Hopes Alive in Change Management

Through our strategy workshops we try to unite people in action (build social capital).  We are able to do that, but we find it difficult to sustain the initiatives undertaken as part of the program (especially the customer visits and new market identification). People have

a tendency to relapse into their individualistic approach to jobs, and they remain operations focused than business focused.  We are very much aware that a poorly led change initiative can inflict disorder on a business unit or the entire company. Sluggish initiatives can breed sarcasm and damage the top management’s and our credibility, and can jeopardize future change initiatives. We are very concerned in preventing change failures. 

Failed initiatives have happened in some of our facilitation midway. As we are a research based consulting, we delved deep into the issues related to initiatives and improved our delivery systems to overcome the inertia of change. In the process of analyzing the cause for change-initiative failures, we also recognized that the business leader’s courage matters most in making the change successful.  There is no substitute for this ingredient, and we have to depend on the leadership level of the client company. Places where we have strong leadership at the top, our strategy facilitation is smoother.   Resilience, patience and trying out until the goal is reached, are the three attributes we expect or want from the top team to implement changes in business strategy.  We are constantly working on developing and nurturing these characteristics in our client’s team.  Even a small breakthrough in change management can give tremendous outcomes.  . We recognize that  leading initiatives is not easy,  but we have identified a few effective principles, that change initiatives stand to  survive the most common vulnerabilities. That is emerging as our strength. 

Contributed by Sasikanth R Prabhu, Marg Atreya

Profit and Profitability

Many incidences we have faced in our strategy workshops, where we have to explain the difference between profit and profitability. Yogesh Jain of Niche Quality Systems Pvt Ltd, who is partnering for the DNA development service in Indore region has witnessed most of the confrontations related to profitability.

The question, what is the aim of doing business? Elicits an immediate and instinctive answer… ‘to make profits’ from most of our workshop participants.  Anything other than profit seems to be unthinkable for both business owners and managers.  This is the point where we struggle most to make the key players of the business think beyond profit.  One aspect that we push them to go beyond profit is ‘profitability’.

When we say that ‘profitability is healthier measure of business than profit’ is not welcome by most of the business owners, partially because they do not understand the difference between these two and due to the sentimental attachment they have towards the term ‘profit’.  

Why this strong sentiment?  We feel …….because everyone in the company pays attention to profits. Most of the key business teams have a revenue / budget / profit plan, each department / functional head owns an important element of that plan and progress is watched closely by them in the review meetings.  All managers work strenuously to meet these targets. Yet, even if each manager meets the budget targets, the company seems to be a lot less profitable.   

I remember sitting in a review meeting of a distribution company several years ago. The business owner of the company sat at the head of the table and looked at the four to five managers sitting on both sides of the table. Each manager, in turns began..’ here are my numbers’……. After presentation, they had discussions on implications of the numbers presented and finally all adjusted their numbers and a consensus was reached. This was the half yearly plan.   

In the following quarter the Sales manager grew the top line and met his quota. An additional sale came from new customers who ordered frequently in small amounts. The gross margin on these orders did not cover the distribution cost. Other customer ordered products that were out of stock locally and had to be couriered from other regions.

Two things were noticed in this situation. First both the Sales manager and the Logistic manager were on target; the sales manager grew revenues and the Logistics manager met his target because his budget was based on an average cost that allowed these inefficiencies with a hope on future business. Even though these managers met their numbers they failed in managing the profitability.

Second, these uncommon sales and orders could have been made much more profitable through some very simple business oriented twists, which would have benefited the customers as well as the company. These twists require only a business acumen and execution - not extra financial capital. Our strategy workshop highlights this point to a large extent.

As a discipline, we need to see Profit and Money as two different things. It is certainly possible for a firm to make a huge profit and have no money. It is equally possible that company is flush with funds but is suffering from losses.  What happens when an organization shows a profit?  There will be a line of people standing in a queue waiting for a share of profit.  Some organizations get into trouble because they don’t make profit. And others get into trouble because they make profit.

But successful businesses stand on two pillars. One: the ability to generate profit. Two: the ability to manage cash flow. Managing cash flow is very much related profitability. But this is missing in most of the companies… profitability is unseen and unmanaged!

 Contributed by Sasikanth Prabhu

Why do customers stop doing business with a firm / company?

Often the business owners / managers feel that the customer’s primary criteria to stop buying a product or hiring a service are its price. Again and again, the experience and research studies indicate that a customer abandons a product, service or a company not because of the price; it is because their needs are not met and also their needs are dealt with indifferently.

A decade back one McKinsey Quarterly reported the reasons industrial companies (B2B), lose their customers. According to their study the reasons customer s leave in a B2B situation are ….

