Tuesday Three: 3 ways to improve your business

Focus on the big things, not the little things

  1. Focus effort on removing the primary bottleneck in your process. That means stop working on anything that isn’t the current or next bottleneck or business as usual. And I mean everything.
    This is the secret sauce behind the turnarounds that I and talented small teams have led at two large refineries, and is a great standard approach to any turnaround (you generally start with looking for where the money is disappearing to and stop that, then move to the bottlenecks to increase revenue).
    To make it work you need to understand your process end to end – from understanding the gap in the market/customer needs that you are trying to fill, all the way through product development, production and distribution. You also need to look hard at pricing, but that’s for another day.
    A refinery is easy – all you need to concentrate on is improving the production process, and so you look at each of the big steps to see where the constraint it, and then you dive into that area, pareto the potential fixes and do the bigest easiest ones – and so on.
    For most companies in tough economic times the constraint is going to be ‘not enough sales’ – meaning that production capacity is idle. It’s common right now to see sales to existing customers off by about 30%, but it is also common to see the solution – good companies are investing in sales (which generally means people) and acquiring new customers to fill the gaps. This bodes well down the track when average sales per customer rebound.
  2. Pay your best people well – very well. If they leave then it will cost you a lot more to search for someone new and get them up to speed.
    These days it is hard to find the cash to pay people well – so pay them in incentives and equity. Let them share your vision of a boom once the current tough times have gone, and let them share in the spoils. They may even be willing to take a drop in cash earnings for a decent stake. Be generous though – your success is conditional on theirs.
  3. Stack it high and watch it fly – focus efforts on the biggest selling items, and push to sell even more of them.
    This is the basic pareto rule – 80% comes from 20%. Sure you need to develop new products, and other products could have higher margins, but this is about focusing your energies on selling the things that are easiest to sell. You’ll maximise your sales dollars, and can find longer run efficiencies on the production side. It’s also more fun to watch higher volumes move.

About Lance Wiggs

@lancewiggs
This entry was posted in NZ Business and tagged , . Bookmark the permalink.