Discipline makes Daring possible.

Musings from The Disappearing Boss on People, Process and Responsible Autonomy for small-business employers.

Category: Scaleability

Confusions
August 22, 2022

Confusions

Stick insects confuse their predators on purpose.   They pretend to be a twig.  A predator already has a mental model of what a twig is and how it works, which doesn’t include being edible.  So it leaves the insect ‘twig’ alone.

We humans confuse people all the time.  Sometimes on purpose, most often by accident.   We assume that our mental model of the thing we’re building will be obvious to everyone who buys it, uses it or operates it.   Yet that is rarely the case.

Take a small business.  For a shareholder or investor it’s a machine for generating returns.   For founders it’s a way to make a dent in the universe or their route to a coveted lifestyle.  For their accountant it’s a set of connected accounts.  For an operations manager it’s a set of loosely related functions, one of which they probably consider to be the most important.  For some employees it’s a means to enjoy life outside work.  For others it’s a lifeline, and for others still a vocation.   For a customer it’s a solution to a problem.

Conflicting mental models pull people in different directions and make the thing you’re building confusing, less effective and ultimately unusable.

The answer?

  • Use a model that is simple, easy to communicate and effective in delivering what everyone wants.
  • Design the thing you’re building around that model, so that the way it works clearly reflects the concept behind it.
  • Share your model in your marketing materials, shareholder reports, filed accounts, operations manual, help guides and status reports, so that it becomes a joy to interact with, whatever your role.

If you’re a small business owner, you might like to use mine:

It works well, if you want to create a business that can last or that can grow.

Or both, if that’s what you want.

Are you building to sell or to last?
August 17, 2022

Are you building to sell or to last?

Are you building your business to sell or to last?

The answer makes a huge difference to what you do before you leave – even if in the end you sell it.

And if the answer’s ‘Neither‘?

Then your business dies with you.

There’s no right answer.

It just helps to be clear.

Where the system ends
August 9, 2022

Where the system ends

When the idea for Crossrail was first floated years ago, I thought nothing of it.  Abbey Wood station is 3 miles away.  Too far to walk, and not a pleasant walk either.  So I forgot about it.

Until TFL created a new bus route that took in the new station.

The thing that makes the new Elizabeth Line work for people like me isn’t the big, expensive part – the Crossrail system, it’s the bus that connects us to it.   And that, plus all the other new bus routes created to serve the Elizabeth Line is what makes the expensive part worth all the investment.

Knowing where your business system ends matters.

Tempted to cut a ‘peripheral’ service for your customers?

Be careful.   It may actually be the enabler for your core business.

Side-effects
August 5, 2022

Side-effects

There’s another bit of feedback we should be using to improve our businesses – our side-effects.

Side effects are not necessarily intentional, but they are real.

They’re not necessarily negative either.

If as business owners, we truly want to ‘make the world a better place’,  our improvement process must include getting feedback on our side-effects, then acting to minimise the damaging ones and maximise the enriching.

Otherwise we’re just not really viable.

Because one day, the negatives come back to bite us.

How much value you create
August 4, 2022

How much value you create

One of my favourite stories from business school was this one:

A sheet steel manufacturer was looking to sell their steel at a premium.

They looked carefully at who their customers were, and the process they went through to get their job done.

Their main customers were white goods manufacturers.  Now, steel doesn’t come out of the mill white, so these customers needed a paint shop where they sprayed the shaped steel casings of their products white.   There’s a reason they’re called ‘white goods’.  Offering other colours would mean adding another paint shop or creating an expensive change-over process for your single paint shop.

The steel manufacturer worked out that by adding a small cost to their own production process, they could save their customers a large cost and enable them to offer their goods at a premium.   It’s easier to paint sheet steel when it’s flat, at the end of your production process.   So that’s what the steel manufacturer did.

“Buy steel from us and you can have any colour you like.  And de-commoditise your products to boot”.

You don’t have to ask your clients intrusive questions about their finances to measure – or at least estimate – the value you create for them.  You just have to understand something about how their business works.

Some things to think about:

  • If you save them money, how much?  What does that add up to over time?
  • If you save them time, how much?   What was that time costing them before you?    What does it cost them now?
  • If you save them effort, how much?  What was that costing them before you?  What does it cost them now?
  • If you enable them to get more from the same level of resources, how much?  How much does that add up to over time?
  • Does any of this enable them to sell more, or to sell at a higher price?  How much more?  How much higher?  That’s part of the value you add too.

Measuring how much value you create for clients isn’t easy.   It is possible.

If you put your mind to understanding your clients first.

What it costs you to do
August 2, 2022

What it costs you to do

An entire industry has grown out of working out what it costs a business to do the things it does.   Along with a panoply of tools and techniques.  When I was studying at London Business School, I loved it.

