(See the McKinsey & Co. enduring ideas concepts at the bottom of this post)
THE BASICS OF BUSINESS
Overview
The single most important key to business success is taking action. A good company has common sense in abundance and deals with people issues successfully.
The company should identify and measure everything that matters in the business using KPI’s (Key Performance Indicators) to monitor performance against targets, and structure the business properly, setting out who’s responsible for what (accountability), and who is answerable to whom (hierarchy).
The company should know the value of first impression (its brand). There is only one chance to get this right. When a new customer phones, or calls, they form a lasting impression of the business in less than 20 seconds.
The company must use communications to advantage. The internet is not just a faster way of doing things, it has changed the whole marketing concept of business (think of social networking, e-commerce, even virtual businesses).
Customers
The company must never presume that customers are getting what they want, regular meetings, and even telephone calls (customer and market research) can gain advantage for the company in improving its services and customer satisfaction levels
Equally, regular contact can discover areas of company services the customer base may dislike and raise awareness of competitive threats and even opportunities.
Providing new services to an existing customer base is far preferable to chasing new business (generally it costs 5-10 times more to acquire a new customer versus keeping an existing customer, known as customer retention).
The company should identify its sources of business and strengthen its links within that sector of the market. Known as the 80/20 rule or the Pareto Principle: generally, 20% of a company’s customers accounts for 80% of its revenues and/or profits.
Employees “The Team”
Hire personality and attitude, and teach skill. An enthusiastic and positive attitude is more important than job experience. You can teach staff how to do the work, you can’t teach personality or attitude.
Most small businesses stay small because they abdicate responsibility by hiring inexperienced people set in their ways and not compatible with the companies culture or structure. Short term appointees or external management agencies seldom benefit the company as they demote and demotivate existing staff often leading to resignations and a rapid turnover in staff. It is always better to appoint senior management and executives from within a company structure.
Show appreciation for a job well done and make the job alive by giving responsibility, and always ask for opinions, staff can often provide the format for doing the job better (team members that deal with customers ARE the front-line of any company).
Staff can and do share the companies vision of the business future, share good news, and request opinions on how in the future to avoid mistakes that may happen, and do not over-react to mistakes, everybody makes them, including senior management.
Delegate areas of authority and explain what the customer would like, and how this can be achieved. This permits the passing on of responsibility and creation of an internal reporting process.
Permit the stature of staff to grow with the business by including key people into customer meetings and letting them deal with customers themselves (team empowerment). As they train additional staff during the company’s growth and meet both potential and existing customers, the company benefits from a wider perspective of opinion.
The company must adopt a realistic attitude to all aspects of customer services related to the performance and ability of its staff. Nothing drives customers away from a successful business as easily as uncaring, incompetent, or unprofessional staff. Again, and just like a good customer in the 80/20 rule above, a good employee costs a lot less than hiring and training a new one (employee retention).
New Sources of Business (ie. Generating Revenues)
The company should adopt policies that make it stand out from the crowd. A unique business is compellingly attractive to potential customers and provides them with value (known as a Customer Value Proposition).
New sources of business are the life blood of any company and first impressions matter. When a potential new customer inquires (calls, walks into a store, checks a website, etc.), they form a
lasting impression of the company within the first 20 seconds.
Use the 6 P’s of marketing to drive success here:
1. Product - What should or shouldn't you offer? What is your real product?
2. People - Who uses your product? What do they care about?
3. Price - Can people afford your product or service? How do they value it?
4. Place - How do people get to your product? Where is it distributed? How is it delivered?
5. Production - Can you meet demand? Is your production flexible enough to meet changing needs?
6. Promotion - How do you let people know what you have? How well does your promotion work?
Data & Analysis
Build your knowledge of your customers and record it, what they like, what they dislike, and most importantly, find out what “connects” with each customer..
A good company inspects what it expects, and good customer databases provide the company with its competitive advantage, along with its employees, brand and products. The data the company has can reveal its strengths and weaknesses, use it to identify where you need to concentrate the company’s energy. Again, direct effort and energy at 20% of areas that make an 80% impact on company performance.
With solid analysis (customer, employee, product, competitive, market and financial research) a company will be able to develop its business and strategic plans.
Finally
Question everything, review procedures to see if there is a better way of doing things, and never be afraid of change. All successful businesses evolve as they grow and the company infrastructure will forever be constantly changing.
Set goals for the company to achieve.
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McKinsey & Co. links to concepts and strategic ideas:
Enduring Ideas: The business System
Enduring Ideas: The Industry Cost Curve
Enduring Ideas: The GE-McKinsey Nine-Box Matrix
Enduring Ideas: The SCP Framework
Enduring Ideas: The 7-S Framework
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