Making More Money: Simple Strategies for Improving Cash Flow and Profitability

Making More Money
Simple Strategies for Improving
Cash Flow and Profitability

Making More Money
Presented to:
The Woodland Park Chamber of Commerce
May 1, 2014
J.R. Dickens
Woodland Park Research Group, LLC
© 2014 Woodland Park Research Group, LLC.
All Rights Reserved.
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Put on your thinking caps
• Ideas, not answers
• After-class exercises apply to your current
business situation
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Money Drives Business
• Simple concept: make more than you spend
• Reality: competition, slow growth
• More reality: seasonality, interruptions
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Getting Better
• Improvement is the key
• Improvement is a strategy with tools, not a
tool to tack on to your strategy
• Opportunity is everywhere, but improvement
is not spontaneous
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Three Keys
• What does it take to succeed?
• Excellence
• Integrity
• Innovation
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Excellence means...
• Doing the right thing at the right time, and
doing it right the first time
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What is excellence worth?
• Errors, defects, and rework can easily
consume 30% of your time and cost
• Lost opportunity can’t be measured
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Integrity means...
• Building trust by serving others
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What is integrity worth?
• Ask the question a different way:
• What will a lack of integrity cost?
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Innovation means...
• Anticipating and embracing change
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What is innovation worth?
• Ask companies that died of obsolescence
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Three Keys
• What does it take to succeed?
• Excellence
• Integrity
• Innovation
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Excellence
• Consider two areas:
• defects/errors
• speed
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Defects/Errors
• Defect is anything that fails to meet customer
expectations
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Defecst/ErerRs
• Do it over again
• rework
• Catch it before the customer does
• test/inspection
• When all else fails…
• damage control
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Defects/Errors
• What is the cost?
• more labor
• more materials
• more time
• more capital
• lower productivity
• lost goodwill
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Defects/Errors
• Fix the process
• Prevention, not inspection
• Root cause—address the source—improve the
process
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Defects/Errors
• Clue: problem always has a human source
• e.g., process design, equipment selection,
maintenance, procedures, training, etc.
• Ignorance—we don’t understand the process
• Disorder is the norm—stuff doesn’t fix itself
and it doesn’t want to stay fixed
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Defects/Errors
• Ideal:
• everything right the first time
• no defects/errors, no rework
• with proper control, no need for inspection
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Speed
• Speed is how quickly you generate sales from
products/services
• time lag between expense and revenue
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Speed
• Timing is as critical as quality
• Right product/service at wrong time is the
wrong product/service
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Speed
• “Productivity” is often the problem
• How are you measuring efficiency?
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Speed
• Typical problem:
• too much
• too early
• Additional problem:
• too little
• too late
• Too late is probably worse than not at all
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Speed
• Right product/service too soon:
• slows you down
• increases cost
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Speed
• Slower speed because:
• making more than you need to meet current
demand
• excess goes into inventory
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Speed
• Higher cost because:
• takes more money to make more stuff
• materials, labor, etc.
• costs money to store and manage excess
• carrying cost of inventory (~25%/yr)
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Speed
• Ideal:
• right product/service at the right time
• speed/flexibility opens the door for customization
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Excellence
• Tip of the iceberg
• Conversation has revolved around
product/service at the customer interface
• Same principles apply to internal processes
• e.g., HR, scheduling, production, inventory,
accounting, etc.
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A Word About Value
• Value is the customer’s perception of your
products/services in relation to cost
• Think in terms of the total customer
experience
• Example: feeding giraffes at the zoo
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Integrity
• Success flows from people
• Customers
• Suppliers
• Employees
• Public
• In a word—relationships
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Integrity
• Relationships are built and sustained on trust
• What does it take to build/sustain trust?
