that it's easier to serve these same regular repeat customers at lower cost: think about how efficient it is at your local coffee shop when you get to the front of the queue, you have the exact money ready, and they have your regular drink ready. 
• Higher service companies may be the ones that sell to better customers: who'd disagree that more agreeable, cooperative, organised customers make better service a lot easier.

I could carry on speculating about underlying reasons, but that’s an intellectual exercise.  What matters here is that, all else being equal, with better service you make more money.

Instead of speculating about why service increases profits, it’s more useful to accept the link and ask: how do we improve service?

It's tempting to look for a process answer here, following visions of efficient, flawless, repeatable mechanisms.  I’m not saying process improvement doesn’t help, but the highest service companies in our charts were also the most informal, with rule-bending and exceptions happening all the time, and none of these had ever been through a process improvement exercise.
 
For an answer I can relate to, I'll bow to the wisdom of the most credible person I've heard talk about this subject, an impressive man called David Neeleman.  He was the founder of JetBlue Airways, which at the time I heard him speak was the lowest cost and the highest-rated service airline in the US for the second year running.  Even in the year of its infamous ice storm crisis where passengers were stuck on planes for up to 8 hours, it still came top in national service surveys.

Mr Neeleman's explanation of JetBlue's excellence was all about service attitude at the top and the bottom.  At the top, his own practice as CEO was to take one trip per week on a JetBlue flight, in which he served as cabin crew during the flight, helped with the bags at the airport, and was an obvious and visible role model of the importance of service.  At the bottom, JetBlue's recruiting practice was focused on hiring courteous people who also cared about service.  Candidate's attitudes to other people were observed closely:  did they hold the door open for other people; were they pleasant to the receptionist?  JetBlue also uses measures in the middle, using Bain's highly-regarded Net Promoter Score system; and Bain has shown excellent evidence of NPS benefits, though Mr Neeleman didn't talk about this at all.

So, recruit a team that cares about service, supported by a leader who continually reiterates its importance and acts as a role model for service excellence, then let that group of people work out how to take it from there.  This is clearly only the tip of the iceberg on service improvement, and I'll expand on it with evidence from some our clients’ successes on another day.

But I want to get back to my main point.  Using the best evidence I know about service, it warms my heart that everyone wins - value begets value – and that better service does lead to better rewards.

Relevant links:

About David Neeleman
http://en.wikipedia.org/wiki/David_Neeleman

About Net Promoter Score
http://www.netpromoter.com/netpromoter_community/index.jspa

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

Six Common Mistakes People Make When Analysing Markets

Market analysis is a difficult science.  So it's not surprising that most attempts that we review contain mistakes and gaps that put the whole analysis, and its consequences for the business, into question.  Even worse, it's our view that the strategy gurus who propose and push high level market analysis models inadvertently cause many more problems than they solve, and are probably the single biggest group of culprits causing shoddy market assessment.

Here are six common mistakes. 

1. The analyst looks only at a macro level

It's important to look at markets at a high level, at growth, trends, competitive environment, etc, and the macro view is what the text books prescribe.  But looking only at this level misses what for us is the most frequent area of critical insight: what customers and potential customers value and pay for now; and what they are going to value and pay for in the future.  There is one place that the revenue and profit pool of a market is going to come from, and that is customers' spend, budgeted or unbudgeted.  There is one source of revenue and profit for each individual supplier to that market, and that is winning some or all of that spend.

Unless you're a cartel, monopoly or lobby group, then you're in the business of providing value for value.  You need to know what results customers need to achieve, how they propose to achieve them, how they decide who will support them in doing so, and the value they place on that support.

The clue to where the customer places most value? Where they intend to spend money.  This is either unidentified and consists of a price they are willing to pay to solve a problem; or is identified in the form of next year's budget.

This micro analysis has got enormously more business value than the macro-level equivalent of quantifying emergent (unbudgeted) and established (budgeted) markets.  What would you rather know, the macro overview that the market has grown by 4% with a trend to cloud computing, or that your target customers are under pressure to reduce infrastructure support costs by an average $15m and will pay 70% of the savings to reliable outsourced suppliers with reputations for service responsiveness? 

