Business musings

It is an inevitable and unavoidable truth that we will all, at one time or another, fail.

Individually. Collectively. Personally. Organisationally.

But the less obvious truth is that failure can lead to success.

To err is human

I missed more than 9,000 shots in my career. I’ve lost almost 300 games. 26 times I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.

Believe it or not, these are the words of Michael Jordan, arguably basketball’s “greatest of all time.” His accomplishments include “two gold medals, six finals MVP awards, five league MVP awards, three All-Star MVP awards, ten scoring titles, Defensive Player of the Year and an induction to the Hall of Fame in 2009.”

Before creating the revolutionary vacuum cleaner we know and love today, Sir James Dyson invested 15 years, nearly his entire savings, and built 5,127 prototypes before he got it right.  In his words that means, “There were 5,126 failures.”

Scott Sandage (author and associate professor of history at Carnegie Mellon University) says:

To paraphrase the anthopologist Marshall Sahlins, academics can be certain of two things: someday we’ll be dead and eventually we’ll all be proven wrong. (Sahlins’ tip for a successful career: make sure the first precedes the second.)

Of entrepreneurship, Charlie Gilkey says:

You’ll make too little and sweat it. You’ll make too much and blow it. You’ll say Yes and kick yourself for it. You’ll say No and spend the rest of the year remembering the ‘wrong’ forks you took.

And the good news is…?

All of these people have experienced failure. They’ve admitted failure. And they’ve known success.

While failure is uncomfortable, difficult, embarrassing and, at times, devastating, it can also be a catalyst for learning, change and reward.

In some cases, failure is essential for achievement and inherent to attaining a goal.

Alberto Alessi, winner of the Design Award for Lifetime Achievement and third generation head of the iconic Italian design firm, told Fast Company:

I have to remind my brothers how vital it is to have one, possibly two fiascoes per year. Should Alessi go for two or three years without a fiasco, we will be in danger of losing our leadership in design.

Walking the winding road to success

Much as we like to think of the journey to success as being like a Roman road, straight and unswerving, in reality it almost always involves roundabouts, u-turns, blind alleys, detours and hairpin bends.

I love the below cartoon (attributed to Demetri Martin, This is a book) and, having become an online meme over the last couple of years, it would seem that it has resonated with others also.

Following such a winding path does however require persistence, tenacity, determination and resilience—it is not easy to keep going in the face of multiple setbacks. Honesty, transparency, maturity and humility are also all needed.

Yet, numerous authors have observed that it is these very traits that can be the source of reward.

For more than 100 years, psychologists and scholars have shown that perseverance seems to be inherent to success over and above either talent or intelligence. Honesty and transparency can also result in the development of credibility and trust.

Avoiding the anti-failure bias

Accepting and admitting failure requires us to confront our fears. It also involves risk—risk of rejection, risk of misunderstanding and risk of consequences. Perhaps this is why we naturally shy away from failure and seek to avoid it whenever possible. Rita McGrath (a professor at Columbia Business School) has coined this tendency the “anti-failure bias.”

But, as we have already seen, failure does not always have the negative impact we so fear. In fact, McGrath points out that an avoidance of failure can itself have unintended and negative consequences. Ironically, failure can be caused and exacerbated by a blinkered desire for success.

We therefore need to create a culture in which it is acceptable to fail, both individually and organisationally. A culture that encourages experimentation and learning. A culture in which individuals and organisations are encouraged to admit their failures and move beyond them.

Many designers and developers have already learned this lesson and agile methodologies encourage their users to: “Fail early, fail fast, fail often.” In essence, this involves rapidly prototyping ideas to test their strengths and weaknesses, discover their failure points, and unearth future improvements. Rather than investing vast amounts of time and money into a fatally flawed project, such an approach ensures that “every failure is a step on the path to success.”

A big, fat BUT…

In writing this article, I do not wish to portray the idea that all failure is good. Circumstances in which failure has resulted in crippling and catastrophic consequences are within all too easy reach: the Fukushima Daiichi nuclear disaster; the global financial crisis; or the Deepwater Horizon oil spill, to name but a few. In both these disasters and within our own circles, there will be people “for whom failure is a crushing reality, not an inspiring lesson.”

Failure is never without a cost. In a working paper on life after business failure, the authors identify entrepreneurial failure as having three primary costs: “financial, social and psychological.” In some cases, it is possible to moderate and recover from these; at other times, the costs can prove debilitating.

