It’s just business

When customers come to visit us I am always interested to know why they choose our venue over theirs. Usually they just want to get out of the office and today is Friday after all. Today’s visitors were here for an altogether different reason. They wanted to see how “real” we were.

You can tell a lot by being in someone’s office. You see how busy they are, how they interact with team members, bosses, employees. You get an impression of how they organize themselves and what their organizational status is relative to others. And we learn all of this, as Malcolm Gladwell pointed out, in a the “Blink” of an eye.

During our 3 hour meeting a very interesting topic came up. We were discussing our corporate philosophy of “never let a customer fail”, which was handed down to us from a former CEO Michael Capellas, and we were describing how we view our customers as business partners. As an organization we strive to develop an intimate relationship with our customers and learn, in detail, about their business operations so we can better support them with our products and services over a long period of time. We do this because customers are hard to get and easy to lose; but most of all because, in our business model, 80% of the revenue we get comes in the years after the initial sale.

Our visitors thanked us for trying to be better business partners but asked us not to try too hard!

Their practice, they told us, is to engage with vendors in short 1, 2 or 3 years bursts. They do this because their own corporate strategy changes dramatically and regularly and any period of time over a couple of years is utterly unpredictable. Any products and services they may be using today may no longer be relevant 1, 2 or 3 years down the line.

They also know that their suppliers’ strategies will evolve over time and may not necessarily meet their needs in the future. Competing solutions will come along that will streamline how they do business and they want to be agile enough to be able to abandon one set of technologies in favor of another. And they want to be able to do this without feeling tied to a vendor out of some misplaced sense of loyalty.

“It is”, as they put it “just business”.

Now this is a remarkable corporate philosophy. Normally we try to control our suppliers and force them to meet our prices and specifications and time-frames in exchange for long term contracts and guaranteed annual revenues. But here this client is saying, we will pay whatever you ask that is reasonable, we will exploit your technology as long as we think it suits our purpose and when it doesn’t we will pick something else.

What is in it for the client? Well it means that know something better is going to come along eventually and they run their business on the basis that when it does they will not hesitate to embrace it. They are immune to ROI (Return On Investment) calculations that extend out to 10 years because they can barely see beyond 10 months. If you want to sell something to them you better have a pretty great case for delivering value fast: out-of-the-box in fact! And they know their business competitors are likely to stick with older technologies because it is very hard to sell replacing something your implemented less than 24-months earlier. This gives them a very significant competitive advantage.

To have all of this ingrained into the corporate culture is nothing short of remarkable.

And what about the vendors? We all need to understand that if we get kicked out and replaced by the latest technology or product or service, it wasn’t anything personal. When we’re negotiating we can ask for reasonable prices for our stuff and we do not have to discount in the hope of getting the revenue back in the long term: because there will likely not be a long term. We also know that if we are the incumbent supplier for more than a couple of years our competitors are still behind us technologically: and we also know if we get replaced we need to bring our stuff up to date fast as the competitors passed us!

How would you deal with this kind of customer? Would you have the confidence to say “if I lose this customer it is because the market changed and I didn’t – and I better do something about that quick”? How many of these kinds of customers do you have today and you don’t know it?

Could you be this kind of customer? Are you able to have an emotionless relationship with the people who provide you with goods and services so that you can say to them “what you provide is what I need today and when I find something better I will move to it”? How many of your suppliers do you keep because they are personal friends, how many suppliers do you ignore because they simply compete with your friends?

If you are in business to make a living you have to choose what is right for the business, not what is right for your friends and family. Next time you choose a business partner, a customer or a supplier ask yourself “am I attached to the value they bring or the am I attached to them?”

After my visitors left today I was ready to Empower Change in my organization and liberate our own thinking about what it is to be a customer and what it is to be a supplier. I am revisiting all of the partners I work with and asking “are you doing the best for my business?” It is going to be very interesting.

August 21, 2010 at 3:03 am | Business and Technology | No comment

Working in the margin

For more than six decades now we have been using technology, specifically computer-based technology, to drive costs out of the business. Quaint hardly describes those now sepia pictures of serried hoards of clerks, stamping, signing and sorting multi-part documents in vast open-plan offices. Typewriters on every desk but phones only on the manager’s. And over the last 60 years we have slowly replaced those jobs with technology solutions and those people have moved their skills into different fields. Maybe you are one of them.

Today there is not much automation that is left to be done. Indeed most people in the computer business spend their time trying to replace the systems they put in 10 or 20 years ago  and we are even replacing systems we put in only one or two years ago. And we are doing this now because we are desperately trying to drive cost out of IT.

With the way the economy has been for the past 10 years everyone is completely focused on cost containment.

But that is not the only way to keep increasing the margins in your business. Mr. Micawber once reflected; “Annual income £20, annual expenditure £19 19s 6d, result happiness. Annual income £20, annual expenditure £20 0s 6d, result misery.” Profit is the difference between income and expenditure. We have already driven out all the significant and unnecessary expenditure we can: the pips are squeaking, there is no more juice in the lemon!

Businesses that can turn technology to their commercial advantage will be the Glaxo’s, the BP’s, the British Airways, the Sainsbury’s of the future. It used to be, in 1935, that if you made it to the Fortune list of top companies you’d be on that list for 90 years. Today companies on the list last only 15 years there on average.

Look at FaceBook, Microsoft bought by a 1.5% stake for $250mn, or Amazon, worth over $50bn, these are companies that could not exist without technology to create markets,  create products and deliver revenues.

So what does this mean for your business? Look to turn technology into a way of creating new revenue.

Maybe you can deliver your product and services to your customers through technology that gets it there faster, cheaper, safer. Do kids want to go shopping in the High Street? No, they want to surf the web, from their iPhone and get a package on their doorstep the next day. And kids have a lot of money these days.

Can technology help you understand your customers better? Help you with detecting trends, buying behavior? Can technology help you discover why customers don’t buy from you? Or why they start to buy and then stop.

Is the customer experience with your company better because of technology or worse? What can you do to make your customers become your best sales team because your technology makes them love doing business with you? What can you do to make your competitors look un-cool, out of date, not in tune with the customer?

If you have an idea for changing your business model does your technology allow you make those changes? Or does it hold back and force you to do things the old way? Can you model what effect your ideas might have if you implement them? Or do you have jump and hope?

How do you know that you are being successful? Does your technology tell you, give you feedback on how you are running your business? Does your technology monitor your competitors?

There are as many ways of turning technology into a competitive advantage as there are business people with ideas.

In this series of postings I want to explore ideas on how we start to use technology to drive sales, how we enable business owners to run their businesses proactively and how we Empower Change that increases the margins in your business.

Tell me how you turn technology into a competitive advantage.

July 9, 2010 at 11:47 pm | Business and Technology | 5 comments