It turns out that there is a simple measure that’s good enough for most cases.

Time.  Or more accurately, duration.

If you know how many clients you deal with, how long it takes for each client to go through your Share and Keep Promise process, and what your total operating costs are over that time period, then you know what it costs you to do what you do for each client you serve.

If you don’t like the answer you can drill down into Share Promise or Keep Promise to find out where things could work better.  And so on.

So how do you measure duration?

By logging events that are of interest and adding up the time that’s elapsed between them.

I’m sure you already note these events: when a prospect makes an enquiry; when a prospect becomes a client; when you welcome a client onboard, when the particular promise you made to this client has been kept.

You may even collect them automatically – they’re in your CRM, or your accounting system, they might even be in your workflow management system.  String them together for each client and you’ve got some extremely useful data.   Combine this with some other equally simple metrics and you’ve got the kind of process feedback you can use to grow your business efficienty and sustainably if that’s what you want.

A little bit of Discipline makes a lot of Daring possible.

Why try to be a unicorn when you can be a zebra?
July 27, 2022

Why try to be a unicorn when you can be a zebra?

Last week, someone sent me a link to this article from Harvard Business Review:

“Lessons from Germany’s mid-sized giants”

If you’re interested in what makes small businesses successful, it’s well worth a read.

Ignore the points made at the end – that’s just wishful thinking on the part of management consultants.  These companies don’t need outside interference, or to look more like their Anglo-Saxon counterparts.   They’ve been working well this way for decades and are likely to continue.

For me, it’s an encouraging article, that shows that given the right environment it is possible to be a global business and operate humanely at home and abroad.

Why try to be a unicorn when you can be a zebra?

I’d like to think there are many such businesses hidden away here in the UK too.   I’m unlikely to find out of course, because if there are, they won’t be looking at social media.

 

That Question
July 25, 2022

That Question

What question do you get asked over and over again about your product or service?

What could you do to save people having to ask it?

What could your people do with the time they spend answering it?

There’s no escape
July 18, 2022

There’s no escape

No matter how much we might wish it away, there is no escaping the fact that we are all connected.   That what we do in one place and time affects others in a different place and time.

In economics and big business, we like to pretend that this isn’t true.  That there are things we don’t need to worry about because they happen outside our bubble.

We call these things externalities.

As if they don’t affect us.

But sooner or later they do.

Because the bubble is imaginary.

We live in a series of systems, and ultimately a closed system – planet Earth, and sooner or later the all the consequences of our actions will come back to bite us.  Even those we choose not to see.

Time then to take responsibility, and dissolve our bubbles.

Climate change needs to be on the balance sheet.  Or we need to do away with the system that gives us balance sheets.

There’s no escape.

Heretical thoughts on packaging your Promise – Price
July 15, 2022

Heretical thoughts on packaging your Promise – Price

Price is about ensuring both participants profit from their time together, finding the the right balance between what you need and what represents value to the people you serve.

Questions to ask:

  • How much does it cost you to deliver?  – Work this out on a per package basis, and remember to attribute a share of everything your accountant would normally dump in ‘overhead’.   That way you can be sure of making a profit each time you Keep your Promise.   Keeping your Promise enough times per year to make the living you want is a different problem.

 

  • How much do you want to earn? – Here’s a quick calculation:
    • Work out how much a year you want to earn before tax.
    • Divide it by 100 (=((365-(weekends, time off and bank holidays))/2) – because you need to spend half your working time running the business).
    • That’s your target ‘daily earnings’
    • Set yourself 2 levels – the least you want to earn, and your ideal.

 

  • How are the alternatives priced?  – Price is part of the story people tell themselves when they choose, and is often used as an indication of  quality.  You don’t need to be cheaper than the alternatives.  You don’t need to be more expensive either, unless your costs are higher or you want to earn more.

Remember:

  • Being in a category of one puts you in complete control of your price.
  • Pricing is part of the story.
  • Payment is part of the format.
  • As long as you’re charging more than it costs you to Keep your Promise you have the potential to be profitable.   Keeping your Promise enough times per year to make the living you want is a different problem.
  • Price can be a flow control mechanism too.   If you’re inundated with clients, putting your price up will slow demand.   Lowering it may increase flow – but only if enough people already know what great value you offer.
  • If you’re not enrolling enough clients, you’re more likely to be underexplaining the value than overpricing it.
  • A low price can help to enrol early adopters, but make sure they know it’s a special deal for them.  And make sure they will rave about it afterwards.
  • If you get it wrong the first time, you can always put your price up for the next new client.
  • You only really need enough.  And enough is up to you.