2. Where micro analysis is done, it is done cursorily, uncommercially, or just plain badly

Talking to customers about their plans, desired results, budgeted spend and supplier requirements is a golden opportunity to understand some critical facts: where customers place future value, the corresponding source and size of a pool of profit for you, and how to win that business.

Unfortunately, most analysts miss this golden opportunity by delegating the exercise to market researchers or untrained, poorly-briefed graduates.  These people are briefed to ask mindless, well-trodden questions about likes and dislikes, strengths and weaknesses; or they get interviewees to rank elements of the value proposition in terms of importance and performance. If you ever listen in to one of these interviews, you'd be shocked by its tedium and superficiality.  The consequent information is sometimes useful.  But it's only useful if it supplements some much more important and tangible information: which elements of the budget are growing or shrinking and by how much; who the budget holder is and how they make buying decisions; what causes people to stay with or switch from incumbent suppliers; what characteristics suppliers need to have in the future to win business; how the supplier can help them make or save more money.

Asking questions like these takes skill and commercial acumen, but their answers are worth more to you than every market research report you could ever commission. 

3. The analyst doesn't take enough care to define his market

"What market am I analysing?" is a much more important and difficult question than it looks at first sight.  Let's take an imaginary organic pet food manufacturer, based in Wales.  Does my market include every potential customer of pet food, even though my product costs three times as much as the non-organic market leader?  Or is it organic pet food, which is defined by the product and some kind of customer sentiment?  Or is it premium pet food, defined by some kind of price and quality level?  Do we include or ignore the supermarket customers that we will never access because we're too small to be stocked by the big chains? How much of the UK do we count as our market? Do we include continental Europe?  If so, how much of it?  Do we include dry food, even though we only do wet? Etc, etc.

The reason I've banged on with this definition example is that every definition I suggested gives you a completely different market, with different size, growth, trends, competitive set, etc.  And the definition you use for one circumstance, say understanding how your core customer group is growing, will likely be different for another equally valuable circumstance, such as how big could demand be if you cut prices by 30%.

The damaging temptation is always to ignore these factors and define the market according to what data is available, which gives you a substantiated quantification of a (probably) irrelevant market.  In our experience, you are almost always better off taking care to define your market to be as relevant as possible to your situation, and accepting that will need to use bottom-up assumptions to estimate the market size, structure and growth. 

4. The analysis obsesses about the competitive environment, to the exclusion of all else

Michael Porter's five forces are a very useful checklist, core competence/strategic intent is a useful mindset, the disciplines of market leaders and the 7S framework can help create insight.  I'll keep my thoughts about The Art of War to myself.  These common strategic tools can have value - competitive intensity is usually the most dominant driver of margins - but they're not the whole toolbox.  They usually only cover the competitive side of the picture and miss such fundamental issues as whether demand is shrinking or growing, what customers actually value and plan to pay for, and what your company actually, distinctively offers.

This obsession with macro competitive postioning distracts the analyst or manager from both the demand side, and from the micro analysis that solves the germane issue: what you actually need to do to make more money.

5. The analysis places far too much confidence in forecasts

Most analyses that we see use a single forecast for the future; no scenarios, no what-ifs, no ranges.  Even worse, that forecast is usually a projection of the recent past with little thought to what might drive any changes, or what the leading indicators are, or anything that might tell us what confidence we have in our estimates.

There is one thing that we can be sure about with all of our forecasts, and that is that they will be wrong.  If we took a moment to analyse the success of our historical attempts at forecasting individual markets, we would all be humbled by our enormous margin of error.  As humans, we regularly and grossly overestimate our ability to predict the future.  If our business relies on such forecasting performance, with no margin for the likely large error, then there is a high probability that it will be seriously compromised.

It's therefore wise to be realistic about our ability to forecast and act accordingly.  We have to accept that we cannot predict the future, we can only prepare for it.  So there is much more value in acknowledging our lack of prescience, and developing a series of scenarios.  Of course we need budgets and targets, but the discpline of working through how we can survive the disaster scenario, or how we can generate sufficient capacity in the optimistic case is of more tangible value than complacently forecasting and hoping that we're right.

