Adding New Customers or Products

For a company failing to grow the top line, or seeing margins reduced on the bottom line, one solution is certainly to develop new customers and products. This can be done in a systematic way, in a way that is likely to yield better results, or it can be done in a hap-hazard manner in which there are almost no noticeable improvements.

It should be obvious as to the approach I have seen when coming in to troubled situations.

Often, with good intentions, individual sales-people and engineers are all working toward some new "thing" -- gaining a new customer, developing a new application, identifying a new product -- without any real direction or focus. There is little if any analysis done regarding the company's strengths and weaknesses in the new area relative to the competitors. There is little analysis regarding the size of the potential market. By gut feeling, someone decided it was a good thing to work on, and so the go-ahead was given.

However, an alternative is one where such possibilities are reviewed systematically, with some idea of the competition, of the customer's willingness toward adapting a new innovation, of the likelihood of achieving a successful implementation. Simple questions can be developed and answered that will give some indication as to the relative merits of one opportunity vs. another.

Any company, no matter the size, has limited resources. No company can afford to chase every dream. Therefore -- in every company -- someone or some group of "someones" must decide on where and how to spend resources. This can bring its own dangers -- a bureaucracy is introduced, or decisions are made by a group of executives too far removed from the knowledge of technology and customer. These are real dangers.

However, this doesn't change the fact that someone or a group of someones is responsible to decide. To do so, there must be a process. The process can be ad-hoc -- "let's wait to ask the boss on a Wednesday afternoon right before he goes golfing -- he is always in a hurry and usually will say yes quickly in order to get out the door." Or it can be systemic.

For example, what is the product, who are the customers, what is the potential size of the opportunity, do we have the technology or is it otherwise related to our existing capabilities? These questions can all be asked and answered quite easily. With such answers, opportunities can be assessed as to the likelihood of success and thereafter to the value for the firm.

As to the risk of stagnation, or bureaucracy taking over -- shame on management if this happens. It is not so difficult to ensure that the right number and type of people are involved in the decision making process. It is also not so difficult to identify the sales and technical people who have earned the opportunity for much more leeway and freedom from the process if they feel that they have a good idea. Give such performers a discretionary budget to spend how and where they see such an opportunity. It doesn't take much money to fund such internal entrepreneurs.

But, certainly, you must put some process around this. This must be managed. It is a certain way to lose focus, and a certain way to spend resources on opportunities that either a) don't fit in the direction of where the company wants to go, or b) have little or no likelihood of success -- technically or commercially.

Non-controllable Costs

One consistent theme in each company I have gone into is the idea of non-controllable costs. "Well, property taxes are not controllable." "We can't do anything about IT." "Energy rates are going to be whatever they are." Such statements come out at all levels of the organization -- even top management.

Consider this for a minute. Executive management is admitting that they are willingly spending money that they cannot do anything about. Is this a sign of a team that is on the top of their game? Would someone dare make such a statement to their spouse regarding the household budget?

Certainly some costs might be easier to manage than others. Some costs are approved "above my pay grade." Every cost can be controlled. Every cost has drivers. Every cost has opportunities for improvement.

Every line item of cost can have an owner, if management wants to manage. The owner can learn the drivers of the cost. The owner can understand the factors that affect the cost. The owner can take action to improve the cost and manage this action through the organization.

This attitude of non-controllable cost is a disease. It is a disease of laziness. It is a disease of complacency. When you hear such statements, know that management is inadvertently admitting that they are not qualified to manage.

When challenged with this, most will come around. "Yes, we actually can do something, but X, or Y, or Z must happen, or so and so must get involved, or...." With this start, you can now begin taking steps to focus on every item, on every project, on every cost -- even the difficult ones. This is the first step toward getting management's mind around change -- a change in attitude toward the future of the company.