Business Issues  



Building A Better Business Model - Not Mouse Trap

PRODUCTIVITY IS THE SUBJECT OF THE CONVERSATION THAT ALL IN BUSINESS NEEDS TO HAVE. FOR MANY, THE ISSUE APPEARS TO BE OVERLY-CHALLENGING AND CONFRONTING. HOPEFULLY, THE ATTACHED ARTICLE TEXT WILL BE THE CATALYST THAT WILL STIMULATE BOTH THOUGHT AND ACTION.

By Barry Urquhart

OH MY, how things have changed, and continue to change! Since August 1962, when J.C.R. Licklider of MIT, (the Massachustus Institute of Technology) first wrote a series of memos about his “Galactic Network” (which would evolve in the internet), the rate of change in technology, communications and business has accelerated. The correspondence and date-line have proven to be significant benchmarks. Changes have been effected in all manner of ways in which we live, interact and do business.

OUT-DATED BUSINESS MODELS
Sadly, many business leaders have not updated and made relevant the business models of their operations. The consequences are palpable. Bankruptcies and failures are increasing in volume and value across a broad cross–section of sectors, professions and regions. Look no further than retail pharmacies, newsagencies, fashion wholesalers and outlets, mining industry contractors, business consultancies and coaches and the taxi industry. Mining companies have not been immune to the trend. Being out-of-step and out-of-date are the initial steps of being out-of-business.

THE EVOLUTION OF RECENT CHANGE
The August, 2008 onset of the Global Financial Crisis (GFC) heralded the start of an intriguing 3-phase global change-process for commerce and government. Embarrassingly, the then Australian Labor Federal Government, and its arguably first-ever financially illiterate Federal Treasurer, declared that the nation had avoided the fallout of the crisis. They were clearly wrong. The “cash-splash” handouts from the Treasury simply delayed the inevitable. The journey has been interesting. The lessons learnt invaluable. The steps have been progressive ... as detailed below:

PHASE 1 – EFFICIENCY
Cash-flows and confidence throughout the world were quickly impacted upon with the collapse of Lehmann Brothers, in the United States of America. Profit margins were soon under pressure. Cost ratios increased as a percentage of turnover. Focus was promptly given to the call for “cost cutting”. Staff numbers were reduced. So too were inventories. The consequences quickly registered along the extended supply- chains. Within entities the ranks and tiers of management were aggressively thinned. “Lean and mean” became another common catch-call and in some instances a badge of honour. The measures of appropriate cost-containment were subjective, and often difficult to quantify. In many instances the “knives and axes” were applied too “liberally”. Cases of corporateanorexia became conspicuous. In essence, the corporate body was feeding on itself and was deteriorating, often with terminal consequences. An example: Only now are some business owners and managers negotiating new and lower rental structures for retail, wholesale and manufacturing premises.

KEY LESSON:
One should be in business to make money, not to save money! Stay focused on the appropriate, positive and longer-term outcomes.

PHASE 2 – EFFECTIVENESS
Following countless rounds of cost-cutting and crisis meetings for team members, emphasis was then given to improving effectiveness. Many business leaders were sufficiently discerning to identify that their businesses had aged, become calcified and were inflexible. Restructuring was suddenly in vogue. Silos were dismantled. Organisation charts redesigned, made flatter and more malleable. Departments were relabelled to be “tribes”, “camps” and “clusters”. Any unsettling of internal confidence and stability was countered with positive feedback of the new approach from external suppliers, associates, customers, clients and channels. Previous hierarchical rigidity was broken down. Authority and responsibility were delegated and warmly embraced by team members who had long desired the capacity to exercise control, power and choice in how they did business. In short, business was better for many, and not solely measured by financial returns. However, competitiveness, particularly on a global measure, was still found wanting in a high percentage of circumstances.

KEY LESSON:
There is always a better way. Find it.

PHASE 3 – PRODUCTIVITY
Once costs and structures had been reviewed, refined and developed attention needed to be redirected to productivity Volume and velocity can be, and are, both a cause and a consequence of competitive advantage. Moreover, they are rewards that can contribute to sustainable leadership, progress and development. Fixed costs (of doing business) are rapidly reduced in relative (to turnover) terms. Variable costs do truly evolve into being marginal costs. Profit, margins and dividends escalate into being attractive and rewarding. Businesses that have progressed to this phase are few. For some it seems to be a step-toofar. The prospects and outcomes of increased volumes and velocity are confronting, possibility challenging. Now is a good time to commence the journey.

KEY LESSON: Individually and collectively, simplifying processes, structures, policies, attitudes and work habits has a huge impact on personal, group and entity productivity.

BARRY URQUHART
of Marketing Focus is an international recognised and respected business strategist, consumer behaviour analyst and conference keynote speaker.

He is author of: “Business Imperatives” “Marketing Magic” “From Black Hole to Blue Sky”