6. There is a disconnect between market analysis and sales forecasts

I've lost track of the number of plans I've seen where the market grows at one rate, and the business grows at a completely different rate, almost always faster than the market.  There's rarely any justification for this implied share gain.  It's possible if the company has just entered a market, or if its product is suddenly better, or if it has a new channel, or if it has something else new and advantageous, or if its competitors have decided to lie down and let it win some of their pitches.  Our default position is to assume no share gain unless there's a very good reason to assume otherwise.  Anything else generates cognitive dissonance in our rational analytical minds.


So there you have it.  Six common mistakes, any one of which can cause a market analysis to be unhelpful, devalued or just plain misleading.  We see many, many more mistakes, but the list is too long to cover in this forum.

I hope by raising them that we have averted some problems and implied some solutions.  I don't have a catch-all unbreakable golden rule for analysing markets effectively.  But my best one is this: business transactions are about providing value and being rewarded for doing so, so to understand the market you need to look for where that value is, and follow the money.


Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

Why Let Facts Spoil the Narrative?

I've just finished reading a very shakey due diligence report, in which one of the key questions to review was the impact of the recession on the company under investigation.  The report author covered the beneficial effects of recession on services (comparable to those of the target company) that people mainly use in their own homes.  The report talked about increases in satellite and cable TV subscriptions, growth in Dominos deliveries, and the trend to "staycations", and implied that, as a result, everything would be OK.

A question kept coming to my mind as I ploughed through this nonsense.  This question was: "But the recession has been happening for about a year - why don't they just look at what's been happening to the company?".  The analyst could have looked at sales, customer churn, average customer value, new sign-ups.  And they could have looked at them before, during, and after recession (now we're coming out of it for a short while).  They could have compared the company's performance to changes in disposable income, or employment, or interest rates, or consumer confidence.  They could have just looked at whether they rose or fell.  The data was available and staring them in the face; but they didn't look at any of the vast array of facts at their disposal, and instead indulged in this staycation narrative.  I'll let you guess whether the facts confirmed, contradicted, or made irrelevant, the report's conclusions .

I kept asking myself why any sane analyst would display such disregard for information.  After some reflection on examples of similar behaviour, here's my conclusion: given the choice between some compelling facts and a compelling narrative, people will often prefer the narrative.  From everyday observation, there are legion examples of people ignoring or skimming over facts that might get in the way of a good story.

This preference can be, literally, fatal; and if you'll indulge a longer-than-usual post, I'll illustrate it with a historical example.

A nineteenth century physician called Ignaz Semmelweis analysed the high incidence of childbirth mortality of Puerperal fever at one of the wards of Vienna General Hospital.  He noticed that Puerperal fever was high in wards where the same doctors also conducted post-mortems, and showed that if doctors washed their hands with chlorine solution after working with cadavers, then Puerperal fever incidence declined dramatically.

His data is hard to challenge:

Unfortunately, Semmelweis's facts didn't fit the narrative of the day.  Prevailing theories of health related to the balance of the four humours of the body, and the role of "bad air" in the spread of disease.  In fact, his implication, that lack of cleanliness in the surgeon was a cause of the disease spreading, was considered insulting to the gentlemen who administered medicine and surgery.

Semmelwies was roundly criticised, and his observation and recommendations were dismissed by the mainstream, despite their obvious life-saving results.  It was only after Pasteur's work into germ theory became accepted 20 years later that the establishment embraced the findings of, the by then dead, Semmelweis.

So coming back to my point.  There will always be an accepted or acceptable narrative to explain anything, be that the four humours of nineteenth century medicine, or the various dubious adspeak marketing theories we hear today.  We can pretty much guarantee that by blindly following the narrative, we will be proven as gullible, closed-minded and wrong as those olden-day physicians.  Alternatively, we can ignore the narrative for a moment, and just have a quick  look at the facts...

Copyright Latitude 2009. All rights reserved.


Related links.