Tellingly, the authors also observe that struggling ventures that delay cessation have variously been referred to as “‘permanently failing’…’unproductive’…’chronic failures’.. and ‘the living dead’”. It seems safe to assume that none of these are desirable states.

Whilst the journey to success is undoubtedly a winding road, ploughing ahead in the face of warning signals at every juncture is surely a fool’s errand. Failure is nuanced and we need to understand this.

Jamer Hunt, writing on Fast Co.Design, suggests that “we need a failure spectrum.” I believe this is a brilliant idea and it is one that I intend to explore further in a later post.

In the meantime, it is enough to say that we need to be able to identify when failure is (or at least can be) productive; when it is a sign that something is wrong and we should quit; and when preventative measures should be taken to avoid it.

Breeding success—a failure how to

All in all, this therefore begs the crucial question: How? How do we affirm failure correctly and effectively? How do we encourage perseverance and daring? How do we embrace failure and turn it into success?

That, my dear readers, is something for another day…

And for those of you who like the research…

Hunt, J. (2011). Among six types of failure, only a few help you innovate. Fast Co.Design

McGrath, R.G. (1999). Falling forward: real options reasoning and entrepreneurial failure. Academy of Management Review, 24(1): 13-30.

Salter, C. (2007). Failure doesn’t suck. Fast Company

Sandage, S.A. (2012). Get back in the saddle. Times Higher Education

Ucbasaran, D., Shepherd, D., Lockett, A. & Lyon, J. (2012). Life after business failure: the process and consequences of business failure for entrepreneurs. CSME Working Paper.

Wylie, I. (2007). Failure is glorious. Fast Company

Acknowledgements…

Special thanks must go to Scott Sandage whose article inspired this discovery into failure and from whose writing the title of this article was borrowed.

It might sound somewhat geeky but I love software! By software I mean the programmes that sit on our computers, mobile devices and in the cloud that have been designed to make our devices useful and our lives easier. We live in an age in which there is unprecedented access to high quality software, both at home and in business. Software is a growing, thriving market, with low barriers to entry, and the fact that investors are willing to back software is only increasing the availability of great solutions.

For me, I love comparing and choosing software, using it, getting to know it and learning about the efforts and ideas that developers have put into their baby. I love the power that software has to transform an action, a process or even an entire organisation.

The trouble is that choosing and using software can be a bit of a Marmite process—especially in a business environment. You’ll either love it or hate it. Software inevitably transforms your life one way or another—for good or for bad! Generally, the more core a software solution is to key business processes, the more this is true. Choose and commit to the wrong software solution and you can bring a business to its knees very quickly. I’ve seen this happen a number of times to unsuspecting organisations and it’s not pretty!

Think of selecting software as a little like marriage—it’s easy to commit but hard to get out of. When you achieve the perfect match, life couldn’t be better. But get it wrong and separation tends to be a painful, messy process.

So what are the rules of software commitment that minimise the risk of marrying in haste and repenting at leisure?

1. Understand yourself and what you are looking for

If you don’t understand yourself, your organisation, and how you work, you won’t be able to decide what you’re really looking for and whether there is a good fit or not. Most people have some sort of list for ‘My ideal partner is…’, based on their own understanding of themselves and what they feel would work in a relationship. Choosing software is not much different. Although ideal partner lists aren’t always 100% correct and you may later discover that certain assumptions were wrong, developing an ideal software list is a great start to the selection process. Before you begin to select any software, it’s vital that you first understand your business, the core processes that make your business tick, and what success looks like for you. What features can you really not live without? What are you happy to compromise on? What are the end objectives that you want to achieve? These are the criteria that will help you to find your ideal partner.

2. Work through stuff together

Looks aren’t everything, right? While aesthetics are obviously important in the attraction process, there is a strong case for the ‘It’s what’s inside that counts’ perspective to gauge how well you will get on as a couple over the long term. And the only way to really find out what’s inside is to work through important stuff together. You need to find out whether your individual approaches to life are remotely on the same page. Committing to software is much the same. It’s vital to work through real business scenarios with the software yourself and you should always insist on both a demo and trial that uses your own case studies, data, processes and tasks. Don’t just rely on standard demos and don’t let a salesperson do it all for you—they are practiced at making their software look brilliant and easy to use, even when it’s not! By working through practical scenarios and day-to-day processes, you’ll soon begin to see whether you have an attraction that goes beyond the first few clicks!

