Your Clients – Have They Got The Right Stuff?
One of my favorite movies of all time is the 1983 released “The Right Stuff”, adapted from Tom Wolfe’s best-selling book of the same name. The story is about the elite Navy, Marine and Air Force personnel involved in aeronautical research, and the test pilots who were selected to be astronauts, leading up to the first manned spaceflight by the United States. These brave military men were said to have had the “Right Stuff”.
It is an interesting analogy to look at these pioneering astronauts, and their support structure, and to superimpose it onto the business world and how businesses build sustainable competitive advantage. They let nothing get in the way of their success.
In my view, there are about 30 things that a business owner must get right to build a successful and sustainable business. The image below shows the elements of “Right Stuff”, which I believe delivers sustainable competitive advantage.
If we look at the Agile approach to business strategy and its concentration on how the internal business environment operates, we can see that there are 3 key pillars that support the business. These are People, Process and Infrastructure. Within each of these pillars, I identify what I consider to be the Right Stuff or the necessary components that a business must have, and which must be managed effectively to achieve business success. It forms an interesting visual checklist that I often use when looking at client companies.
Let us now examine each element of the Right Stuff so that we can fully understand its importance for a business owner. Then ask yourself if your clients have the right stuff and whether they are operating in the right way or not.
Right Leadership. Without effective leadership, the crew is travelling on a rudderless ship. The business owner or CEO needs to not only have a really clear vision of where he is taking the business and how he is going to get there, but he must also inspire everybody else in the business to share his vision and get behind it.
Right Recruitment. Recruitment may be described as the process of searching out potential applicants and inspiring them to apply for the vacancies that exist in a business. It starts with identifying a specific need within the business, moves on to develop a detailed job description or role, and then concerns itself with advertising the position in a way that makes it attractive to the type of people, with the right skillset, qualifications, temperament and brain power, which the business wants to hire.
Right Selection. Selection is the process of choosing the best candidate from the list of applicants for a job. One of the best ways I have seen of doing this is a process called Topgrading, which uses a well-defined screening and reference checking methodology for choosing the right candidates and ensuring that the business only hires “A” players. Check out “Topgrading” by Bradford D. Smart Ph.D to see how it works.
Right Remuneration. Money is only one part of the reward package needed to attract and retain employees. Many other things come into the picture such as: industry attractiveness, company culture, health benefits, 401K plan, stock options, performance incentives, paid holidays, club memberships, company cars, performance recognition, excellent working conditions and challenging roles & responsibilities. You need to get the mix and blend right as it may differ from one role to another or one person to another.
Right People. Having the right people, and the right mix of people, working in the business and being able to hold onto them, is key to business success. The right people must be in the right jobs and must perform to their full potential. Hiring the wrong people has a huge cost and it is significantly higher than the pay and benefits that you pay for up front. Have the courage to terminate your mistakes quickly and move on.
Right Mindset. Mindset can often be a cultural thing, which flows from the CEO down. It is commonly known as business culture. Examples of this include a “can do” attitude, the employees embracing excellence in everything that they do, always helping colleagues, showing innovation and creativity in doing their jobs, taking responsibility, mentoring new employees, going the extra mile with customers of the business, and attracting like-minded friends into the business.
Right Focus. Great businesses ensure that their people not only focus on doing things right but also focus on doing the right things. They understand where value is created in the business and they encourage employees to take personal responsibility, while educating them about the individual part each one plays as part of the overall business strategy. Verne Harnish talks about this in his book “Mastering the Rockefeller Habits” It can be driven by having frequent staff meetings (daily huddles) that keep everybody aligned towards achieving the same 3 or 4 monthly or quarterly goals, with one overriding goal.
Right Goals. Goals or objectives are developed by the senior management team in a drive to realize the vision and mission of the business. Verne Harnish, referred to in the previous section, offers a free one-page strategic plan on www.gazelles.com. He sees Targets as something you plan in a 3 to 5 year timeframe whereas goals must be met within a one-year period. Targets are where you are going, whereas goals are what you are you doing. The type of tangible/measurable goals he recommends include: Revenues, Profit, Market Capitalization, Gross Margin, Cash, Accounts Receivable Days, Inventory Days and Revenue per Employee. Various initiatives need to be developed to meet articulated goals. His business plan model is sharp and it is a great template for developing the right goals.
Right Actions. It is not enough to have employees knowing what they need to do; they must also put it into action by doing what they need to do.
Right Execution. Whereas actions are individual tasks that must be undertaken, execution refers to how a job role as a whole gets carried out. Employees must continuously and consistently execute their role correctly and efficiently for their execution to be considered right.
Right Performance Management. Every business needs to have the right performance management system where employees and their bosses get to talk on a one-to-one basis on a frequent basis, preferably quarterly but at least twice per year. It presents an opportunity for the expectations of both parties to be discussed openly and honestly, for the employee to be recognized for achievements, and for benchmarks to be set that are both fair and in alignment with company goals and targets.
Right External Advisors. Choosing external advisors can be a tough task. Despite getting references to check from external advisors, many businesses don’t go to the trouble of picking up the phone and talking to the referees. Big Mistake. Always check out external advisors by calling the referees. You can learn an awful lot from a one-to-one conversation. Also, it is often better to engage the external advisors for a short sharp engagement to check out their capabilities, before committing to a bigger project that may be mission critical for the business.
