Profit First

Transform Your Business from a Cash-Eating Monster to a Money-Making Machine

The book review for this week is Profit First by Mike Michalowicz.

Michalowicz introduces a new and unique way of managing the financial side of your business. Rather than running your business using traditional GAAP based reporting, he introduces an approach that keeps the business owners focused on profits not on Revenue, SG&A or COGs.

His point is that profit is not an event . . . Profit must be baked into your business every day, every event, every transaction. The best way to do this is to build a system that puts profit first and not GAAP accounting (although the accounting still must happen). Michalowicz lays out a simple but powerful system that does this.

Do You Have a Customer Service Chasm?

In a 2005 Bain and Company survey of 362 companies, a huge gap was identified between what customers experience versus what companies thought they were delivering.

The gap was not just huge, it was staggering! Only 8% of customers in this survey described their service experience as “superior” while 80% of the companies described the service they provide as “superior.”

Tom Peters calls this the 8/80 chasm!

I have experienced this 8/80 chasm on a few engineering projects over the years.

An engineering contract typically has a ton of detail built into it. Because of this, it is really easy to fall into the trap of “working to fulfill the contract” instead of working to understand exactly what the customer needs before you are too far down the design road to make adjustments.

When a project manager falls into this trap of managing to the contract, it is inevitable that they will encounter a customer who is not happy with the finished product. Usually, when this happens, the project is so far down the design path that the effort to get realigned with the customer’s expectations is extremely painful for both the project manager and the customer!

So what can businesses do to bridge this chasm or avoid it altogether?

What Powerful Advice Do You Wish You Had 20 Years Ago?

Recently, I was a guest on “Ideas and Stuff”, a Calgary based podcast (episode 50). One of the questions they provided in advance for me to think about and prepare for was; “If you could go back to the day you started your business/career, what would you tell yourself?”

As it turns out, we had a great conversation during the podcast and never quite got to this question! However, the question did really get me thinking.

If I could back up my career, what do I wish I knew that would make a big difference?

As many of you know, I am an electrical engineer by education and practiced in this field for quite a few years.

As engineers, we are forced to focus on numbers, formulas, Lagrangian multipliers, and other theorems that would give most people nightmares! However, as the Dilbert stereotype so aptly illustrates, we are generally not taught the basic things about effective communication, teamwork, or leadership!

So, what would I tell myself if I could go back to the day I started my career?

How to Be Urgent with the Tactic and Patient with the Strategy

I attended a “Jamie Clarke” keynote earlier this year and was struck by a number of things he said and how they apply to business.

Clarke is a fellow Calgarian who has summited Mt. Everest twice, climbed the Seven Summits, written a few books, and is the CEO of Live Out There Ltd. He was a very engaging speaker with a ton of life experience and wisdom.

Of the topics he covered in his keynote, there was one statement he made that every business leader needs to practice:

“Be urgent with the tactic and patient with the strategy”

It is really easy to get stuck on one side of this equation and forget about the other. Some people gravitate towards tactics and are always busy but never really “move the ball forward.” Other people are so focused on creating a legendary strategy that they don’t get anything practical done!

About 10 years ago, my son and I decided to build a remote-controlled submarine. We talked through some ideas, drew up a few conceptual plans but never really had a solid strategy in place before we went a bought a bunch of parts from Lowes. Once we had the parts, we went into full-on build mode.

We had a ton of fun while we created an amazing submarine prototype that ended up having so much buoyancy it probably could have floated a full-sized car! We were too focused on tactics and should have stepped back and built a solid design strategy!

In the end, after a lot of discussion and some quick Google searches, we discovered it was way cheaper to just buy a remote-controlled submarine online. However, we still have yards of white PVC pipe glued together somewhere in the shed as a reminder of our glaring failure!

We often hear that execution eats strategy for breakfast or that action without strategy pointless . . . So what is the answer?

Blue Ocean Shift

Beyond Competing - Proven Steps to Inspire Confidence and Seize New Growth

The book review for this week is Blue Ocean Shift Beyond Competing by W. Chan Kim and Renee Mauborgne.

Blue Ocean Shift is the second book in the “Blue Ocean journey” for Kim and Mauborgne. Here they expand on the concepts defined and outlined in Blue Ocean Strategy published in 2005. It is easy to see that the authors have been busy with research, consulting and projects since then! This book has updated tools, concepts and compelling case studies. Entire countries have got on board and kicked off Blue Ocean initiatives (Malaysia’s National Blue Ocean Shift Summit)!

My takeaway from this book is the Blue Ocean shift diagram (below) and the understanding behind it. Each business leader must continuously strategize on how to move into or stay in a Blue Ocean market. This is a daunting task and takes significant effort, creative thought, innovation, wisdom, and action. However, the alternative, the Red Ocean of cut throat competition, MUST be avoided to avoid the slip into becoming a Red Ocean commodity!