3. Dig deeper

With software, as with people, sometimes not everything is as it appears on the surface. That’s to be expected—we don’t always like sharing our weaknesses, especially when they make us vulnerable. A software sales person is even less likely to be completely open and honest with you as it’s in their best interests to make a sale. The website of a software product is also unlikely to list everything that the software can’t do. That’s why it’s up to you to ask the right questions and dig deep. Software sales can be a case of ‘truth by omission’ so it’s your responsibility to find out what they haven’t told you. Unfortunately, this courtship tends to be a bit more one-sided than is ideal but, with software selection, I’m afraid that’s the way it tends to be. Caveat emptor—let the buyer beware!

4. There is no such thing as the perfect partner

As Debbie may occasionally tell you on a bad day, there is no such thing as the perfect husband—I know, shocking right?! And likewise, there is no such thing as the perfect software. Unless you buy a bespoke solution, no software will have been designed for you personally but rather for someone a bit like you. This means that it’s highly unlikely you’ll find software with a perfect fit. You therefore need to look for best fit solutions—software that most appropriately fits your processes and that you can live with on a daily basis. Of course, each solution will have its own strengths and weaknesses but inevitably you’ll be able to live with some, whilst others are going to drive you insane! The secret is choosing the former and avoiding the latter.

5. Know where to draw the lines

Different relationships work in different ways—it may be that you’re responsible for the admin and your partner looks after the garden. Maybe you co-parent your kids. Wherever the responsibilities lie in a relationship, it’s always an idea to play to your strengths. If both of you suck at housework or DIY, you might hire a cleaner or a handyman. Knowing where to draw the lines between software works in a similar fashion. It isn’t often that one piece of software can be all things to all people. Indeed, software that claims to do everything is, in reality, often unwieldy and mediocre at most things, whilst being excellent at few. You will therefore need to decide which software solutions will best look after which processes. You’ll also need to consider how the solutions will effectively integrate with one another without things dropping through the cracks. Making these decisions often requires a bit of juggling as you work out what fits where and the boundaries will, on occasion, require reworking and renegotiation. But, as with any successful relationship, that’s all part of the fun!

6. Don’t think you can change them

Starting any relationship with the aim of changing your partner into something they are not is a dangerous plan and one that’s doomed to failure. The fact is, people don’t change easily. Evolve? Yes. Change? No. Established software is similar in its inability to accommodate significant changes. The sales people or developers may promise change but in reality it’s not that simple. Software tends to be built around a fundamental concept, philosophy and envisaged use scenario, so promising change is the equivalent of an architect promising to create a mansion out of a bungalow. Yes, it’s technically possible but only if you knock it down and start again. In most cases, you might as well have bought a mansion in the first place! As a rule of thumb, tweaks are fine but you should be very sceptical of promises for deep changes to core functionality. Such changes are usually risky, expensive, create more problems than they solve, and are often no more effective than putting lipstick on a pig! Software as a service (SAAS) solutions tend to be even more inflexible. By its very nature, SAAS offers a one size fits all solution—the entire business model hinges on solutions for the masses. Whether software as a service or boxed software, whatever you do, don’t commit to it based on a vague promise of added functionality sometime in the future.

7. Ask the children

I’m not for one moment suggesting that your staff are your children or that you should treat them as such! However, much like parental decisions not only affect the adults but also influence the children, you need to realise that a software partnership isn’t just between you and the software provider—others within your organisation are going to have to live with your decision day in, day out. Get your colleagues involved at an early stage. Involve them in developing the statement of requirements, invite them to meetings, and ask them to test the software themselves. Be conscious of those people who will be most impacted by your decision—they will usually be the ones who get shouted at if they can’t do their job properly due to poor software and they won’t thank you for a poor choice! Where possible, make a business-wide decision as to which solution to commit to. Remember, unlike children, your colleagues can walk out if you get it really wrong. Businesses have lost good staff through poor software selection and implementation because dealing with bad software on a daily basis made their jobs nigh impossible.

8. It’s not just about the wedding

Long-term marital success is as much about life after the wedding as it is about your partner selection and promises of commitment. You need to give each other time to settle in and adjust. Make time for one another, continue to talk, resolve differences, and put one another first. In a successful software partnership, continued commitment following the initial selection process is vital. Surprisingly, choosing your software is actually the easy bit of the process. Without a full and proper implementation, you could in fact create a failed project even if you have selected the right partner. In rolling out the software you should be aware that staff will need training; an effective transition from the old way of working to the new will need to be made; and there are likely to be teething issues that will need to be resolved. Longer term, adjustments will need to be made to ensure that the software continues to evolve with you. Of course, you can’t do this on your own. Both you and the software provider need to remain completely committed for the long haul, even—or should I say, especially?!—after the initial honeymoon period is over.