Indifference to the customer’s need - 68%

Product dissatisfaction – 14%

Price – 9%

Development of new relationships elsewhere – 5%

Relocation – 3%

Death of a Key individual – 1%

In a B2C situation too this pattern seems to be followed.

Yesterday, my friend reported an experience at a factory outlet of branded shirts / men’s apparels. Many popular and premium brands of shirts and men’s apparel are available here at a discount price. A young man and women, of about same age say around 21 years, came at a time when the show roo is scheduled to be closed. As soon as they came in, one of the floor representative told them it is about to be closed and it is not possible to buy anything today. The boy said he is about to attend an interview next day and need some formals. Now the floor manager stepped in and confirmed that the shop will be closed at exactly at the scheduled time and they do not have time for searching for the product and do the billing formalities. The customer boy humbly requested again to allow them to choose an apparel. Now the shopkeepers got really irritated and waived him to go off. The boy then asked from where else he will get the apparel in the vicinity. They frowned and said bluntly they do not know.

The young pair walked out disappointed from this ornately merchandised, adequately human resources, optimally promoted shop. What is the use of investing so much and not being able to treat a prospective customer with care?

If this happened to you, will you visit such a shop again?

Mostly, this is how customers are lost.

contributed by Sasikanth Prabhu

Offering service and creating an experience

Is offering service and creating experience to a customer same?

It is very difficult to articulate the difference. It is very difficult to convince a scholastic person and to explain to a business owner the difference between these two.

Mostly, the B school erudition treats the service and experience offering as same. The B school scholars may prove it with their entire intellectual bulk that experience is all service and experience is created by service.

Yet there is difference in subtle way. The difference is felt in our hearts and I am struggling to find ways to explain it.

Once the difference is felt by the business owners and if the focus is shifted from just service orientation to experience orientation, the structure of business and organisation will qualitatively and quantitatively change.

contributed by: sasikanth prabhu

Business Definition

We have been using the question “What is your business” in our strategy workshops. We have been feeling that this is a very important question to be answered before we make strategy. But many times we have experienced that our clients wish to hurry to look for ways to improve their current operations than spend some time reflecting on this question and answering it genuinely. We feel in our heart that this is an important question to be answered before we renew the strategy. When clients show hurriedness in looking for ways to generate profits, we mercilessly try to bring them back to this question and do not allow taking forward our interaction to other business issues. Of course, our client seemingly feels irritated and sometimes we doubt ourselves having obsessed with this question.

But we feel now consoled when we read the breakthrough article by Theodore Levitt “Marketing Myopia” (1960). The main theme of this article was the question we ask our clients. The question introduced by Theodore Levitt was ‘What business are you really in?’. He says in the article those who define their business incorrectly are bound to stagnate in the market until they correct it. Also he suggests in the article a shift from product orientation to customer orientation will determine the winning position.

We feel encouraged that we belong to the school of this great thought leader. The importance of our question”what is your business?” is strengthened in our scheme.

What customer service means?

In most of the organisations, there is now a customer care department. It is a good news that all have begun to recognise the importance of customer service. But bad news is that many do not yet implemented the true customer care.

For many employees working in these organisation, customer care is mostly handling complaints or following a rigid set of processes. The customer care element is lost the moment a seperate department is created for caring the customer, other departments may feel that customer care is not their responsibility. Instead customer care must be a enterprise wide policy.

What I feel every organisation must simply do is.......

• ....... before beginning action always find out what the customer wants
• ...... always respond to the customer cordially irrespective of the customer issue
• ....... as quickly as possible provide answers to the querries and problems (not to complaints alone)
• ....... make it easy for the customer to do business with
• ....... give personalised service wherever possible
• ....... be honest, responsible and reliable with the customer
• ....... put an effort to deliver more than what is promised

Making a commitment to customer service is a company wide initiative. It begins with the top leadership. Top level executives must not only verbalise the customer care policies but lso must build systems and resources to carry out customer care.

In the long run the company that keeps the customer satisfied has the greatest chance of survival.

What is a product?

When we look around, a myriad of products are seen. For instance, sitting in your bedroom you can list dozens of products present there, such as pen, desk,book,table lamp, fan, bed, cot,mirror etc. Just think! Why we call these as products? This is an important question that demands answer from each and every business organization in the world and this question must be answered sincerely.

The term product is used by all to communicate and it connotes to all more or less the same way. Usually the term 'product' is used as a generic term to describe what is being marketed or sold - whether it is a good, service, idea, person or a place. Another definition goes thus - a product is set of tangible and intangible attributes including, packaging, color, price, quantity, brand , reputation of the company etc. But these ideas of product does not help an organization to position its business. I order to create a stable and durable position in the market, the businessperson should clearly and esoterically understand what is a product.

