We All Need Clarity

We All Need Clarity

In discussions with many clients this week, the common theme that I heard was exhaustion and depression. As I have said before, thanks to COVID, we are all tired. However, our personal situations amplify the stress that we all suffer from because of COVID. In some cases, it may be a spouse losing a job, homeschooling multiple children while trying to do your work, or worries about elderly parents.

Regardless, the stress is coming at us from all sides. I recommended that my clients spend time talking to their direct reports, employees, clients, and suppliers and asking how they are doing. Not just asking, but actively listening to hear what is going on in their lives. Things like this make a difference.

Besides, a repetitive theme is “Clarity,” e.g., what is your strategy in a single sentence. However, regardless of our intentions, the corporate playbooks come out periodically, messing everything up. I have recently heard companies ignoring such advice and reverting to keeping all information secret and locked up.

Now I am not talking about profits or trade secrets, but rather things like strategy, brand promise, employee development, and bonus calculations. This lack of clarity causes confusion and more stress. However, it is also giving rise to another issue, the loss of “A” employees.

My recent blog on the coming talent crunch pointed out a shortage of “A” players. As see from my clients and others, as we are starting to emerge from COVID, demand is increasing. Many are scrambling to fill positions to meet that demand. As a result, for “A” players, the call is out that you are needed, and the market will reward you!

If your organization is focused on obscurity over clarity, whether intentionally or not, your “A” players are vulnerable. It reminds me of my many years in M&A when a selling owner or CEO would concoct stories to cover the buyers’ due diligence. In every case, the “A” players would realize what was going on. In the best cases, they would be in the CEO’s office that same day asking, “Are we being sold?” However, in the worst cases, they would start the discussions around the proverbial water cooler. Nature abhors a vacuum, and it never ceases to amaze me the stories that people can come up with when they don’t know what is happening. Regardless, the net effect of uncertainty with the future leads all your “A” players to get their resumes out and start looking. Only the “C” players stay because they have no options.

Regardless of how your business is doing right now, you need your “A” players to survive and thrive. If you are left with your “C” players, you might as well start looking for a buyer or considering some other form of exit.

So, consider your “A” players. They need to know the strategy, brand promise, and core purpose of the organization, their career development and options, and their expected compensation and how it is calculated. Why?

Strategy

If they don’t know the strategy, they cannot execute it. As David Marquet put it in, Turn the Ship Around, “Push the decision making to where the information is.” The information is at the front lines, not in the board room. The more your employees know about the strategy and the clearer it is, they can make the correct decisions as market conditions change. And market conditions are changing rapidly at the moment.

Core Values and Brand Promise

COVID has brought home how precarious life is. So, people during this time of lockdowns and death are questioning the meaning in their lives. They are now looking at the organizations that employ them and asking if their values align. A recent Harvard Business Review article put it that Core Values are no longer a nice thing to have but a core part of the strategy. So, if you cannot articulate your core values and brand promise clearly to your employees, they will determine it on their own, and it may be very different from what you proclaim. Self-determined values are based on the behaviors they see rather than what is claimed. In that case, you may lose those employees who would support the values and brand promise you aspire to rather than what you live.

Career Development

As mentioned above, COVID has brought home fragility. Many are questioning if they want to do “X” for the rest of the career. Thus, a vital part of any employee review at this time is understanding what they seek for their future. It may no longer be promotion and leadership, but more time with family or new experiences in other divisions or markets. Understanding your employees’ desires and working with them to realize their desires while meeting the organization’s needs is more likely to retain them than ignoring them.

Their compensation and its calculation

Your “A” employees are getting calls from headhunters and recruiters because there is a talent crunch. If not, they soon will be. While the vast majority of employees don’t leave because of compensation, as a result of COVID, many bonuses or pay raises were deferred, changed, or ignored. Many organizations face cash flow issues and are in no position to provide employee bonuses or raises but explaining that is key. Others thrived during COVID, and many of their employees have stepped up well above expectations.

In some cases, those employees don’t understand how their financial rewards correlate to their efforts and believe they were short-changed. Those employees are more likely to take a headhunters’ call. Therefore, explaining the situation, explaining the policies, pay, and bonuses are calculations will help dramatically.