9. Trust is important

Trust is important for any relationship and especially for one in which there is a long-term commitment. Without trust, a relationship can be at best difficult and at worst impossible. Likewise with software, the concept of trust is critical. You need to trust the software’s security, its resilience, your backup of the data, the service level agreement (SLA), and the fact that the future road map of the software is going where you need it to. After all, you are entrusting your business to this software. Not only that but you need to remember that you are not just choosing the software itself but also the people and the organisation behind it. You will be reliant upon the competence of the team who develop and build it; the responsiveness and helpfulness of those people who answer your urgent support requests; and the wisdom of the owners and managers who determine the long-term direction and success of the business. Can you trust them to do good by your organisation? Do they really understand your needs? Are they consistent and congruent in their relationships? Are they people you’ll enjoy working with well into the future? By doing your due diligence upfront, you’ll reduce the risk of being disappointed and heartbroken later on.

10. Money matters

Research suggests that money is one of the topics most argued over in a committed relationship. Differing expectations and differing priorities have to be worked through, compromises made, and a shared understanding developed if money isn’t going to become an issue that gets in the way of a relationship. If this kind of understanding can’t be reached it begins to suggest the partners might indeed be incompatible. Likewise with a software partnership, financial priorities and budgeting can be an issue. Knowing how much to spend on software is not always obvious, especially when price is not directly correlated to quality or even value. In reality, you can only ever really make a comparative decision between differing software options, balancing the complex mix of functionality, best fit, price, licensing model, consultancy and training fees, ease of implementation and upgradability. In the end, you’ll need to choose the solution that you feel provides the best return on investment. It may be that you have a natural tendency to spend very little or to spend a lot. At the end of the day, it’s not about your personal spending preferences but about the business case, the range of software options available to you and, ultimately, what will be best for your business—even if it takes you out of your comfort zone.

Enjoy the process

Hopefully I haven’t scared you off either marriage or software selection after all that! As I said at the beginning, I love software and, as Debbie will testify, I get particularly absorbed during a software selection project largely due to the fact that I’m having so much fun! I’m also an advocate of healthy and happy marriages—after all, I found not only my wife but also my business partner too.

Whilst some businesses are happy to approach software selection with little more thought than a drunken and impromptu wedding to a stranger in Vagas, only to wake up the next day regretting the fact that they didn’t put a bit more thought into choosing a more suitable partner, there are some who are wiser and heed the call to approach software selection as you would a serious courtship. Hopefully, you, dear reader, fall into the latter category!

Also, do remember that, much like marriage, you need to go into software selection knowing that you’ll always have a lot to learn. So be willing and able to get stuck in. Grow. Make mistakes. And, most of all, enjoy the process! Sometimes, even if you follow all the rules and do absolutely everything right, it won’t always work out, but at least you’ll be able to look yourself in the mirror and say, “I gave it my best shot.” And, after that, you will pick yourself up and start over again.

Much of the time, instigating change within a business is about new initiatives and new improvement projects. However, what starts as rapid and exciting organisational change can lose steam over time, slowing performance improvement down to a crawl.

In cases like these, the tendency can be to attempt to overcome resistance by redoubling efforts, increasing the number of improvement initiatives and hoping that, with enough management sponsorship, progress can be maintained.

In reality, once an organisation has reached a certain point on its improvement journey, the more you implement, the harder it can be to hold the gain—let alone achieve true transformation. When you get to this stage, adding more is no longer an effective solution.

What about a different approach? In order to catalyse change, why not take away rather than add?

What you choose to subtract will depend on the transformation you want to achieve, your specific business and your individual situation, but here are a few examples to give you a little inspiration.

Customer service

Do you want to achieve true transformation in customer service? You’ve written the guidelines, done all the training and worked with your staff to ensure service improvement, yet you still feel you lack a certain ‘wow’ factor in the service your organisation delivers.

Time to take away

Take away the restrictions that govern how your customer service staff support customers and move to an ‘If it makes the customer happy, do it!’ approach. By taking away restrictions, you shift focus onto the customer and the relationship that your staff have with them. If this approach feels risky and dangerous, it could reveal that you don’t entirely trust your staff and it is restrictions that keep the wheels turning rather than a great culture and core values. If this is the case, it’s not surprising that you don’t have the customer service wow factor! You need staff you trust, who value your customers as much as you do, and who have the power to make a difference.

Culture change and engagement

What if you’re looking for culture change? Are your staff tired, demotivated and fed up of the rules? Maybe you’re looking for an opportunity to shake things up and transform internal staff engagement.

Time to take away

Organisations can inherently communicate resistance, stuffiness and a lack of trust—often through rules, expectations and management looking over shoulders all the time. Want to communicate trust? Let people decide their own holiday quota as long as they get the work done. Bums on seats mentality? Let people work when they want to or allow them to work from home—you could even follow Plantronics’ example and take away desks so there are not enough to accomodate every one of your staff. Want to increase productivity? Do what Best Buy did—take away the work day and move to a results only work environment. Risky? Maybe. But if your staff stop working or you don’t know what they’re up to, this reveals a more serious performance management issue that needs confronting. Removing such safeguards would certainly motivate managers to focus on engagement and collaboration too!

Sales and profitability

Are you looking to increase sales and improve profitability? Often, in our attempts to make ours the company to buy from, we default to adding to product and service ranges or adding features. This isn’t always a sure fire route to increased profits

Time to take away

Maybe your extensive product range is getting in the way of client decision making. Too many options have been proven to reduce sales rather than increase them. What about product features—are your products overwhelmed and overflowing? Halve the number of features and focus on creating a small, high quality feature set that out shines that offered by anyone else. Are you making customers jump through hoops to buy from you that, if you’re honest, are just there to make your life easier or exist only as a legacy? View the buying process through the eyes of your customer—get rid of the hoops and make it as easy and frictionless to buy from you as possible. Try out an exercise in reduction: reduce options, reduce features, remove hoops. Risky? Sure. But you’ll soon find out if complexity is making up for quality or if abundance is hiding an uncompetitive offering.

Subtraction can give you more

What you subtract from your business is very much up to you but it’s important to understand that it’s not just the addition game that can result in the magic 2 + 2 = 5. Subtraction can also reward you with 5 is the magic number!

At the end of last year, Debbie took an in depth look at the art of simplicity and the idea that less can be more, both for your customers and your bottom line.  Whilst Debbie’s article focused on simplifying product ranges and services, less can be more in performance improvement and change initiatives too. Assessing what you could take away to achieve results (rather than what you could add) gives you a completely different perspective on problem solving and can help to reduce organisational friction too.

Although removing safety nets can feel dangerous, having the faith to trust your staff and your organisation can have surprising results. It can also give you a great insight into areas that may be functioning adequately but are in reality only propped up by the safety nets that hold them in place. Dare to embrace subtraction, to catalyse change, and to achieve added value in the process.

Browsing Twitter yesterday, I happened across a tweet that intrigued me.

Following the trail, I found myself at TED watching a video of a short talk given by Eric Berlow. An ecological networks scientist, Eric approaches problems with a network or systems perspective to connect the dots amongst problems, concepts, people, projects and more.

In a highly succinct and lucid talk, Berlow demonstrates that complex doesn’t always equal complicated and shows how visualising vastly complex situations, systems and connections can actually lead to surprisingly simple answers and insights. He even distilles and crystallises an infamous Powerpoint slide that was designed to portray the complexity of American military strategy in Afghanistan and of which General Stanley A. McChrystal is said to have remarked, “When we understand that slide, we’ll have won the war!”

If you have a spare 3 minutes (the talk really is that short!), I’d really encourage you to watch the video.

For me, the stand out quotes from Berlow were…

The more you step back and embrace complexity, the better chance you have of finding simple answers. And it’s often different than the simple answer you started with.

…Simplicity often lies on the other side of complexity, so for any problem, the more you can zoom out and embrace complexity, the better chance you have of zooming in on the simple details that matter most.

You may be wondering however why I am writing about this on a blog entitled ‘Business Musings’. Well, for me, what Berlow is saying really does apply to business. Matt and I have oftentimes found that the more one steps back and embraces complexity in strategy, marketing, performance improvement and more, the clearer the situation becomes. With complexity also comes an increased likelihood that you will find an answer that delivers the outcomes you are looking for.

Chatting to Matt earlier, he cited the example of sales being a frequent focus of financial objectives and concerns. When targets aren’t being met and a business isn’t growing at the rate you hoped it would be, it’s tempting to assume that you simply need to drive more sales and for your sales people to work harder. Their targets have been set, they must achieve them!

However, this can be a simplistic and naive outlook. In reality, although a failure to reach sales targets could be due to the underperformance of your sales people, there are a whole host of other factors that might be influencing this outcome. It may be that your target market is declining or your market has shifted such that your product or service no longer meets the needs of your audience; a new competitor or a substitute product/service may have appeared in your marketplace making it difficult for you to compete; your marketing may be failing to generate an adequate number of leads or to encourage trust and loyalty to your brand; your branding and positioning may have become outdated or may no longer be relevant to your market; or it could be that your sales targets are in fact inaccurate. And that is just a handful of the factors that could be involved. To paraphrase Berlow’s vocabulary, by focusing only on the sales and finance ‘nodes’ in this situation, you risk missing the fundamental root cause that is in reality your key to success.

In almost all business situations, it’s vital to examine the broader situation, to consider a host of contributing variables, and in the end to hopefully arrive at a clear, accurate and potentially simple solution. Whilst embracing complexity doesn’t necessarily guarantee either success or simplicity, I would personally take complexity over a simple but fatally flawed outlook any day.

Chances are, if you are anything like most businesses, you have a lot of paper to deal with in your office and in your job. The fact is, we rely to a large extent on paper: to communicate, to record, to remind, to sell. The promise of a paper free office remains a technological fantasy for many.

However, it is important to recognise the scalability issues of paper as a technology: paper can only be in one place at one time so it doesn’t work well across multiple sites; revision control is tricky; and it can be hard to back up – do you have duplicate copies of everything if worst came to the worst?

Even if we cannot remove paper entirely, there are things we can do to consign it to a supporting role rather than the main deal within a business.

Steps to creating a paperless office

1. Analysing your processes

The first idea to grasp is the fact that paper usually relates to a process or processes within your organisation. Understanding this will provide a solid foundation for beginning to deal with the paper as the processes themselves provide the structural foundation for creating a paperless office. By analysing the papers for clues about the activities the paper itself represents and following this paper through the system, you can outline your processes, giving you an accurate view of ‘now’.

2. Revising your processes

The next step is to revise your processes in order to maximise efficiency. This includes:

• Eliminating bottle necks and their resulting backlogs
• Removing unecessary steps within the process(es)
• Assessing crossover and interdependency of processes within the wider organisation to ensure integration
• And, overall, designing as lean a process as possible.

Value stream mapping may be a good tool to use at this stage. The people involved in each process within your organisation will also be a vital source of information and feedback as they are the people on the ground who are involved in the processes day-in, day-out.

3. Integrating paper and technology

Having created a coherent set of lean processes, the next challenge is to reduce the use of paper where possible. This can be done by assessing the processes to find out which parts of them can be automated and then developing an IT and technology solution that has your best practice processes inherently embedded into its system. In other words, the IT and technology solution reflects and is built around your processes, rather than the processes being built around the technology.

4. Sustainable continuous improvement

Once you have found a solution that works for your organisation as a whole and that maximises your efficiency and effectiveness, it is important to maintain the momentum of improvement. Ongoing assessment and revision will ensure that as your organisation grows and develops your processes continue to support the delivery of your organisation’s objectives. New technology is also continually emerging that may provide a solution to paper based systems where a solution did not previously exist. Staying abreast of these developments allows you to continually improve organisational performance and efficiency.

5. Reducing risk

Although it is not always possible to eliminate the use of paper completely, you should not be relying on paper for mission critical functions. However, neither should you be relying on technology without a business continuity plan in place. Whatever system and solution you are using, you should always make sure that fail-safes and redundancies are built into the process(es).

If you would like any advice or support in creating a paperless office for your organisation, please contact me or call me on 02476 100 193 – I would love to help!

I went to the Barclays ‘Let’s Talk More Profit’ seminar in the latter half of last year and have been meaning to post this blog for a while. Robert Craven, author and consultant, spent half a day talking to around 200-300 companies about how to increase their profits. I found it really useful and practical, so thought I’d share the key message.

There are only 5 ways you can increase your profits…
and not all of them are created equal!

Here are the only 5 ways you can increase your profits:

1. Raise your prices
2. Lower your direct costs
3. Fix the underperformers
4. Increase volume
5. Lower your overheads

And the winner is…

We looked at each of the five methods of increasing profit, and looked at how effective they each were. In reality, increasing your prices is by far the most effective way of increasing your profits.

Let me give you an example:

If you sell a widget at £100, with a cost of sale of £70, this creates £30 gross profit
However, if you reduce the price by just 10%, and sell it at £90, with the same cost of sale of £70, this only creates £20 gross profit.

Therefore, you would have to sell 50% MORE widgets just to make the same amount of profit you had been previously.

So, raising prices has the opposite effect. Sell at £110, less cost of sale £70 = £40 gross profit. A 33% increase in gross profit.

The counter argument is that, based on the supply and demand curve, you would expect to sell fewer widgets if you are charging a higher price, therefore making less money. The bit about selling fewer is true; the bit about less money depends on the demand curve. There is more profitable flex in this than you might imagine.

Say you sold 100 widgets at £100 making a total gross profit of £3000 (£30 profit on each widget x 100), then increased your prices to £110. You would now only need to sell 75 widgets to make the same profit (£40 profit on each widget x 75 =£3000), resulting in less work (and therefore overheads) for the same amount of money.

In addition, it is likely that your ‘worst’ customers are also the most price sensitive and will take up the majority of your time.

So, let me put it this way…

If you would like to work less, earn the same, and get rid of your least favourite customers… consider putting your prices up!

You can then spend the time you have saved looking for new, higher paying customers. When you have found these new customers and returned to selling 100 widgets, you will now be making £4000 profit instead (an extra £1000).

The only proviso is to be aware of demand sensitivity: if your business’ particular demand curve is very price sensitive (for example, if you were raise to prices by 10%, you would lose over 25% of your customers) you will then end up making less money, not more. That said, this sensitivity may be counteracted by upgrading your branding, customer service, or product/service differentiators to justify the price increase and thereby retain more existing customers. Raising your prices might mean raising your game, but then when has that ever been a bad thing?!

And finally, what about the other 4…?

The other 4 listed above are also very valid. Robert Craven suggests you work down in order, from 1 to 5. Implement each element and then move onto the next. By working in order, you ensure that you start with those that will have the most impact on your business’ profitability.

So, why not consider giving it a go!

The process I used to keep track of my sales pipeline used to be a bit complicated. Accurate: yes. But simple? No.

As a result, it was hard to update. The more complex something is, the more commitment it takes to use it.

So, following a conversation with my business coach (who supports my own personal development and keeps me on my toes!), I’ve radically simplified the number and type of stages in my sales pipeline. Now it is much easier to gauge my pipeline at a glance and to see gaps in the flow.

The result? I’ll use it much more.

In your business, is there anything that is more complicated than it needs to be?

Why not challenge your team and your customers to see what they think could be simplified in your business. You might be surprised at the results.

I have just finished Good to Great by Jim Collins and I wanted to record my reflections about the book. However, I am in somewhat of a dilemma. On the one hand, I really enjoyed the book and felt that many of the concepts Jim talks about are values and ideas that I recognise as important in building a great business. On the other, I have read a number of critical reviews of the book (such as that by Rob May) pulling apart both the fundamental research foundations of the book and also its findings.

On balance

Overall, I think that Good to Great provides a very useful model and framework for developing and creating a great business. Concepts such as the flywheel go some way to challenging the ‘magic bullet’ fascination within the business world. Similarly, a Level 5 leader in place of ‘Fred the Shred’ might have created a very different outcome for Royal Bank of Scotland in the last year.

Solving the impossible

At the same time, trying to unravel the complexity of the business world to create a model that enables a business to become great is a tall order! Businesses operate in too complex an environment for a ‘key to business success’ to exist. Any business book that claims to have discovered the ‘secret to success’ is deceiving itself. Although I don’t feel that Jim Collins does claim the key to success in Good to Great, the book is taking on a huge task in assessing what creates ‘greatness’ and I suppose it is not surprising if it falls a little short of the answers.

Everlasting greatness

Obviously, there are other criticisms leveled against the book regarding the companies that were chosen and their subsequent fall from grace – Fannie Mae, being the most recent. However, the book never claims that the companies chosen will continue to be great beyond the 15 years of great performance shown. Indeed, 4 of the 11 great companies used in the study were facing serious challenges to their greatness or had already lost it by the time the book was published. It is also worth noting that Jim has recently published a new book (although I haven’t yet had chance to read it), entitled ‘How the mighty fall: And why some companies never give in‘, which I imagine begins to examine some of the questions raised by the fall of great companies.

Correlation versus Causality

I think one of the key problems with many studies and books is that of causality and correlation. Causality and correlation are similar and yet entirely different. Causality is where one or more factors cause an effect; correlation is where a relationship of some kind exists between two factors but one is not necessarily the cause of the other. Yet, so often when correlation is discovered, people assume they have discovered causality. Good to Great discovers correlation, but cannot prove causality: there are too many other uncontrollable and unexaminable factors to pin down exactly what causes greatness.