Right Strategic Relationships. No business is an Island and forming strategic relationships with others inside and outside your industry can deliver market reach or power that would not be available to a business were it to try to go it alone. It effectively increases the size of your internal environment and allows you to leverage other peoples’ resources for the benefit of your own business. It is best described in the Four Links Model, which looks at opportunities for collaboration with Government, Formal Links, Informal Links and Complementers.
Right Strategy. Business strategies can be seen as “how” the business meets its objectives or goals. They are the right actions, key thrusts and initiatives that make a business a winner.
Right Capital Structure. Without the right capital structure, it is impossible to grow a business successfully. The ideal mix of debt and equity will be different for each business. A cash starved business will find it very difficult to grow and it is incumbent upon management to ensure that there are sufficient liquid resources available, not only to survive but to thrive.
Right Financing Partners. The collapse of Lehman’s in 2008 turned world financial markets on their heads. The knock-on effects destroyed financial institutions all over the globe and bank balance sheets are still being rebuilt in many countries. This continues to restrict bank lending, particularly in the SME sector. Lack of debt capital is still impacting the ability of small and medium businesses to expand, and the sector continues to suffer from years of under investment. Businesses need to look beyond traditional sources and consider new forms of financing such as crowd funding and online lending platforms, as they react to tighter lending standards adopted by their banks. Beware of fair weather bankers and investment funds looking to make a killing.
Right Process Execution. The right process execution revolves around what, who and when. For process execution, Verne Harnish recommends that a business should identify 4 to 9 processes that drive the business. Next, assign specific accountability to someone for each process and list the Key Performance Indicators (KPI’s) for each process. Then define the timeframe for delivery. By doing this, there is nowhere for anybody to hide and you build a clear understanding of what delivers the right business performance.
Right Design. The right design of a product can often determine whether a product is successful or not. The right design of a business process can determine whether a product or service is profitable or not. Both must be right for success.
Right Manufacturing Process. Products and services must be designed in a way that allows for streamlined manufacturing. In this age of just-in-time manufacturing, the best producers often have to cope with smaller manufacturing runs and deliveries to downstream customers as frequently as every couple of hours. The right manufacturing processes are essential if a business is to remain competitive as well as profitable.
Right Products. There is little point in creating products that nobody wants or products that are over-specified and thus more expensive than potential customers are willing to pay for them. Similarly, cheap and nasty products generally don’t sell well. Choose your product set wisely and let your choice be determined by evidence of real market demand.
Right Marketing. Sometimes business people come up with wonderful innovative products that would undoubtedly benefit consumers. However, without the right marketing, these products may lie undiscovered in a warehouse. Never underestimate the power of the right marketing for creating product awareness and creating consumer demand for it.
Right Timing. Businesses need to keep track of the trends and fashions in the markets they operate in. Launching products at the wrong time can be a costly mistake. Going too early may flood a market with products that nobody is looking for and going too late may drive down margins to the point where a business cannot compete successfully or make any profit.
Right Policies & Procedures. The right policies and procedures can be used to streamline how a business is run internally. If evolving best practices, standards and tools are used, this not only creates operational efficiencies, but can also improve the entire customer experience and contribute to competitive advantage.
Right Sales Force. If cash in a business is King, then sales come in a close second. The right sales people are the engine that gives life to the rest of a business. High performing sales people need to be rewarded in the right way so that a business can retain them. Many are worth their weight in gold.
Right Customers. This is simply about reaching the right customers, in the right way, at the right cost and commanding the right price.
Right Value. Consumers are always price conscious and will always shop around to get the right price. However, delivering the right value is even more important than delivering the right price in the longer run. Lots of consumers buy cheap laptops that do the required job, but few of them love their laptops in the same way as an Apple customer loves their MacBook. Apple products tend to be significantly more expensive than PC based equivalents but Apple’s success is predicated on the total customer experience, which in essence is the value generated by the brand.
Right IT Infrastructure. Technology is advancing faster and faster all of the time and the range of tools available to businesses is constantly expanding. Interestingly, the cost of IT infrastructure is falling at an ever-increasing rate. For many businesses, the Cloud is creating new opportunities that could not be considered even a few years ago. The Cloud can deliver scalable and flexible applications and storage that significantly reduces the risks of investment in on-premise platforms that can quickly go out of date.
Right Plant & Machinery. Plant and machinery is an old term relating to fixed assets that are used by a business for the purpose of carrying on the business and are not stock in trade, the business premises or part of the business premises. Essentially, they are the components that are used in manufacturing or supporting the manufacturing process in a business. In modern businesses, computer equipment can be considered a part of plant and machinery. The “right plant and machinery” creates significant operating or manufacturing efficiencies for a business. However, traditional plant & machinery is increasingly being replaced by intangible assets, especially powerful software and innovative ideas, which are becoming the main source of income for a large and growing proportion of enterprises worldwide.
Right Buildings. It is indeed rare for a large and growing business to be housed in someone’s home and successful businesses normally operate in the right buildings, in the right locations, and with the right support infrastructure available in terms of people, power, water, and telecommunications/broadband.
Right Transportation. Although it is usually only manufacturing businesses that require transportation for their products, it is becoming increasingly important that business locations chosen by business owners are near transportation hubs in order to service their clients better and to facilitate easy commutes for their own employees.