I recently facilitated a workshop with several CEOs where we worked on the dramatic business growth model components. One of the questions that I had asked them beforehand was, "What is Your Profit/X?" The results showed that there this concept is not clear to many....
Working on an event with a not for profit that I recently joined, I posed two questions, “Who is our audience?” and “What do they want?” I figured that these were easy questions and should quickly have responses; however, I was shocked, because they couldn’t be answered. How can you put on a successful event when you don’t know who you are marketing it to and what they really want. It made me think about how COVID is dramatically changing who our customers are, what they buy, and where.
We all know that a large amount of business has moved online, but many companies have yet to fully pivot to the point they can provide both information and delivery of their products and services in an online format that meets or exceeds their customers’ expectations. During a recent conversation with an executive of a training company, he was discussing how they working to move all their training online, but dealing with the challenges of how to deliver it in a way that the attendees got its full and would enjoy the experience. In my own business, I know many clients are getting tired of Zoom calls and want to return to in-person meetings, but only when it is safe. The challenge is how to make it interesting and keep people engaged?
If we look across the economy, many industries are finding the delivery of, and demand for, their products are changing. We all experienced the toilet paper shortage when the lockdown started. Why? From my understanding, the toilet manufacturers had most of their production set up to service commercial clients, the biggest users. However, with the lockdown all that commercial demand transferred to residential demand, which the manufacturers were not set up to produce or deliver. Likewise, with the liquor business were sales were transferred from restaurants to retail, again disrupting supply chains.
A recent article in Bloomberg noted that:
- SK-II beauty brand produced by Procter & Gamble Co. has seen sales decline by double digits. The reason, most sales were done at airport duty-free shops. With travel effectively on hold, the airports are empty and no one is buying. Thus the delivery needs to change.
- Mondelez International Inc. said that sales at its gum and candy division plunged 33% primarily due to falling sales of gum. Why? Gum consumption is very dependent on people being away from their homes. It is used to freshen breath for meetings or first dates – activities have been effectively halted for the moment. Thus, demand has evaporated.
- Starbucks announced that U.S. traffic slumped 52% from a year earlier; however, the average total bill, rose 25% over the same period. The reason was that shops were closed and people are not out, but when they are they are bundling orders for everyone at home. While bundling of orders makes the economics of delivery orders more attractive, it requires skill to allocate labor and tailor operations to ensure big-batch orders are fresh and hot.
- Molson Coors Beverage Co. reported revenue down 23% over last year. During the COVID period, party-friendly kegs sales disappeared; however, sales of 12-ounce cans exploded. The issue for Molson was getting enough aluminum for the cans to meet demand, which causes the fall in revenue. The company is working with suppliers to ensure the availability of the packaging materials needed to accommodate the stay-at-home lifestyle.
- As we all know U.S. tourism has been hit badly with COVID, but this is taking a toll on many retailers that have tourist-centric locations, e.g. Tiffanies and Macys on Fifth Avenue. However, it is also affecting stores like Carter’s Inc., the baby, and kids’ clothing chain that has seen tourist-centric locations revenue fall by 20% while non-tourist centric locations saw a rise in revenue of 15%. The issue for Carter’s is that tourist-centric locations account for about 20% of revenue. Thus the company is facing issues with delivery and is working closely with retailers like Wal-Mart, Target, and Amazon.com to help offset the decline.
Therefore, if you are experiencing either an increase or fall in revenue, spend time to understand why? Is it that customer tastes/requirements or channel delivery has changed and plan accordingly. As I have said before, I expect us to be living with COVID for at least a year, so be prepared for the long haul and recognize that many customers’ behavior changes may not revert when it is all over.
There is a war for talent. How do you attract talent to your company and have them apply for jobs there? You have to show why they should consider you, who you want, what you offer, and how your current employees feel.
Productivity remained during WFH with COVID. However, further analysis found that hourly productivity fell and was compensated for by employees working more hours. What was the culprit – Meetings. Want to increase productivity, have fewer meetings.
For those of you who are not aware of EOS, it is the Entrepreneurial Operating System. It seeks to improve businesses by getting six components aligned to enhance business operations. The six are: the vision the people the issues traction - meetings and goals...
COVID has affected everyone. However, companies need to examine if they have lived their core values during COVID, how they are reinforcing them in a WFH environment, and especially with the onboarding of new hires.
Knowing how much cash you generate is essential for planning for growth. Too many companies don’t know and when they grow they find they are continually running out of cash. Understand your cash flow generation and how to improve it through improvements in your Cash Conversion Cycle and using the Power of One.
The key to achieving long term goals is to define short term goals that lead you there. Focusing those short term goals around a key metric is essential. However, ensure that the metric will not lead other areas astray by having an appropriate counter critical metric act as a counter balance.
Defining an organization’s culture as a “Family” culture reflects tolerance to subpar performance. Rather focus on those characteristics of a “family” culture that you want.
Knowing the profit of your core customers is key to building a growth model. Many companies have identified core customers that are generating a sub-optimal profit and so they cannot realize the profits they seek. Identifying the correct core customer allows you to generate profits and often operate in “Blue Ocean.”
The European Super League collapsed within days of launch due to hubris and the founder forgetting the key parts of their business model, value creation, sales, and value delivery. The collapse might bring a high price.