On Ignaz Semmelweis
http://en.wikipedia.org/wiki/Ignaz_Semmelweis#Ideas_ran_contrary_to_established_medical_opinion

On truth, bias and disagreement
http://www.econtalk.org/archives/2009/03/klein_on_truth.html



Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

So-What (SWOT) Analysis

One thing that makes my palms sweat when reviewing a business plan or strategy document is a SWOT analysis.  Reading one of those two-by-two tables makes me think that my generally very smart, commercial, rational clients, have decided to illustrate what they learned at primary school, or have accidentally inserted a no-idea-is-stupid whiteboard printout from the start of a brainstorming session.

I'm not saying that SWOT doesn't have its place at the beginning of the strategy development process; it does, especially if you start with the "O".

O, for opportunity, forces you to take a moment to look around and speculate where the future pools of profit might be, which is especially useful for bringing out those areas that you're currently not doing anything about.

S(trengths) helps you realise where your sources of competitive advantage might lie.

W(eaknesses) forces you to be realistic about what may need improving, and traits that might put you at a disadvantage.

T(hreats) forces you to look at those things coming over the horizon that might sink you below the water line.

This forced lookaround for factors that may be important is, in my experience, the entire benefit of SWOT.  But it's only of value if you go on to test properly which ones are true and material.  Unfortunately, most plans that I see stop with the SWOT output, and bung the list unqualified into the document.  This is worse than useless; it's foolhardy, because it can set in train a series of actions that are based on barely-substantiated speculation.

From the long list of strengths, weaknesses, opportunities and threats that emerge in the SWOT analysis, how do you know which are actually true as opposed to speculation? Which are material and will affect the entire future of your business, and which are pretty much irrelevant?  Which ones should you deliberately not do something about, for example the weakness in high-end products that would kill your cost advantage if you addressed it?  How do you know which opportunities are the ones to put time and money into, and which are the ones to deprioritise?

If you recognise SWOT's limitations, and treat it as a start point, from which you do some testing with facts, then you can create something valuable from this motley list of brainstormed hypotheses.

Start with the opportunities and ask some standard commercial questions.  How big are they? How well positioned are we to exploit them versus everyone else?  How much does it cost to start exploiting each of them?  How sustainable is the profit stream that comes from each?  Which of them is the most valuable use of a dollar of investment or an hour of management time?  If the business case of any one of them stacks up, what do we do next to get there?

Do the same kind of reality check and so-what test with the strengths, weaknesses and threats.  And you will end up with a short list of credible opportunities and actions, which I promise will pay back the additional time a hundred-fold.

You'll also have fewer business plan readers with sweaty palms asking "so what?".


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

You Can't Take Vision to the Bank

She sat, watching him in the manner of a scientist: assuming nothing, discarding emotion, seeking only to observe and to understand.

A description of Dagny Taggart, “Atlas Shrugged”, by Ayn Rand

Earlier this year I worked with two companies that couldn’t be more different.

Company one is one of the most respected names in the FTSE, and operates in a classic recession-proof sector.  Company two is an unknown business in an unfashionable declining sub-segment of the telecoms sector.

Company one’s management team is smart and sharp, and would be intimidating if they weren’t such pleasant people.  The Directors have a cadre of direct reports who, to my initial and ongoing bemusement, make sure that everything that reaches the Directors is high level, conceptual and visual.  When working with us, one tried to insist that our presentations contained less data and more pictures – pictures for God’s sake!  But, the thing is, these people weren’t acting dysfunctionally – in every meeting with us, the company Directors dwelt and debated on the concepts and vision, and seemed to skip very quickly over all of our data and analysis.

Company two’s management team is one of the most uninspirational I’ve ever met.  The top two Directors could pass as the two main characters in Peep Show.  But these guys love their numbers.  Every question we asked them in our work with them was answered with numbers, supported by a flood of analysis.  The business is managed using a set of KPIs that would have a quantitative analyst in paroxysms of delight.  Everything is tested, everything is monitored.

Company one has had flat sales in a growing market, and so seen its share decline pretty much continually for the last ten years.  But it now has a striking vision of industry leadership for the future, which might work.  You never know.

Company two has grown revenue and profit more than 20% annually in the time since the management team came on board.  This isn’t from harvesting – new services launched in the last three years now make up about 25% of profit.   Company two’s vision – I’m quoting exactly here – “we’ll try a bunch of things and see what the numbers tell us”.

I think I’ve made my point.  Vision can be appealing, numbers count.

Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk