The Fundamentals of Start-Up Business Success–Part 3

Leaders control their own destiny, the best leaders distinguish themselves when faced with adversity. Earlier this month (December 11 – The Fundamentals of Start-Up Business Success–Part 1), I established five (5) necessary qualities for building and sustaining success. These qualities are brought to life, through consistent action, starting with these 3 primary fundamentals:

1.  Ensure Alignment Through Plans: Every company’s highest ranking officer must set the tone by delivering a strategic and tactical plan to all direct reports.  Within one week each direct report must create the same for her functional responsibilities.  These plans must cascade throughout the organization and progress against established goals becomes the focal point for internal weekly meetings. The process must be guided by honesty; it is incumbent on every manager to challenge presented plans, 360 degrees.

For example, I worked with one CEO whose primary if not sole objective was to earn as large a bonus for himself as he could.  At the other end of the chain-of-command spectrum a VP reporting to me was singularly focused on getting promoted.  Of course neither openly admitted to this, which is why the former groused every year about not making enough money in his role while the latter never got that promotion.  Neither the CEO nor VP were able to constructively work with others because they defined success purely through their own personal agendas, where co-workers, supervisors and direct reports were all adversaries. Simply put, it was impossible to align the organization which kept the company from generating reasonable results years on end. Within 6 months of implementing this process, both the CEO and VP were out of their positions as they were unable to support their words with consistent deeds or actions. 
2.  Meaningful Customer Mapping and Segmentation:  You undoubtedly know the percentage of revenue your top 5 and top 10 customers represent.  How does this list compare to prior years, both the names on the list and their impact on your business?  What do you attribute any changes to?  More critically, unless you’ve previously implemented business plans and disciplined reviews you can’t honestly say if any changes are positive.  Though one can build a business by simultaneously growing customer share and market share there must be a driving strategy to manage your business against.  I’m too often called into companies when they’ve fallen into the last stage of desperation because they misread what was really happening in their business, fooling themselves that “I don’t care how we made the number as long as we made the number” is sustainable.  For example, if you expected to grow in 2012 by adding new customers but at year’s end you satisfied your revenue target strictly by growing existing customer revenues you should be concerned.

I believe the most important aspect of customer mapping is to identify the degrees and strength of mutual touch points.  How many people from your organization regularly interface with each customer and how wide and deep are your contacts in each customer’s organization?  Expecting “relationships” will prevail ignores the competitive global environment and hinging your revenue on a singular (customer) executive contact ignores the reality that C-level executives and senior managers are turning over at faster rates than ever before.

Meaningful customer mapping and segmentation does not merely protect your existing base. When I first did this exercise I discovered that my organization had deep ties to our best customers’ Accounts Payable departments.   Following through on this data, I quickly discovered that virtually every AP department in every company hated our industry because our high-volume low-dollar invoices were a pain in the neck to process.  Within a year we added over $100 million in new business by selling streamlined billing while our competitors never knew what hit them.

3.  Competition is Broadly Defined:  Whenever I ask “who is your competition?” I get the same stock answer: like-companies producing like-products for like-customers. Wrong!  Your competition is everyone selling every conceivable product in the world because in building your business what you are first competing for is mind share: engaging a prospect in conversation that may eventually create a customer.  No buying influence can make time to meet with or review materials from every company trying to sell them something. As practical people they will entertain only meetings with prospective suppliers most likely to help them meet objectives where high tech and low tech are lumped into one schedule dictated by (perceived) impact.

The typically narrow view of competition is best evidenced by the myopic sales pitch I now hear in my sleep, those droning promises to save me time and money.  A business, let alone an entire economy based solely on the promise of reducing costs cannot sustain growth.  I can assure you any prospective supplier suggesting they can help my business make money will get serious mind share and if these initial promises prove to be true that conversation will become a fast-tracked priority. 

In industries that are often dismissed as commodities I’ve had particular success positioning the company to help its customers convert a cost center into a profit center.  This is surprisingly easy to implement as long as your company manages to plans and has a firm grasp of its customer base.

Part 3 of this series features the three (3) effective steps for controlling your own destiny while others fret over fiscal cliffs and things they can’t control. Like all fundamentals, they build on one another and are dependent.  

In Part 4, I’ll put the finishing touches on necessary basics for ensuring your emerging business success.

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