With greater clarity, you will more likely realize your strategy and keep your “A” players, enabling you to thrive. Obfuscation will only lead to tears.

 

Copyright (c) 2021, Marc A. Borrelli

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Is Your Company Scalable?

Is Your Company Scalable?

I guess the first question is, “Why should it be?”

If you can scale your company, it provides you with FREEDOM. If you don’t, you get stuck in the “Owner’s Trap,” where you do everything yourself. Eventually, in the Owner’s Trap, revenues flatten, and profits fall because the owner is spread too thin. So, how does scaling provide you with Freedom?

Provided you scale correctly, growing your business provides you with Wealth, and Wealth is correlated with “No!” Your ability to say “No” gives you FREEDOM because you get more:

TIME – You get out of the Owner’s Trap. You have the ability to say No, you get to choose when you want to work, so you have more time to spend with family and friends.

MONEY – With more money, you can say no to more things, and you have money to spend on things that matter to you.

 OPTIONS – With more Wealth, you have a much better BATNA (“best alternative to a negotiated agreement”), which increases your poker hand. Your choices concerning your business increase so that you can:

  • Keep it and be effectively a coupon clipper.
  • Pass it on to your children or employees
  • Become a Non-Executive Chairman and leave the day to day running to your President or CEO.

As we can see, through scaling, you increase Wealth, which provides you with more Freedom and Options.

So if we want to scale, how can we determine if we can? To scale effectively, we have to change our Mindset and ensure our products meet the TVR requirement.

Mindset

Our Mindset needs to be that we “want to sell a few things to many people, rather than many things to a few people.” Many business owners aim to sell a few things, but they are not strategically dependent and have different consumers. Such a strategy is limiting, and they are not adhering to the Mindset. 

Strategically dependent services mean the consumer who purchases A is also likely to buy B, and both A and B meet the same “Job to be Done.” The late Clayton Christensen said that when consumers purchase a product or service, they are essentially “hiring” it to help do a job. If it does a good job, they will rehire it, if not they will fire it. Here as Christensen noted, “Job” is shorthand for what an individual seeks to accomplish in a given “circumstance.” The circumstances are more important than customer characteristics, product attributes, new technologies, or trends.

In Know Your Customers’ “Jobs to Be Done,” Christensen et al. discussed a construction company that was selling condominiums aimed at couples looking to downsize or divorced single parents. The units had high-end finishes providing a sense of luxury. However, although they had much traffic from prospective clients, they were not selling. The company made changes based on focus groups, but still, sales didn’t budge. A consultant decided to look at what differentiated a serious buyer from a tire kicker.

The data didn’t provide a clear demographic or psychographic profile of the new-home buyers, even though all were downsizers. However, from discussions with buyers and tire kickers, the issue of the “dining room table” raised its head. The condos had no formal dining room and just a breakfast bar. However, what they heard was many people saying, “When I figure out what to do with my dining room table, I will move.” The consultant realized that every family event is spent around the dining room table, from homework to birthdays, to holidays. Thus, giving up the dining room table asked buyers to give up something with profound meaning in their lives. So, the decision about whether or not to buy a high-end condo revolved around this one piece of furniture. The company realized that they were not in the business of building condo, but “in the business of moving lives!”

With this understanding of the Job to be done, the company:

  • Changed the layout of the condos to allow for a dining room table,
  • Provided moving services,
  • Two years’ worth of storage, and
  • A sorting room within the condo development where new owners could take their time making decisions about what to discard.

With all these changes, the company raised the condos’ prices to cover the moving cost and storage, and in 2007 when industry sales were off by 49%, they saw their business grow by 25%.

The condo’s strategic dependent service was not a second home or special finishes but moving-related items. Therefore, understanding the “Job to be Done” helps decide on much more effective strategic dependent services.

TVR

The TVR requirement for all services is that it is:

  • Teachable. Others can do it so that you don’t have to do everything. If you look at the entire process from sales to production, if there is any step that only you, the CEO, or business owner can do, you are in the “Owner’s Trap.”
  • Valuable to the consumer – A Need, not a Want! If you are meeting a want, your products and services are easily substituted or given up when bad.
  • Repeatable. Consumers need it regularly.

