Improve Your Business

When Operational Technology and Information Technology Collide

2008-12-16T16:34:00.003-05:00

What happens when business units acquire or develop new technologies that support more efficient business practices, without the involvement of IT? What may start as a good idea, and not initially seen in the domain of 'traditional' IT, may very quickly result in islands of technology with all of the characteristics of taditional IT - but owned and supported by the operational business unit.

For example, I recently helped a client in the utility industry that had developed innovative technologies that would drive tremendous value to their consumers, the industry and their own top line. However, these technologies included infrastructure, applications and networks that overlapped those systems that were in managed by the IT department. This situation had resulted in organizational silos; political tensions; and waste due to duplicated processes with a negative impact on the company bottom line.

CHALLENGES

Little integration between corporate IT and business technology strategies.
Multiple accountabilities and responsibilities around technology
Corporate IT not seen as agile enough to adapt to maturing systems that support new business technologies.
IT change request process perceived by business as too slow and bureaucratic
Potential loss of intellectual capital and tribal knowledge due to losses in personnel through retirements and natural attrition.
Lack of consistent project management discipline across technology projects.
Security responsibilities split between IT and business units. At the same time, higher risk exists to system via more access points to new wireless networks.

KEY OPERATING PRINCIPLES

We quickly determined that we needed to establish a framework which the C-suite could agree on, before any solution could be found. These key operating principles were:

Corporate CIO is responsibile for establishing a technology governance model that should standardize technology policies, practices and procedures and communicate openly and often with the business.
Corporate CIO needs to have overall oversight accountability for all technologies.
The IT organization needs to be strategically and tactically aligned with business requirements to be flexible and responsive to changing needs.
Business unit leadership needs to be accountable for support of operations-specific applications and should be closely aligned to the corporate CIO
Technology infrastructure needs to be centrally managed throughout the company to help ensure standardization.
Technology security (cyber and access) needs to be centrally managed across company.

BUSINESS IMPACT TO WAYS OF WORKING

Without going into the details of the solution for this specific client, it sufices to note that the above design framework had a real impact on the "ways of working" across the organization. Any organizational tranformation initiative would include some or all of the areas below:

On Technology Governance. Establishment of clear levels of accountability and enforcement of technology standards and policies, as well as strong relationship between corporate and business technology groups.
On Project Governance. Establishment of strong working relationship with project managers across the company, in order to standardize project methodologies and tools, as well as develop the standards for project management across the company. If possible, leverage and build on existing project management and process standards.
On Portfolio Management. Development of processes to support project and application portfolio management; assessment and implement tools to support these processes; establishment of procedures to make this work across the company.
On IT Change Request Management. Migration of the current change request processes under a single group with all associated communications and clear, simple working procedures to ensure complaince while ensuring speed of change.

RISKS TO NOT CHANGING.
If this sounds like a lot of work, here are the risks of not making any changes.

‘Islands of technology’ will make integration of newer technologies with enterprise systems difficult.
Multiple technology strategies – not aligned to business strategy - continued waste due to duplication of processes.
No single accountablity around technology standards and policies - means no technology standards and policies.
Limited visibility across company of technology projects may result in poor leverage of learnings and benefits and higher implementation costs.
Multiple views and approaches to applying cyber security policies across company hieghtens risk to systems.
Multiple views of technology across company will limit decision making at all levels of organization.

Managing IT in a downturn: Beyond cost cutting

2008-09-23T10:42:00.004-05:00

According to the McKinsey report "Managing IT in a downturn: Beyond cost cutting", there are opportunities to drive business benefits even in a slow or bad economy. The authors state that economies around the world are slowing down, and companies are looking for ways to trim spending and improve the bottom line. Although information technology often represents a small fraction of the corporate cost base, senior executives inevitably turn their attention to IT budgets for substantial contributions.

Yet in some instances, IT investments deliver more value to a company’s top and bottom lines—by creating new efficiencies and increasing revenues—than any savings gained from traditional IT cost cutting.

The "sweet spots" for IT improvements during slowdowns include:

Manage sales and pricing. Develop insights into customer segments and improve pricing discipline to increase revenues without increasing prices.

Optimize sourcing and production. Rethink supply chains and logistics to improve the scheduling of deliveries and inventory management.

Enhance support processes. Improve the management and use of field forces (such as installers and field technicians) and of customer support centers.

Optimize overhead and performance management. Sharpen awareness of risk exposure and improve decision-making and performance-management processes.

How does Green Computing help your business?

2008-05-27T07:59:00.001-05:00

Green Computing has come out of multiple programs over the past several years around protection of the environment, corporate social responsibility & sustainability. Sustainable development was defined by the Brundtland Commission as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."

Green Computing is driven by technological developments, as well as by implementation of tools and processes that make more efficient use of computers. Some of these are simply "common sense" things that we can do to reduce consumption. Reducing power consumption saves money as well as the load on our resources - is a key factor in the strategic sustainability "triple bottom line" of people, planet and profits.

As the need to capacity and processing power increases, so does the need to cool down these more powerful processors – and increasing consumption of energy. Major initiatives are underway to address this issue, and over the next few years we will see newer cooling technologies being introduced that will reduce our reliance on noisy and power hungry fans on PCs. The Economist recently ran an interesting article how this issue can impact us closer to home.

These and other technological advances are fundamentally changing the way we use computers so that Green Computing becomes a reality – supporting sustainable development. HP has a range of energy efficient solutions built around their ProLiant Servers, while Dell have developed programs and policies around energy efficient computing. Intel too have multiple initiatives underway around Green Computing – from specific targets to reduce CO2 emissions with energy efficient processors to building lead-free and halogen-free devices. Sun Microsystems have created solutions around their Sun Eco Innovations around the ‘greening’ or data centers.

Applications that are run over the web as services (Software-as-a-Service or SaaS) also contribute to Green Computing, if they are built to support the following key principles:

Provision of centralized processing and shared services. This reduces the need to infrastructure on the client side, and thus less decentralized processing power.
Building of green SaaS data centers. Centralized data centers mean that the innovative technologies, processes and policies can be effectively applied.
Greening of the software development process. Using ‘lean’ coding processes like Agile Software Development, means simpler coding processes, faster delivery and fewer energy consuming processor calls.

Here are some of the many blogs where you can find more information about how Green Computing is supporting sustainability efforts around the world.

Applying LEAN to ERP System Implementations

2008-03-08T21:05:00.000-05:00

"The speed of the boss is the speed of the team" - Lee Iacocca

LEAN methods have been applied to software development. LEAN methods, or Agile methods use development iterations during software develoment. These methods minimize risk by developing software in short pieces over short periods. These short development project pieces, or iterations allow for logical pieces of functionality to be developed; the bugs to be ironed out; and for project priorities to be re-evaluated.

How do we apply LEAN to ERP system implementations? Traditionally, a 'waterfall' approach is used on ERP projects. This means that you would design the solution first; and then configure the ERP software; and then test it. Using this traditional approach, project teams would have spent a lot of money and time before finding issues that may have required going back to changing the solution design, or system configuration.

But LEAN CAN be used to make ERP system implemenations more effective. This is how:

Spend time up front in getting requirements correct to avoid waste due to developing functionality that is not needed or defects.
Break down Design concepts by critical business subprocesses or functional areas that can be tested and validated against business requirements.
Plan iterative Design / Build / Test activities around these functional sub-system designs.
Creating Learning Cycles around the Build and Test activities. This will reduce training effort and better utilize people's time.
Align business processes around ERP system functionality – maximize asset usage; avoid having to customize the system more than you need.
Avoid complex project plans. Use a milestone plan to drive achievement of project objectives. Use of Work Packages to breakdown work activities, if more detail is needed at that level. These Work Packages should be build around the iteration cycles that will lead to rapid deployment of the system.
Rapid deployment – design, build, test and review pieces of the solution. This requires user involvement during design, testing and review – knowledge transfer reduces training effort of traditional methodologies.
Document of design and review decisions – capture knowledge

LEAN in system implementation has two basic components:

a quick, interactive process to achieve flow in the development process, and
a knowledge capture process to improve quality, reuse, and repeatability of information developed in the interactive cycles

Relationship Selling - "Going for the Green"

2008-01-13T00:37:00.004-05:00

"Going for the Green: Selling in the 21st Century" is a "how-to-book" written in the form of a novel about golf. So, it can be read as this - a story of a single mother who, suddenly about to lose her job through no fault of her own, discovers a new world of unrealized opportunity.

Or, you can read this book as a learning tool about how to use your relationships within your organization and with your clients and vendors, to succeed in selling your products or services.

The author, Doug Peterson, uses golf analogies to keep the reader engaged in the process of learning how to deal with challenges in making sales numbers. He asks the questions, and educates the reader through the storyline, about the process of Relationship Selling.

The book includes some practical advice, which includes:

"Studying the Links". What do you need to know about your customer?
"Playing out of the Rough". Once you have gathered useful information about the client, how do you analyze and process that information to be successful?
"Changing your Game". Are you product-focused, or customer-focused?
"Course Management". How do you develop a relationship strategy in order to build an effective plan?
"Grip it and Rip it". Can you sell your solution within your own organization?
"The Approach Shot". How do you 'win' the opportunity?
"On the Green". How to manage the new strategy?

The book concludes with advice on getting "In the Cup" and "Turning Pro".

A good, and easy read - whether you enjoy golf stories, or want to learn more about Relationship Selling.

Building a Business Case for an Improvement Project

2007-11-23T10:33:00.001-05:00

“Write your injuries in dust, your benefits in marble.” Benjamin Franklin.

How many times do we go into projects without defining the measure of success? That is what we do when we do not think through the cost and benefits of any investment in an improvement project. How can we measure how we haev achieved our improvement goals, if we do not have these quanitified in terms of the time and expense we put into building the improvements?

Building a business case does not have to be an exact science, and is simpler that many think. However, it does take effort, and requires buy-in from the project sponsor or the person who is signing the check.

Building the Business Case for a project is most commonly done using Excel. You want to estimate the costs & benefits over time with all of the assumptions that you will need to make, so that you can define the key project metrics that will help you decide whether to go on with the project or not. Below I have listed the elements of this business case: the costs and benefits over time, and the metrics.

Types of Costs

One time costs to implement solution. Eg. project time & expense costs, hardware and software purcahses, etc.

Recuring costs. Eg. depreciation, training, licensing, etc.

Types of Benefits. Below are examples of typicial quantifiable benefits of an business improvement project

Increased number of customers

Improved revenue per customer

Improved customer retention

Reduction in sales discounts

Reduction in penalties, returns & credit notes

Software portfolio consolidation

IT maintenance cost reduction

Reduction in capital costs

Labor savings (by department)

Improved cash collections

Reduced stock holdings

Faster training

Other one-time benefits (

Other monthly benefits

Business Case Metrics

Payback. Payback period refers to the period of time required for the return on the project investment to "repay" the sum of the original investment. Calculating Payback Period using Excel

Net Present Value: NPV measures the excesses of shortfalls of cash flows over time in terms of present value of the cash. Calculating NPV using Excel

Internal Rate of Return: A project is a good investment if its IRR is greater than the rate of return that could be earned by alternative investments (investing in other projects, or even putting the money in the bank). IRR will be expressed as a percentage. Calculating IRR using Excel

ERP Systems Production Support's role in Continuous Improvement

2007-09-22T09:49:00.001-05:00

"As you wander on through life, whatever may be your goal,

keep your eye upon the doughnut, and not upon the hole."

Deborah Osgood, Chief Architect and Cofounder of BUZGate.org

I recently came across a good article on ITtoolbox Blogs entitled Building a "SAP Support Model". The author, Bob White, outlines a step by step approach for building an ERP support model. This article was SAP-centric. This model also aims to support and solve the technical issues that you would find. Great if you are looking to only support your IT investment.

The question is, having made such a great investment in your system, and then this ongoing cost of supporting your application, how can you sweat this asset to drive real business benefit and continuous business improvement?

The answer lies in understanding the Continuous Business Improvement cycle for ERP systems. This cycle of

Adopting (the ERP system);
Sustaining (customizing, implementing and supporting the ERP system); and
Exploiting (driving business benefit from your ERP system)

This is what aligns technology-based business improvement to business strategy. The illustration above shows this cycle more clearly. Once the ERP system has been implemented, and is stablised with an effective support model (as the article above describes it); then it is time to make System Support a cornerstone of initiatives to drive real business benefits.

How does System Support help drive continuous improvement?

Great support data gathered from users that will point to improvement opportunities.
Issues identified by System Support are related directly to the ERP system. Any changes to address these issues will exploit the system capabilities - 'sweat the asset'.
System Support team are often well positioned between Solution Managers who understand the system capabilities; the users who identify opportunities for improvement; and the deployment teams who can make the changes happen.

___________________________________________

How can you apply this to smaller businesses? Look into the capabilities of your current applications and the needs of your users to identify opportunities to drive productivity and improvement via automation in your business. No need to reinvent the wheel. Use what you have.

Keep your eye on the doughnut around and not on the hole ...

Communication - The 5 rules of Orwell

2007-07-11T15:34:00.000-05:00

Communication is a critical part of running any business - regardless of it's size. Imagine running your business without any communication!

HOW EFFECTIVE IS THE COMMUNICATION FROM, TO AND WITHIN YOUR BUSINESS?

The fundamental answer to this question does not lie in systems, or tools, or policies. Fundamentally, communication is based on language and the style of the language used.

Even though George Orwells "Politics and the English Language" has been around since 1946, I have only come across it recently. Orwell incapsulates these fundamentals of effective communication in English in 5 Rules which I have summarised below:

Never use a metaphor, simile, or other figure of speech which you are used to seeing in print.
This sounds easy, but in practice is incredibly difficult. Phrases such as toe the line, ride roughshod over, stand shoulder to shoulder with, play into the hands of, an axe to grind, Achilles’ heel, swan song, and hotbed come to mind quickly and feel comforting and melodic.
For this exact reason they must be avoided. Common phrases have become so comfortable that they create no emotional response. Take the time to invent fresh, powerful images.

Never use a long word where a short one will do.
Long words don’t make you sound intelligent unless used skillfully. In the wrong situation they’ll have the opposite effect, making you sound pretentious and arrogant. They’re also less likely to be understood and more awkward to read.
When Hemingway was criticized by Faulkner for his limited word choice he replied:
Poor Faulkner. Does he really think big emotions come from big words? He thinks I don’t know the ten-dollar words. I know them all right. But there are older and simpler and better words, and those are the ones I use.

If it is possible to cut a word out, always cut it out.
"Great literature is simply language charged with meaning to the utmost possible degree" - Ezra Pound. Accordingly, any words that don’t contribute meaning to a passage dilute its power. Less is always better. Always.

Never use the passive where you can use the active.
This one is frequently broken, probably because many people don’t know the difference between active and passive verbs. Here is an example that makes it easy to understand:
The sales target was missed. (passive) We missed the sales target (active).

Never use a foreign phrase, a scientific word, or a jargon word if you can think of an everyday English equivalent.
This is tricky because much of the writing used in business can be highly technical. If possible, remain accessible to the average reader. If your audience is highly specialized this is a judgment call. You don’t want to drag on with unnecessary explanation, but try to help people understand what you’re writing about. You want your ideas to spread right?

Bonus Rule: Break any of these rules sooner than saying anything outright barbarous.

And if the above rules are not easy enough to follow, just remember what Einstein said:

"If you can't explain it simply, you don't understand it well enough."

Lean Training - the "ILU" Chart

2007-03-30T21:59:00.001-05:00

Much of what the Toyota Production System has taught us, has now fallen under the "Lean" umbrella. There is a ton of great material on Lean Manufacturing, Lean Projects, Lean methodologies for all types of activities. Lean Cuisine for business! Yes - Lean is big!

However, do a search for Lean as it relates to people training, and you don't find much.

Two key principles of Lean are VISIBILITY and SIMPLICITY. When you apply these to people development and training, there is nothing leaner than the ILU Chart.

This is something that I learnt a long time ago, and have applied many times. Simple to understand, simple to implement and very, very effective. To explain the ILU Chart, you have to understand the idea behind the original ILU Charts. Think of a matrix with skills along the top and people down the side. The chart below is an exmaple of what an ILU chart would look like to a Watch Repair business.

"I" (the first 'stoke' on the chart) indicates that the person has undergone training for the skill.

"L" (second 'stroke' on the chart) indicates that this person can now execute this task within the standard time so that she can work productively.

"U" (3rd stoke on the chart) indicates that this person is an expert at this task and able to train others.

In the above example, you can see that Mary has recently joined the team and is building up her skills. Kelsey seems to be the expert in the group, and is probably the team lead/ trainer.

The ILU Chart SIMPLY and VISIBLY shows where people's expertize and definiciencies lie.

How can you use the ILU Chart as a Lean tool in training / people development?

Quicker System Implementations – Quicker Benefits

2007-02-23T23:15:00.000-05:00

"If you want to get somewhere else, you must run at least twice as fast as that! " Project Management Proverbs.

Rapid Deployment and Lean Methodologies in application development are not new. These methodologies employ iterative cycles of designing, building and testing activities, to quickly validate requirements, and address development issues. In this way, defects and rework are reduced. This also gets requirements correct to avoid waste due to developing functionality that is not needed.

Even though these methodologies are not new, the execution of these methodologies in large ERP system implementations is not widespread as it should be. There could be several reasons for this. If you are a large consulting company with a big bench, it may not be in your interest to propose a shorter implementation with a smaller team!! However, I like to believe today the consulting industry is competitive enough so that businesses are smart enough to look around and get the best deal when implementing their systems.

I bigger hurdle to getting to rapid deployment with ERP projects is the planning for such a project. Rapid deployment/ lean approaches depend on breaking down the work into pieces that can be designed, built and tested in parallel. This requires a thorough understanding of business processes, business requirements, and of the ERP application – in planning the project! Project Preparation is therefore crucial in getting a rapid deployment project executed correctly. These pieces of the project can be defined as Work Packages or Learning Cycles. Some companies prefer calling these Learning Cycles, as that emphasizes the fact that the team needs to be continually learning through design, built and test to ensure the highest quality of the end product.

This approach requires early availability of system infrastructure for development and for testing / quality assurance.

This approach also requires early involvement of the user community in testing and QA activities. This supports early knowledge transfer, and thus reduces training efforts closer to go-live.

Key benefits of faster system implementations:

Leveraging what is there! Building on what we know. Not re-inventing the wheel = innovation.

Sharper requirements - stay focused on meeting business requirements. Less "fluff" in development.

Reduced rework through quick design-to-test cycles.

Learning cycles built into development - faster knowledge transfer.

Controlled scope = simpler project plans and lower overhead. Milestone plans drive project performance.

Using Web 2.0 to Improve your Business

2007-02-08T16:34:00.000-05:00

The growing number of user-driven, web-based appliactions is being called Web 2.0. We all have heard of the success stories around YouTube, MySpace, Blogger, eBay, and a plethora of other sites.

BUT, HOW CAN WE USE WEB 2.0 TO HELP IMPROVE OUR BUSINESS?

Driven by new applications and innovative use of existing applications, businesses are finding new and exciting ways to use Web 2.0 to grow their business.

I was recently sent a link to a site which I think will be of value to you in this regard: "The Entrepreneur's Guide to Web 2.0: Top 25 Apps to Grow your Business".

No doubt that this guide is already outdated :-)

Top Reasons to Upgrade your IT Systems

2007-01-30T17:06:00.000-05:00

We live in a connected and automated world of alphabet soup systems - ERP, SOA, CRM, etc - fueled by innovations in software and hardware of an unprecedent scale.

We want to beat our competion by leveraging technology, and technology vendors want our business, which in turn drives investment into better systems that we can leverage.

As your business changes, your IT systems need to be kept aligned with your processes to support your business objectives. In the same way, your business will benefit from taking advantages of improvements in technology. So you may be sitting on software that is a few years old and under pressure to upgrade. Here are 3 good reasons to upgrade your software:

Taking advantage of new functionality offered. Sticking to older version means needing to build custom code for desired features that were not incorporated into a product. The newer releases may have the desired functionality built in. While converting to a newer release is a painful experience because of the modifications, it reduces risk. Your code no longer has to be tested each time a patch comes out for the language you used or the operating system changes.

Maintenance costs increasing, or hard to find skilled resources in the older versions. So needs to get on the upgrade bandwagon. Often it is difficult to find support staff to support older versions of software. Most people want to stay at or near to the current releases. Finding someone that is competent to work with an old release can be difficult and expensive.

Older versions are not compatible with newer hardware and you are locked into old technology. The hardware or operating system is no longer supported by the software vendor. I've seen this one bite companies severely over the years. Software companies shed low sales volume operating systems and hardware platforms to reduce support costs.

Project Management for Dummies

2007-01-10T14:20:00.000-05:00

PMI Definition: A project is a temporary endeavor undertaken to achieve a particular aim and to which project management can be applied, regardless of the project’s size, budget, or timeline.

Further, as defined in the 2000 edition of A Guide to the Project Management Body of Knowledge (PMBOK® Guide), project management is the application of knowledge, skills, tools, and techniques to a broad range of activities in order to meet the requirements of a particular project.

Essentially, project management is comprised of five processes:

Initiating,
Planning,
Executing,
Controlling,
and Closing

These five processes are wrapped around the triple contraints of project management. These 3 constraints will define a project, and any changes to any of these will impact the project enough to require review and approval by the project sponsor(s).

TIME
COST
SCOPE

The Project Management Insitute has also defined NINE knowledge areas

Project Integration,
Project Scope,
Project Time,
Project Cost,
Project Quality,
Project Human Resources,
Project Communications,
Project Risk Management
and Project Procurement.

Project management is used globally by multi-billion-dollar corporations, governments, and smaller organizations alike as a means of meeting their customers’ needs by both standardizing and reducing the basic tasks necessary to complete projects in the most effective and efficient manner. As a result, project management leadership is a highly desirable and sought-after skill as intense global competition demands that new projects and business development be completed on time and within budget.

PM a nutshell: 3 contraints; 5 processes; and 9 knowledge areas.

RELATED BLOG ITEM:- Project Management Resources

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Imagine tracking net-profit by customer, by product - on demand!

2007-01-05T00:09:00.001-05:00

In a previous article, "Optimize profitibilty by managing value", I discussed the use of an application called ProfitFinder which allows you to analyze net profit by product AND customer along your value chains. This is an unique innovation around how profitibility is tracked and measured, that allows businesses to look at how value really can be managed to increase company net profit.

These would be the benefits of having this information at your fingertips:

Customers Net Profit – compare to today’s Gross Margin – you can then focus resources on more profitable customers and their buying patterns and manage the less profitable customers.
Customer / prospect costs – you can adjust the amount of sales activities and decide when to stop working on prospects when target marketing costs are reached.
Resource capacity utilization – giving you the capability to do marginal marketing to maximize utilization of your resources to lower the fixed costs and increase total profit.
Sales force effectiveness - track net profitability by sales person. This information allows you to better set sales targets based on profit, as well as allows you to manage sales accounts more effectively.
Supporting departments costs per Value Chain – the ability to adjust the different departments costs involved in the value chains related to the profit that the respective VC brings in.
Decision-making information by Value Chain from products/services/procurement through inventory/warehousing to customers/ markets, on a real-time basis or in batches on order.

RELATED BLOG ARTICLE:

Data rich information poor

Organizational Restructuring - Aligning People with Technology

2006-12-14T23:00:00.000-05:00

"Processes don't do work, people do." - John Seely Brown

I have been on too many technology implementation projects where Change Mangement, Organizational Transformation - or whatever you want to call it - is simply seen as "Training". Seeing Organization Change Management (OCM) during a system implementation as simply writing up new business processes, procedures and training people - is setting your new system up for failure!

OK - maybe 'failure' is a strong word. But doing by this, you are simply not maximizing your system investment.

Why spend a good percentage of your gross revenue on a great new ERP system, that hopefully has been built, configured and implemented using best practices, and then spend a fraction of this investment on the people who will make or break you new system? So, apart from training our people on how to use the system, what else can we do - you may ask. Well, here are a few things :

Involve the people who will use the system in the system design and configuration. In this way, you ensure that their requirements are baked in, AND they start understanding how their jobs will change. The sooner people understand this the better.
Develop 'powerusers' by involving them in system testing. These 'powerusers' will be your first line of system support, and will be key in establishing the new system as part of daily business.
Involve people in the design of new processes that must change with the implementation of the new technology. Understanding how their daily jobs will change is part of managing any resistance to change.
Avoid class-room style training.
HIRE people who understand the new technology and business processes!
MOVE people around as new skills are learnt and utilized.
Compentate people for these new skills - retain & develop your investment in people.

Involving people in all aspects of a system implementation - even if it takes longer - will allow the new "champions" to shine, and to develop your greatest resource to ensure success after a system implementation.

RELATED LINKS

Optimize Profitibilty by Managing the Value Chain

2006-12-07T07:23:00.000-05:00

I recently came across an interesting innovation that actually drives product profitibilty. The innovation comes from a Sweden-based company called Scorebase. According to the founder, Börje Paulsson, what started as a technique for analysing business data to track profitibility at the various phases that the product goes from production to market, has developed into a powerful analysis tool which has become a valuable piece of software for his clients. The application is called ProfitFinder and is more than a profitibility analysis tool.

Gross Profit is defined as sales minus all expenses directly related to these sales. PROBLEM: GP does not consider fixed costs in production and marketing

Net Profit is defined as total revenue minus total expenses. PROBLEM: NP is normally measured monthly and is not easy to measure by customer/ product combination more frequently.

(Click on Picture)

ProfitFinder will allow you to see, based on actual production and billing, your net profit by product/customer combination - along the value chain!

Imagine what you can do with this information.

You can identify and reduce waste in your production process, & reduce direct costs;

You can understand and manage how indirect costs impact your product cost;

Quantify and manage your direct sales costs by customer. How much more are you paying in shipping for the same product for different customers? How much of a sale-person's time is being spent on marketing/ selling to a specific customer? Are yoru marketing dollars spent in the right area?

Indentify and manage how indirect marketing costs are being allocated to products.

Rank performance across market segements more accurately - better plan your marketing campaigns.

Not have to wait until the end of the financial period to know what you net profit is!

Assess your Business

2006-11-28T21:29:00.000-05:00

"Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win."

Sun-tzu (~400 BC), The Art of War. Strategic Assessments

Businesses need to step back and assess how they are performing against plan and how to get to the next level. You need to take the time to step away from the business and look at the basics. Do your business numbers make sense?

Review your Market

Which markets, or market segments, are most profitable?
What plans do you need to attack new markets?
Are existing markets saturated?
Who makes up your markets
Are your existing marketing methods right?
How much do they cost?
How do you target potential new customers?

Review your Products & Services

Which are the most profitable? Why?
Which are the least profitable? Why?
Do you understand your how your product/ customer mix affects your company profitibility?
What issues do you have around price, service and quality?

Your competition

Who are they?
What are their strengths and weaknesses?
How do customers compare you and your competitors?

Assess your business performance.

How does your cashflow forecasting system work? Is it accurate?
What about your profit forecasts - do you keep them up to date and monitor performance?
Do you maintain tight budgetary control on financial matters?

Your suppliers

What are relationships like?
Do you work with them to improve their quality of supply to your business - and thus to your customers?

Assess People

Do you have the right people to achieve your business objectives?
Do they know what is expected from them in achieving those objectives?
Do you operate a training and development plan?
What are their strengths and weaknesses of your management team?

Assess Yourself

Do you know your own strengths and weaknesses?
Do you need training?

Assess Your Infrastructure

Will your premises cope with your plans?
Are they used to best effect?
Is your equipment up to date?

How will you find any improvements?

How the best differ from the rest

2006-11-21T07:23:00.000-05:00

"Only the mediocre are always at their best." Jean Giraudoux (French dramatist: 1882 - 1944)

Why is it that some companies perform better than others. Is it luck? Their people? Their products/ services? Their markets?

Some time ago, I reviewed the top-rated book "Six Disciplines for Excellence" . In that book, Gary Harpst defines five key reasons for why the best differ from the rest. Here's the top five - in order of their importance:

Strength of the Leadership Team. Top-performing organizations rated 155% higher than the lower performers. The two primary factors were the ability of leadership to define a clear vision for the company, and the appropriate involvement of leadership in leading and supporting projects that were strategic to the organization.

Ability to Attract and Retain Quality People. Top-performing organizations rated 142% higher than the lower performers. The best small businesses have found that success in this area all starts with recruiting.

Disciplined Approach To Business. Top-performing organizations rated 114% higher than the lower performers. Top performers are also good planners, but are practical and are disciplined about the commitments they make.

Strategic Use of Technology. Top-performing organizations give more emphasis to using technology to impact the business in strategic ways (114% more) than the lower performers.

Effective Use of Trusted Relationships. Top-performing organizations rated 100% higher than the lower performers in their ability to utilize the expertise and talents of external organizations.

Other factors contribute to top-performing organizations and how they differ from lower performers (i.e., work ethic/attitude, teamwork, commitment, etc.). The five described above highlight the areas of greatest difference.

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Why do Start-ups Fail?

2006-11-02T07:10:00.001-05:00

“Once you've hit five years, your odds of survival go way up. Only two to three percent of businesses older than five shut down each year.” David Birch - MIT

The stats are scary! 50% of all businesses fail within 5 years. Why? I've listed 10 reasons below. Can you think of more?

1.Lack of experience
2.Insufficient capital (money)
3.Poor location
4.Poor inventory management
5.Over-investment in fixed assets
6.Poor credit arrangements
7.Personal use of business funds
8.Unexpected growth
9.Competition
10.Low sales

Here are a couple of books if you are interested in learning more:

Small Business Management, by Michael Ames

The Do It Yourself Business Book by Gustav Berle

Reasons to Own a Small Business

2006-10-27T09:45:00.000-05:00

Thinking of starting a small business? You're on the right track. There's a lot of thinking to be done before you plunge into entrepreneurship. Below are some of the reasons why you should take that plunge:

You are your own boss. Of course, you live or die by your decisions, but that’s good - isn’t it?

You get to do what you’re interested in – you can turn a hobby or interest into a profitable enterprise.

Your firm, your deadlines - meeting your own targets can be a huge motivation to work hard and drive the business forward.

Get creative – Being an entrepreneur gives you the freedom to express yourself and develop your concept in any way you choose.

It’s not hard to set up a business.

It can be very profitable - if you run your business well, the rewards can be huge. And, from a purely selfish point of view, you will keep most of the profits yourself.

It’s not boring – an entrepreneur’s work is not just busy, it is also extremely varied.

Cut the commute.

Your big dream really can become reality.

Still not sure? This set of quizzes and check-lists from the U.S. Small Business Administration will quickly and simply help you determine if you're ready to start your own business and give you some factors to consider in your planning.

Seven Phases for Selling Professional Services

2006-10-11T20:36:00.003-05:00

When you buy a car, you want to know about its features, don’t you? Does it have electric windows? How big is the engine? What is the fuel consumption? Does it have all wheel drive? Automatic or manual stick shift? Even though the salesman may influence your purchase, if you like the car (and the price), you will buy it even if you don’t necessarily like the salesman.

However, when you sell your professional services, you are selling yourself first! If the client does not like you, they will not pay for your services. Think about the professionals that you use in your life. Your doctor, your lawyer, your accountant … do you like them? Would you do business with them if you did not like them (and had a choice)?

What if you are the professional trying to sell your services? Successful professionals are great at Personal Marketing. This applies to doctors, lawyers & accountants. But this applies particularly to consultants, as their services are far less tangible.

Here are Seven Phases of Selling Professional Services:

Phase 1. Create a Public Image. Getting involved in professional associations; civic, social & political organizations; church groups; school associations; writing articles, blogs; delivering talks to groups. Malcolm Gladwell calls people who do this well “Connectors”. Connectors are people who involve themselves in diverse groups – in this way getting known by a broad cross-section of people.

Phase 2. Develop Contacts. Through the networking opportunities that these activities create, you will get to know of many people … and many people will get to know of you. Professional Networking tools will help you further develop these contacts.

Phase 3. Develop Relationships. Contacts are great … but do these people really know you well enough to help you sell your services, or to buy your services from you? Developing relationships with your contacts takes a lot of work. You need to understand their needs; offer assistance where possible. Use your contacts to help people connect with others that can help them – they will remember you for that. You need to interact socially with people … why do you think good sales people play a lot of golf?

Phase 4. Interest the buyer. Your contacts and your relationships will lead you to opportunities where you can demonstrate your capabilities enough to interest a buyer.

Phase 5. Sell. Just having someone interested in you will not get them to agree to pay for your services. You will need to do the due diligence of understanding and defining the need well enough where you can make a proposal to the potential client. This takes preparation, documentation, presentation and follow-up.

Phase 6. Deliver your Service. Some may say that at this point, the selling is complete. In selling professional services – this is when you have your opportunity to PROVE your capabilities and thus to develop additional business. So, in meeting (or exceeding) your clients’ expectations, you are in fact selling yourself and your services.

Phase 7. Retain your clients. Retaining an existing client is a lot easier than getting a new client. You retain your client (and thus sell more business) through delivering high quality, timely service. After delivering your service – maintain and develop your relationship. This is back to Phase 3, but this time around it is a lot easier if you have done a good job of delivering the service that was paid for. Becoming a “trusted advisor” makes sure that you have effectively locked out the competition.

If you sell professional services – review the above phases. How well do you do each of these? It is extremely difficult to be good at all of these. Your ability to perform different phases better than others depends so much on your personality and personal preferences. Some people are great networkers, but not good at closing deals. Others are good at closing sales deals, but not good at delivering solutions.

The 14 Commandments of Creating a "Wealth Pulling" Niche!

2006-10-04T21:22:00.000-05:00

The person who finds or creates a special niche, gets the cream of our societies financial rewards. Whether you're Bill Gates or Joe Average.

To out-niche your competitors you must focus on these "14 commandments" of niche creation at all times. Observe the ones you apply to your business, product, or service - and watch your sales soar.

1."The Principle of Adaptation" - The simplest way to create a new idea is to do what others in another business or industry are doing. Next, see if you can adapt it to your own business, product, or service.

2. "The Principle of Addition" - Can you add something extra to your product or service that your competition doesn't have or isn't doing?

3. "The Principle of Combination" - "What positive elements can you combine from another product or service to make yours better?" A candy bar did it with simple peanut butter and chocolate, and made a successful new product. So can you.

4. "The Principle of Customization" - Can you find little ways to personalize a part of your product or service? That's a quick, easy, and cheap way to create niches. Can you make your product or service more personal and less cookie cutter?

5. "The Principle of Ease and Convenience" - Can you find more ways to make your product or service easier and more convenient to buy, use, or own? Then you'll have a strong niche.

6. "The Principle of Elimination" - What negative or inconvenience can you eliminate for your customer, with your product or service. People not only pay for more they'll pay for less. Less irritations, less waiting, less inconveniences.

7. "The Principle of Enlargement" - Do people like your service or product? Then it's a sure-fire bet there is a segment of your market that would like even more of it. Can you super-size something?

8. "The Principle of Entertainment" - From cradle to grave, we all have this inner urge to be entertained, amused, or fascinated - especially before we spend our money. A relaxed customer spends more. Find little ways to amuse customers before, while, or after they buy your product or service.

9. "The Principle of Longevity" - It's making some feature of your product or service last longer. It can also include making a positive experience or feeling last longer. If you can do either, you will have a niche that's hard to match.

10. "The Principle of Portability" - People hate to be tied down. So, if your product allows people the freedom to use your product or service in more than one place, that's a powerful niche.

11. "The Principle of Reduction" - If you sell a product or service, is there any way to reduce a certain feature to make it more convenient? More portable? Or easier to use? Can you reduce it and make it more affordable for another type of customer?

12. "The Principle of Reversal" - Look at what features or services your competition is offering or not offering and reverse them. If they close on weekends, can you be open? If they cater to seniors, target more young people. Or if they cater to high-end customers, target more low-end volume customers etc? The list is endless.

13. "The Principle of Safety" - If you can show others how your product or service can add safety or reduce risk, you'd have a powerful niche. People hate to experience loss, feel insecure, or waste money. Try to think of little ways you can help people avoid the above with your product or service.

14. "The Principle of Speed" - You should always be thinking, "What can I do faster than my competitors-without reducing quality?" Can you fill your orders faster? Can you give faster service? Can your product get faster results? Can you resolve customer issues faster? Think speed!

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REFERENCE: Business Know-How

Failure is the Mother of Innovation

2006-09-27T19:58:00.000-05:00

"Failure is our most important product. "
R.W. JOHNSON, FORMER CEO, JOHNSON & JOHNSON

It is amazing how many innovative and visionary companies have grown, not out of detailed strategic planning, but rather by trail and error. By stumbling onto a great opportunity by accident.

Johnson & Johnson started their business back in 1890 as a supplier of antiseptic gauze. Because of complaints that this gauze caused skin irritation with some patients, they started sending a small packet of Italian talc with their medicated plasters to apply to the skin. To their surprise, customers started asking to buy the talc directly. J&J responded by creating a separate product called "Johnson's Toilet and Baby Powder". And as they say in the classics, the rest is history!

In the 1940's J Willard Marriott was running a successful group of restaurants, and was opening up new restaurants across the country following a strategy that clearly worked. But then a strange thing started to happen at his restaurant located at Hoover Airport (now Reagan National) in Washington DC. Their customers were not behaving in the same way as customers at other restaurants. Many of the customers at this airport restaurant were buying meals and snacks, and stuffing them into pockets, paper bags and carry on luggage - and taking the food onto the plane with them. Marriott was smart enough to recognise the opportunity and within a short time, had negotiated a deal with the airlines to supply pre-packaged food to passengers on the tarmac. This service soon grew to other airports and became a major business for Marriott Corporation.

Jim Collins and Jerry Porras write about companies that "Try a lot of stuff and keep what works" in their book "Built to Last". As J&J, Marriott and many other successful companies have shown, growth is not driven purely by good strategy. Bill Hewlett of HP stated that he "never planned more than two of three years out". Companies follow an evolutionary process that allows them to grow through learning from what works and what does not work for them.

But, how do you formalize this "evolutionary process" to ensure that you DO learn from your mistakes, and that you do not miss opportunities that may be off your strategy radar? The answer is through making innovation part of your business.

You make innovation part of your business by having the your ear to the ground! This means having the capability to capture business intelligence, and then to review that information that may be off your strategy radar to find those variations in your business that will lead to opportunities that you may not have thought of. The greatest source of this information is your people! How are you tapping into this wealth of information, ideas, and creative energy; and then translating this into your business plan? Are you staying fresh and ahead of the competition, or are you sticking to what you have done in the past? How do you know what works and what does not work in your business?

Imagine what Marriott Corporation would look like today, if they had ignored what was happening at that one restaurant at the Hoover Airport way back in the 1940s!

Why Should I Hire a Consultant?

2006-09-14T20:21:00.000-05:00

"A consultant is someone who provides value through specialized expertize, content, behavior, skill, or other resources to assist a client in improving the status quo in return for mutually agreed compensation"

Alan Wiess

I know that I need someone to help me with my problem, but how do I know that I need a consultant? Why should I invest my company's money and time in a consultant? How can I measure the return that make in this investment?

In his book, "Million Dollar Consulting", Alan Weiss goes on to define the categories of value that a consultant will bring to a company. These are the key areas of value that you can use to evaluate whether the consultant you are considering using to solve your problem to is the right one for you.

Content. This is the most common consulting value. The consultant you use must know what they are talking about. Consequently, you will probably be able to find consultants who have worked in a specific field or industry that you need help on. Many people who break out of corporate life to go into consulting base their business on content consulting.
Expertise. Many consultants have an expertise that transends a specific industry. For example supply chain management; or change management. These consultants can adapt their expertise to a variety of problems and across multiple industries. You will find people who have worked across diverse industries and companies to have developed this type of expertise.
Knowledge. This is a quality of people who have "been there before". Knowledge includes an understanding of process as opposed to content. Real process knowledge come with experience. However, don't expect the consultant to have the same level of knowledge of your business that you have.
Behavior. A consultant with good interpersonal skills in virtually never behind the scenes. These interpersonal competencies may be of value to you in facilitating groups, leading teams, resolving conflict, enhance brainstorming and creativity, listen to customer or employee feedback, etc. Mediators and arbitrators are examples of consultants with with this competency.
Special Skills. Some people have highly developed, well defined skills that are in high demand. These are often talents and innate abilities. For example, some people have a sense of style that makes them excellent image consultants. These people may not know anything about the content, or have precise expertise of knowledge related to your business. But, these consultants will have a gift or talent that you cannot acquire independently.
Contacts. Good consultants are normally well connected and will be able to get the right person for the job at hand, if they themselves do not have the necessary expertise, content, knowledge or skills that you may need for a specifiuc task. A well connected consultant can also be a good lobbyist for you.

Consultants will bring one or more (or all) of these competencies to bear to help you move from the status quo to the improved position.

Turbocharging Data Access with SAP-BI Accelerator

2006-09-06T13:36:00.000-05:00

Naeem Hashmi, Chief Research Officer at Information Frameworks recently published a paper on the new SAP-BI Accelerator that caught my eye. Below is my summary of the points he makes. For a complete copy of his paper click here.

Building a data warehousing architecture requires following a process that begins with defining user requirements as clearly as possible. This too is the case with SAP-BI (formerly SAP-BW). The reason that user requirements are so crutial to define correctly, is that the design and development of InfoCubes is key to how data will be accessed and information presented to the end user.

With a well designed data model, performance has not been an issue for most smaller SAP clients. Any performance issues could have been managed by aggregating data and user data navigation views. However, in larger applications with complex data structures - with time based, multiple-hierarchies, snow-flaked dimensions - data access performance degrades rapidly.

"Now Generally Available BI Accelerator Complements SAP NetWeaver® and Enables Customers to Analyze Large Amounts of Critical Business Information up to 200-Times Faster than Alternative Tools."

SAP Saphire Press Release of May 17, 06

SAP-BI Accelerator is an appliance (blade server) that sits alongside of the BI instance and that works with SAP-BI. Indexes and data are moved to the accelerator that is able to search indices and associated data at lightening speed.

With the SAP Netweaver technology, BI Accelerator serves as a cache at the SAP-BI application server and is at the same time a full InfoCube as well as an Aggregate. To the end user, this application does ad hoc data aggregation at high speed, on the fly, off the Cube based on user queries.

SAP-BI accelerator eliminates the need for aggregates in the data model. So SAP-BI accelerator will simplify data modeling, but will probably introduce (in the short term) some challenges in managing/ changing established processes and best practices. This does not do away with the need to based your design off user requirements, because you still need to build your Cubes, but it will certainly cut down on support costs due to ongoing development of views based on changing user requirements.

In the long term the intention of SAP is to make cubes optional ... but until then we will have to keep them in mind when developing data warehousing solutions in SAP.

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