• a willingness to serve the needs of others
• Relationships take time and effort
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Six Principles
• Respect
• honoring authority
• Commitment
• guarding relationships—confidentiality
• Charity
• kindness, forgiveness
• Stewardship
• caring for the property of others
• Honesty
• truthfulness in all things
• Gratitude
• contentment with your own circumstances
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Integrity
• Integrity is concrete, not mushy—principles
never change
• Integrity is about personal character
• To be trusted, be trustworthy
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Customer Service
• Integrity applies to customer service
• Customer service is still a differentiator—
most people don’t do it
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Customer Service
• Where does your business touch the
customer?
• pre-sale
• point-of-sale
• post-sale
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Creating Engagement
• Make it friendly
• Gather information
• Find the customer’s “problem”
• Connect…
• …and reconnect
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What is the Message?
• Content is king
• Focus of client engagement is providing
information
• Internet is the new sales funnel—where
people go for answers
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Integrity
• We’ve applied integrity to customer relations
• Integrity applies to all relationships—
professional and personal
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Innovation
• Innovation is about growth...
• ...and growth is not about getting bigger
• Think of the maturation process
• Growth may mean getting smaller
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Innovation
• Three premises:
• You tend to act according to your assumptions
• Your assumptions are often wrong (or incomplete)
• Opportunity hides behind wrong assumptions
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Innovation
• The key to innovation is challenging your
assumptions
• Ask the right questions....
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Paradigm Paralysis is...
• The condition of not being able to see beyond
your assumptions
• What are the symptoms?
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Paradigm Paralysis
• “This is the way we’ve always done it.”
• “We already have an SOP.”
• “This is a matter of company policy.”
• “No one is allowed to question that.”
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Paradigm Paralysis
• We tend to ignore or dismiss information we
don’t like
• Reality doesn’t go away—so we might as well
confront it
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Sacred Cows
• Sacred cow: something that no longer serves a
useful purpose
• Worse: no one is allowed to question it
• Needless waste of resources
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Sacred Cows
• How to find them?
• Start from scratch—think like a beginner
• Ask, “Why?”
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Sacred Cows
• Thinking like a beginner means putting aside
your assumptions
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Strategic View
• Look at your business from 10,000 feet
(or 20,000 feet, if you live in WP)
• SWOT with an extra T
• Strengths
• Weakness
• Opportunities
• Threats
• Trends
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SWOT/T
• Strengths—what you already do, well
• Weaknesses—what you already do, poorly
• Opportunities—what you could do, in the future
• Threats—conditions that pose an imminent danger
• Trends—the general direction of things that affect your
business (good and bad)
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SWOT/T
• Helps you look inside and outside
• Helps you think strategically—where you are,
where you’re going
• Reality check—not intended to be a feel-good
exercise
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SWOT/T
• What do you do better than anyone else in
the world?
• Differentiation
• Branding
• What can you get someone else to do for you?
• Ideal: you’re not the best, you’re the only one
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“The Paradigm Question”
• What fundamental change would put you out
of business and/or turn your industry upside
down?
• Don’t take success for granted—be prepared
for change and/or anticipate it
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Summary
• We’ve highlighted the areas of Excellence,
Integrity, and Innovation in relation to
improving your financial success
• Next step: Workbook exercises
• Brainstorm, prioritize, and attack
• Quantify opportunity in $$$ wherever possible
• Take ownership for change
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Suggested Reading
• Sacred Cows Make the Best Burgers (Kreigel)
• It’s Your Ship (Abrashoff)
• Paradigms: The Business of Discovering the Future (Barker)
• The Goal: A Process of Ongoing Improvement (Goldratt)
• The Quality Secret (Conway)
• The Seven Habits of Highly Effective People (Covey)
• The 21 Irrefutable Laws of Leadership (Maxwell)
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Woodland Park Research Group, LLC
PO Box 122, Woodland Park, Co 80866
(719) 687-4304
www.woodlandparkresearch.com
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Making More Money: Simple Strategies for Improving Cash Flow and Profitability

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Making More Money: Simple Strategies for Improving Cash Flow and Profitability