There is one other item, that is not technically are part of TVR but needs to be kept in mind, what is the market size. If you are providing services for. a very small market, then no matter how effectively you can scale, your growth is limited by the number of competitors.

Some of you will note that I said, “Services,” and you ask about selling “Products.” Unfortunately, all products become commodities. Once that happens, you are in a race to the bottom in terms of price. Suppose you want to maintain product differentiation. In that case, you need to wrap your product in a service that has a TVR model. For example, the iPhone is a product, but it is also a service. Apple provides an environment where apps and your data is safe, so it demands a much greater price for its phones, generating a considerable margin for the company. Google’s Android phones are a commodity, and the prices are much lower. The only way to stop falling prices is to increase the available options. Of course, this irrelevant to Google as it is only providing the operating system, so the more phones (commodities) its operating system is on, the better.

In the condo story above, they had moved from selling condos (a product) to providing life moving (a service), and thus it could not be commoditized. To reiterate, if you sell Products, figure out a way to wrap a service around it so that you can defend your position and make it comply with the TVR model.

However, the TVR model does pose an internal contradiction. “Things that are teachable are often not valuable, and things that are valuable are often not teachable.”

If what you do is not teachable, then your work depends on those who know-how, limiting its scalability. The challenge is to (a) make it teachable so that more people can do the work, or (b) offer a different scalable service based on the core service. A company I know builds unique websites using its platform. They have done this to ensure that once a feature is improved, it is automatically available on all the sites that use its platform. However, because of the intricacies of its platform, it does something very valuable but not teachable. It is developing a scaled-down version that anyone can use, offered at a lower price, but with many of its platform features. Thus, it is producing something teachable and valuable.

Another example is Cook’s Warehouse in Atlanta, which provides kitchen appliances and wares. They compete with many other companies from Williams Sonoma to Target. Cook’s Warehouse has wrapped a service around its products by offering cooking classes. In these classes, chefs cook with you and teach you how to use many of Cook’s Warehouse’s products. As a result, customers develop an appreciation for the service, see the stores as a place of education, and are more likely to increase in-store purchases while attending a cooking class.

The other part of the TVR is that it has to be repeatable. We want customers to purchase it continuously. To use a simple example, wedding photographers do valuable work, but it is not that repeatable. Most of us get married once, or in some cases, twice, but rarely more. Also, there are usually several years between the events, so a customer is not a repeat customer. With my above example of the web design company, they sell their lower-end customers a monthly subscription to use their platform, meeting the repeatable requirement.

Some service providers will say what they do, is teachable and repeatable but do not have much value. In that case, look at your service offering and see if there is a way you can turn into a Rundle – a repeatable bundle. Creating a Rundle of your various offerings in ways that provide value to your customer is a possible solution. For example, an accounting firm providing tax returns for small businesses is teachable but not that valuable – you can get any other accounting to do it. However, suppose the accounting firm were to bundle – tax returns, bookkeeping, payroll, and business financial planning into a rundle with a fixed monthly payment. In that case, it is now offering something that not many others are and has value.

Suppose you cannot make a rundle of your services. In that case, unfortunately, you are in the commodity business. You can expect your competition to be internet-based, e.g., TurboTax, or available from service providers on Upwork or Fiverr.

So, examine your offering portfolio and ask the following questions:

  • Is there a service we can wrap around a product to differentiate it?
  • Are our services strategically dependent and meeting the same “Job to be Done?”
  • Are our services teachable so that others can do them?
  • Are our services a “Need” of the customer and not a “Want?”
  • Are our services demanded repeatedly?

If you can answer these questions in the affirmative, then you can build a scalable business and achieve business freedom.

 

Copyright (c) 2021, Marc A. Borrelli

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What is Your Strategy, In a Sentence?

2020 was a challenging year. By March, we had thrown all of our plans away and were adjusting to a new environment. Having made it through 2020, we now have entered 2021. What awaits? From what I hear, we are going to be living with COVID for a while, regardless of the vaccine. How long who knows, but forecasts I hear are Q3 or Q4. Thus, we are in a Groundhog Day for effectively another year. So, what is your strategy for 2021 and beyond? And more importantly, do your employees clearly understand your strategy? Can they state it in a single sentence?

In discussions with many companies, and ignoring those that respond with a blank stare, I hear everything across the spectrum from “We have a detailed strategic plan” to “We don’t really have a strategy.” Often what I hear are tactics, but mostly hope. But as Dr. Akande famously said, “Hope is not a strategy.” So, I hope all of you have your strategies planned for 2021 and beyond.

If you do, I hope it is written down, because as Emmitt Smith said, “It’s only a dream until you write it down, and then it becomes a goal.” So, assuming you have your strategy, and it is written down, you need to be able to articulate it in one sentence.

Why one sentence? Because most of those that have strategies don’t provide a crisp, clear answer in a single sentence (which may be the reason so many people in organizations complain about a crisis of clarity).

Patrick Lencioni’s Four Disciplines of the Advantage are even more key today. The Four Disciplines are:

  • Discipline 1: Build a Cohesive Leadership Team
  • Discipline 2: Create Clarity
  • Discipline 3: Over-Communicate Clarity
  • Discipline 4: Reinforce Clarity

In a time with so much uncertainty, the key to success is being able to adapt quickly to market conditions and pivot where needed. However, if your employees don’t know your strategy with clarity when the environment changes, they will be seeking input from above as to how to respond. Slowing decision making increases the opportunity for you to adapt too slowly and suffer from increased losses or missing out on new opportunities.

So, a one-sentence strategy achieves Discipline 2. Furthermore, if there is clarity, then it can be easily communicated and understood. With Discipline 3, over-communicating clarity, everyone in the organization should know the strategy and state it in the same way. With clarity and focus across the organization, it is more likely that the organization can reach its goals as everyone will understand if something fits with the strategy.

In addition, it needs to be a sentence because a single sentence has real power. As Clare Booth Luce once told John F. Kennedy in 1962, “a great man is one sentence.” His leadership can be so well summed up in a single sentence that you don’t have to hear his name to know who’s being talked about. For example, “He preserved the union and freed the slaves,” doesn’t need explaining that it was Abraham Lincoln. Luce was telling Kennedy to concentrate, to know the great themes and demands of his time, and focus on them. It was good advice. When imperatives are clear and met, you get quite a sentence.

While these are legacy sentences and focus on the past, the same logic can apply to strategy, which is focused on the future. Thus, a great strategy is a sentence.

So how do you do it?

Roger Martin, in his book, Playing To Win, proposed a strategic framework based on five key questions:

  1. What is our winning aspiration?
  2. Where will we play?
  3. How will we win?
  4. What capabilities do we need?
  5. What management systems must we have?

However, to state your strategy in a sentence, you just need to focus on the first three questions: winning aspiration, where to play, and how to win. With that structure, you get the format:

Achieve [Winning Aspiration] in [Where to Play] by [How to Win].

Breaking it down:

  • Winning Aspiration. The winning aspiration needs to describe a clear win that is future-oriented, ambitious, specific (thus measurable), contains a competitive element, and avoids a play-to-play goal.
  • Where to Play. The Where to Play needs some element of market segmentation, you satisfy the entire market.
  • How to Win. The How to Win needs to capture your organization’s unique and defensible value proposition and your competitive advantage.

Here are some examples:

  • We want to lead the U.S. luxury performance sedan segment by offering higher quality and competitive design for one-third less.
  • We want to have a top-ranked 5-star property in every market that will support a luxury hotel by providing a home-away-from-home, office-away-from-office experience.
  • We want to capture the short-haul air travel market with high-frequency flights and efficient service to secondary airports at a price that rivals driving.

Hopefully, you didn’t need to be told “Lexus,” “Four Seasons,” or “Southwest Airlines.”

So, get with your leadership team and develop your one-sentence strategy. Once you have all agreed on it, ensure it has clarity. Then, as Lencioni says, over-communicate it to your firm, customers, suppliers, etc. With everyone focused on the same goal, you are more likely to achieve it!

 

Copyright (c) 2021, Marc A. Borrelli

 

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Thank god, but 2020 is nearly over. While it has been a crazy year, it has, in many ways, flown by. It seems only yesterday that we were all locked down and adjusting to a new world. However, the year is nearly over, and the world has not changed. However, we are experiencing a “K” shaped recovery. Effectively, the economy is bifurcating, and many industries and companies will end up on the downward slope.

As I have said before, I expect COVID to be with us until Q3/Q4 2021, but call me a pessimist. Even so, we should expect to be here till the end of Q2 2021. So how are you planning for 2021? What got you here won’t get you there!

This Year It Is the Accelerant Stupid

As you begin the planning cycle, consider that COVID is an accelerant. Whatever were the major trends were in your industry at the end of 2019, take them forward ten years, that is where the industry is now! So where are you and where should you be?
Concerning where you are and where you need to be when COVID is over, you need to take a realistic look at your organization and do a gap analysis on:

  • strengths and weaknesses,
  • culture and core values,
  • human and capital resources,
  • processes and systems,
  • customers and buying habits,
  • product and service delivery,
  • suppliers, and
  • competition.

With that gap analysis, you can determine where to focus your attention, so that you can emerge from COVID in a leadership position. I am not going to go through all these today, but here are few things to consider.

Culture

Culture has never been more critical. If employees adhere to the company’s core values and live its culture, then provided they know the organizational goals, they can make the right decisions. Moving decision making down to the front lines is critical during the next twelve months as the environment changes quickly. Having the decision process moving up and down the organization is a luxury few can afford.

For a great reminder, look at Turn the Ship Around by Capt. below.

Further, reading “Adaptation under Fire: How Militaries Change in Wartime,” by Lt. General David Barno and Nora Bensahel, there are several crucial lessons for management.

  • Everyone Knew the Mission, not just the task. Post World War I, decentralized, independent battlefield actions, a tradition in German military thinking, returned and became a central tenet of German army doctrine. Mission orders were regularly emphasized and practiced during peacetime training exercises.
  • Continuous Improvement. The German army established the culture of relentlessly critiquing its leaders and units’ performance in exercises and war games. Commanders and staff officers at all levels were expected to do so candidly and objectively, without regard to personal embarrassment or potential career damage. This candor extended to critiquing the performance of senior officers and higher headquarters as well. These principles made German doctrine inherently adaptable in the face of battle.
  • Changing the rules of the Game. The French army believed the next war would be the same as WWI. French interwar thinking focused primarily on leveraging defensive operations to prevail in any future conflict. Thus, they undertook no “no large-scale examination of the lessons of the last war by a significant portion of the Officers Corps.” In contrast, the Germans examined how to use new technologies to change the “Rules of the Game” and win using offensive operations. They improved their Blitzkrieg tactics that had great success in World War II.

I would bring these lessons into your organization as part of any new model to succeed. Regarding business Blitzkrieg offensives, I would look to John Boyd and his OODA Loop as a better model.

Process and Systems

As you examine your processes and systems, I would recommend asking, “If we didn’t do it this way, would we?” and “Will these systems get us to where we need to be?” In many cases, with the acceleration that has been experienced, the answer may be no. Thus, put together multifunctional teams together to examine these and use different problem-solving models, as I mentioned in “Want the Best Results, Get out of your Comfort Zone.” Some I would look to are:

  • Get out of your comfort zone. Change the environment or put limitations on the team. Use Brian Eno’s Oblique Strategies, where each card puts a constraint on the team to help too when teams are struggling to break through a problem. They are available on Amazon.
  • Break your business process down to its most simplified version, e.g., ship a product to a customer and then work on new solutions. The more you define the process in the question, the more you are tied to that system in the solution. By being most simple, you can expand the range of solutions.
  • New ideas, enforce the rule that you cannot challenge any idea until 100 are developed. This rule stops the thought process from being shut down early by those that oppose change, and often the craziest ideas come at the end, but a gem of something great.
  • Also, in examining systems, take a look at Tom Wujec’s TED Talk, “Got a Wicked Problem, First Tell Me How You Make Toast,” below.