Let us now therefore take an example: a particular kind of shrub is growing all over road side. Now the question is , "Is this shrub a product?". Most people will say 'no' because it is freely available and no one would want it. But one day someone imagined it as a drawing room decorette. Soon the shrub is places in the corner of the room with an artistic touch. Many visitors of the house appreciated the plant and its arrangement.

Let us consider this example and ask ourselves, at what point the shrub changed its character from a useless thing to a decorative item?. It is when the idea was introduced and given a perceivable form. Thus the product is idea in a form. In this example the product is: the arrangement of shrub in a decorative manner.

But a product is not simply an idea in a form. You may have picked the shrub from the road side and arranged in a decorative manner, but nobody expressed interest / desire for it even after it is exhibited. Until somebody says they want it, the thing does not become a product. This means that there must be a demand / value for the idea in form before it can be said to be a product and this demand / value is provided by the customer. If any products are sold to the customer without any inherent demand / value, then it is no less than hoodwinking. Through demand / value, a link of interchange is established between business-as-product and its environment-as-customer.

The recognition of the product as an idea in a form with a demand/value is very valuable to a business organization. Giving form to ideas that has value in the market should be the central and dominating activity of a dynamic business organization. A business devoted to the identification of central ideas, formulation of strategies for moving swiftly from ideas to operations i.e. giving form will differ qualitatively in structure and in activity from a business primarily concerned with management of money and other resources. The former is dynamic, adapting and enduring while the latter is static, rigid and monotonous. This esoteric definition of product will have transformation effect in restructuring the business.

(This is an article by Sasikanth Prabhu in 'Passline' January 1999)

Simplicity gets results

A couple of months back I saw a small trader in the Ernakulam market place (kochi - India), who has started a new business there. He was so excited that he was able to acquire a breathing space in this part of the city to run a business. He feels elated that he has about 40 sq.ft at his disposal. A casual glance at his kiosk made me feel that his merchandise is not matching with the excitement he has. All sort of things are there. Children's toys, hangers, strings, torches, mosquito bats, battery, etc. In one glance I could view at least 20 items. The items are displayed in nauseatingly cluttered way.I just asked him how is the business? He said it is OK. On further interview it was found that he is not able to 'break even'. He was of the belief that one has to keep all the items a customer asks. It may be good to keep all the items under one roof, but the trader has only about 40 sq.ft.

When a walk-in customer come to the kiosk and asks for a particular product, often it seems that the item demanded by the customer is not available or that the available product does not suit the customer's choice. At the departure of the unsatisfied customer, the trader immediately updates his stock as per the required of the flown customer. Thus day by day the inventory increased but the sale dwindled. I felt sad at the plight of the trader and entered into a conversation with trader and suggested to specialize in one or two products / product clusters because of the paucity of space and also the confusion it creates in the minds of the customer. The trader seem to have got some flashes as result of this coversation and consoled me he will do the needful.

Last week when I saw him at his kiosk, he has somehow liquidated his earlier inventory and right now has lesser number of products. I again asked him how the business is? he said the sale is less but some customers are doing repeat buys from the kiosk. He looks very optimistic about his business. Now the kiosk looks more tidy. And intuitively one could understand that this shop sells perfumes and related products. There is a range of perfumery products available in the kiosk. It has a welcome look now.

Mark Gottfredson and Steve Schaubert in their book "The breakthrough imperative" asserts simplicity as the one of the fundamental laws of business. This is beacuse human beings can't effectively focus on more than three or four things at once. The simplicity attribute must pervade the whole business; be it product issues, organisational issues or process issues. An organisation with too many products and options drives up costs and confuses its customers. Similarly, an organization with too many layers of management will probably be unable to take quick action, even when the need for action is obvious.

Great business persons always keep it simple.

All businesses inherently are simple and straight forward. Complexities arises when we deviate from our business or when we are ignorant of it. When there is joy, ease and lightness in what we do, we are minding our business. The moment we lose any one of these, take it that we are away from our business.The prospective customer must be able to do business with your organization as simple as possible. If it is not, the chances are that even the most loyal customer might one day leave you. Hence it is important to make the business dealings as simple as possible and as cheerful as possible.
Simplicity gets better results than complexity.

Driving simplicity in the organization:

• Study the customers' needs in detail

• Find three things the customer really cares about and do something about it intensely

• Develop products and services that would solve the needs of the customer

• Set no more than three to five critical imperatives for your organization, and communicate them so that everybody in the organization can remember, recite, and buy into what the company is trying to accomplish.

• Adapt your organizational structure, decision-making responsibilities, and critical business processes to ensure clarity, speed, and efficiency in meeting customer needs better than anybody else

Here is a site that tells more about simplicity in action http://rpc.blogrolling.com/redirect.php?r=16496b548dee948366e5c33591d13962&url=http://simplicityitk.blogspot.com

contributed by : Sasikanth Prabhu