Should you read it?

If you are looking for factors (or levers) within a business that can be proven beyond doubt to create success then you might as well stop reading business books!

If however, you are looking for interesting ideas that help develop you and your business, not as a magic formula but rather as concepts to play against and spark off, then Jim Collins’ Good to Great does just that. It may not hold the secrets to success but it will certainly provide you with food for thought!

Whilst not a ‘cutting edge’ idea, the concept of conversion rates is an extremely powerful one.

Your sales conversion rate (as a percentage) is basically:

([number of sales generated] / [number of interactions with potential customers]) x 100

Whether for online shops (where your sales conversion is the number of visitors who make an order) or for more traditional businesses (where the sales conversion may be the number of telephone enquiries you win business from), the general principle is the same.

I’ll show you the calculations and let you see for yourself.

Current position for this year
Number of website visitors = 500,000
Number of orders = 10,000
Conversion rate = 2%
Average spent per order = £20
Total value sold = £200,000

Increased sales – same conversion rate
Number of website visitors = 550,000 (10% increase)
Conversion rate = 2%
Number of orders = 11,000 (1000 extra orders)
Average spent per order = £20
Total value sold = £220,000 (increase in sales value of £20,000)

Same sales - increased conversion rate
Number of website visitors = 500,000
Conversion rate = 3% (increased by 1%)
Number of orders = 15,000 (5000 extra orders)
Average spent per order = £20
Total value sold = £300,000 (increase in sales value of £100,000)

For every company the figures will be somewhat different, but the concept is still the same: converting your existing potential customers is often more lucrative. The beauty of conversion is that it doesn’t have to cost you anything in trying to find new customers. They have already found you; it is now your chance to turn them into customers.

Learning is a key part of what I do.

I’m learning and developing my own skill-set all the time. I push myself to learn new skills and develop existing ones.

If I don’t grow and develop, I limit my business and limit my clients’ businesses.

Learning is a process. I put time, money and effort into that process, through which I am rewarded with increased knowledge and skill.

Yet, whenever and whatever I’m learning, I’ve noticed the same two feelings occur: excitement and frustration.

The frustration occurs during the stages in the process at which I am investing time and effort, but don’t have the immediate gratification of knowing and understanding.

The excitement comes from ‘knowing’ something new and being able to do something that I couldn’t do before. Learning is fun!

So what can we learn from this process?

1. We need to judge frustration correctly. Will the frustration break through to excitement, in which case we just need to keep pressing on? Or do we need some help or need to pursue another avenue? It is pointless pressing on if the frustration is there because we have reached a dead end, but we also shouldn’t give up too quickly.
2. If we are not getting frustrated about the learning process, then this may be telling us that we’re not being stretched enough.  Maybe we’re just coasting when we should be pushing through into a new area.
3. ‘Breakthrough’ is difficult to predict – normally it comes after, or in the middle of, frustration, but we have no way of knowing exactly when it will happen. It often feels like one of those lightbulb moments when suddenly it all makes sense.

Applying this to our businesses…

In business, we find the experience of learning in both our own personal development and also in the implementation of new projects and tasks.  How often have you felt frustrated that a project seems to be going nowhere and you just feel stuck?  Maybe you’re trying to re-write the copy for your website but you just can’t quite grasp those elusive words that say what you really want to say!  The same principles as above apply.

1. We need to judge frustration in a project correctly.  It may be that we’re on the right path, we just haven’t reached the point of breakthrough yet; in which case, we need to keep pressing on.  Alternatively, we may need some external input and support – it’s amazing what a fresh pair of eyes can see.  Or, we may have actually reached a dead end; using a business analogy, maybe the marketplace we’re competing in just isn’t the right one anymore and we need to target a new set of customers.
2. If all the projects we take on as a company or as individuals are easy and never give us any sense of breaking through, it may be that we’re coasting.  Although coasting can be great – especially if the company is making good profits and returns from something that they find relatively easy – coasting can lead to complacency and also never gives that great sense of achievement we gain from breaking through in something we’ve found quite challenging.  I can’t imagine that the truly great companies out there have ever achieved that status without stretching themselves.
3. Breakthrough is difficult to predict, so when we feel we really are on the right path, we need to press on through and not get discouraged.  Breakthrough may be just around the corner and it will be a fantastic moment of elation when we reach it.