Using these problem-solving methods, if done correctly, could provide an additional benefit, reinforcing your culture and camaraderie among your employees, which has been challenging to do during our COVID work from home.

Contact me if you need help facilitating any of these processes as you look ahead as I wish you all the best succeeding in 2022 and beyond.

Copyright (c) 2020, Marc A. Borrelli

Recent Posts

Do you know your Profit per X to drive dramatic growth?

Do you know your Profit per X to drive dramatic growth?

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....

Five Ways to Attract Prospective Employees

Five Ways to Attract Prospective Employees

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.

Are you killing your firm’s WFH productivity?

Are you killing your firm’s WFH productivity?

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.

EOS is just that, an Operating System

EOS is just that, an Operating System

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...

What has COVID done to Company Culture?

What has COVID done to Company Culture?

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.

Profit ≠ Cash Flow

Profit ≠ Cash Flow

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.

What Are Your Critical and Counter Critical Numbers?

What Are Your Critical and Counter Critical Numbers?

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.

Do You Truly Know Your Core Customer?

Do You Truly Know Your Core Customer?

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 Greatest Own Goal or the Greatest Collapse

The Greatest Own Goal or the Greatest Collapse

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.

COVID continues to accelerate changes in business models

COVID continues to accelerate changes in business models

As I have said repeatedly, COVID is accelerating change for all businesses, whether or not they recognize it.  A recent survey by the IBM Institute of Business Value concluded that “executives must accept that pandemic-induced changes in strategy, management, operations, and budgetary priorities are here to stay.” I see three significant shifts taking place.

  1. How CEOs Lead
  2. Changes in priorities
  3. Changes in business models.

How CEOs Lead

  1. Unlocking bolder (“10x”) aspirations. COVID caused most CEOs to question their assumptions about the pace and magnitude change attainable. The realization that a change in mindset can dramatically affect goal setting and the operating model, many CEOs are effecting changes in a few months that companies previously assumed would take years. The speed for many of these changes is down to employees working longer and harder; however, many CEOs also recognize that many employees have more time available with the stop in travel.
  2. Elevating their “to be” list to the same level as “to do” in their operating models. With COVID, leadership has to change. CEOs’ priorities were setting up strategy, culture, and making people decisions at regular times. However, now it about maintaining morale and ensuring employees are prepared for whatever may come in the face of uncertainty. Thus, leaders are changing how they and their senior management team show up. Leaders now need to be empathetic and offer words of encouragement.  According to Lance Fritz, CEO of Union Pacific, “[Employees] need to see that their leadership is vulnerable, empathetic, and making decisions in accordance with our values, which I’d better be the living proof of.”
  3. Fully embracing stakeholder capitalism. While I have also previously discussed embracing stakeholder capitalism; however, COVID has accelerated this trend as it has emphatically affirmed the interconnection and interdependence of businesses with their full range of stakeholders. CEOs are confronting tough decisions with profound human consequences every day. CEOs have realized that their choices are affecting their employees, communities, and suppliers. How they behave will have a long term effect on their business, especially as 87 percent of customers say that they will purchase from companies that support what they care about.
  4. Harnessing the full power of their CEO peer networks. As a result of COVID, CEOs talk to one another much more and at a much greater rate. The belief is, “Let’s learn from each other. Let’s hold hands. Let’s commiserate.” They are achieving this through informal networks and groups like Vistage. The power of a Peer group where you can be vulnerable and get input into these hard decisions is immense. CEOs don’t have to feel like they are carrying all the weight themselves. During the Great Recession, Vistage member companies outperformed non-Vistage member companies [. ]

Changes in Priorities

Not only are CEOs changing the way they lead, but companies are finding that their priorities have changed dramatically! According to the recent IBM survey, companies will focus more inwardly over the next two years. Their top priorities now are:

87% Cost Management
87% Enterprise Agility
86% Cash Flow and Liquidity Management
84% Customer Experience Management
76% Cybersecurity
75% I.T. Resiliency
65% IoT, Cloud and Mobility
58% New Product Development
52% New Market Entry

 

As companies move away from just-in-time delivery, 40% of those surveyed identified the need for space capacity in their supply chains. However, about 60% said they were accelerating their organizations’ digital transformation, and three-quarters plan on building more robust I.T. capabilities.

Changes in Business Models

Finally, many companies have also changed their business models to address market changes resulting from COVID, including some clients. Some of the creative pivots are:

  • Mandarin Oriental. As mentioned last week, many high-end hotel chains are supplying alternative residences for the wealthy. MO has not only done that; it seeks to deliver the luxury experience where you are rather than at a destination. The company promotes “Staycations at M.O.” at its properties if there is one in your city. These staycations offer early check-in, late check-out, a free bottle of wine, and credits for other purchases. However, if you don’t want to leave you home, MO says, “Just call room service.” They will deliver food, items from the cake shop, supplies from the spa, or other merchandise to your house.
  • JD.com. For producers of alcoholic beverages, COVID was a considerable blow. During the Chinese shutdown, its e-commerce giant, JD.com, go D.J.s and performers to stage three hour live show online. During these shows, viewers could purchase alcoholic beverages from Rémy Martin to Budweiser and have it delivered to their doors with a single click. As a result, whiskey sales from “a single partner brand” increased eightfold during a day with the show. As a result, JD.com plans to continue its live music events but to expand the products it offers.
  • David Dodge. As auto sales plunged nationwide, according to the Washington Post reports David Dodge in Glen Mills, Pa., the auto dealership sold more cars in July than in any previous month in its 15-year existence. David Kelleher, David Dodge’s owner, pivoted to meet the changing market. The company created a business development center to consolidate online leads and located it prominently just inside the front door. Salespeople now work phones, email, texts, and Zoom. They are using FaceTime to accompany customers on test drives. For those customers who want to stay socially distant, David Dodge allows the whole process online, and they deliver the vehicle to the customer’s home. Kelleher and his top salesperson, Mike McVeigh, doesn’t expect to return to the old ways once COVID is behind them.
  • Chipotle Mexican Grill. For a company that had been struggling with several crises over the last few years, when COVID hit, Chipotle new it had to change its business model to survive. The model was for pickup orders to be its lifeline. The company added “digital kitchens,” which handle online orders for pickup, at those restaurants that didn’t already have them, to enable this pivot. In May, Chipotle announced it would add 8,000 new workers to meet the growing demand. In July, it needed to hire 10,000 more. The company has aggressively added “Chipotlanes,” drive-thru lanes exclusively for picking up digital orders. That business model requires more employees than traditional stores—hence all that hiring is much more profitable.

Cause for Concern

All these changes are requiring more from employees in terms of working longer and harder. As I have noted on numerous occasions, empathy is needed, and burnout is a huge issue. What is worrying is that IBM’s research, drawing from other surveys that included employees, found a disturbing wide gap between “employers significantly overestimating the effectiveness of their support and training efforts” and how employees feel about these measures.

Source: IBM Institute of Business Value

As CEOs and leaders, it is critical that as you face COVID and plan for changes in leadership style, changes in priorities, and pivots in your business model, you need to do more for your employees. They are scared, uncertain, working from with kids doing school virtually, potentially overwhelming debt (see below), and they need management to support them. Those leaders who don’t rise to this challenge will see the good employees leave and create a reputation stain that could last a generation.

Recent Posts

Do you know your Profit per X to drive dramatic growth?

Do you know your Profit per X to drive dramatic growth?

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....

Five Ways to Attract Prospective Employees

Five Ways to Attract Prospective Employees

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.

Are you killing your firm’s WFH productivity?

Are you killing your firm’s WFH productivity?

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.

EOS is just that, an Operating System

EOS is just that, an Operating System

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...

What has COVID done to Company Culture?

What has COVID done to Company Culture?

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.

Profit ≠ Cash Flow

Profit ≠ Cash Flow

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.

What Are Your Critical and Counter Critical Numbers?

What Are Your Critical and Counter Critical Numbers?

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.

Do You Truly Know Your Core Customer?

Do You Truly Know Your Core Customer?

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 Greatest Own Goal or the Greatest Collapse

The Greatest Own Goal or the Greatest Collapse

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.