Business Rocks: Finney’s KPIs

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This week’s riff: Finney, our beloved cocker spaniel, is an expert environmental scanner. Each morning he will lie on our bed and see what clothes my wife and I put on. If we are wearing business clothes, he realizes that he won’t be going for a long walk for a while and heads off for a little sulk. If, however, we put on jeans or casual clothing, Finney will bounce around the house with his tail wagging: he immediately knows that it’s going to be a good day!

Similarly, if Finney is in our front room and hears the fridge door open he probably won’t move; but the moment he hears someone opening up the packet of ham slices he’s off to the fridge like a shot. What’s more, he can discern the sound of my wife’s car from all the other vehicles passing by, long before it reaches our driveway and will immediately head to the front door to meet, as he’s quite properly realized, the leader of our particular pack!

Most businesses are awash with data, and business leaders are forever being encouraged to add more KPIs to their portfolio of performance measures. Most of it, however, just becomes noise. The key to managing the growth of most businesses is through identifying and focusing on the handful of objectives – and the related measures – that have a disproportionate impact on your business’s performance.

The CEO of one of my clients, for instance, focuses first and foremost on the size of his company’s order book, the percentage of orders delivered ‘on time and in full’ and the value of sales invoices still outstanding. If all three of these are healthy, he believes the company will be successful, but if any drop below his required standards, he uses it as sign to take action.

Likewise, Finney gets by with just a few visual and aural clues to determine his plans and happiness. Which are the few critical objectives and KPIs that you should focus on to drive your organisation’s success?

Off The Record: I Love My Dog by Cat Stevens

I love my dog as much as I love you

But you may fade, my dog will always come through

All he asks from me is the food to give him strength

All he ever needs is love, and that he knows he’ll get

Stuart Cross 2017. All rights reserved.

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Shifting From ‘Quick Wins’ To ‘Big Wins’

making a big change

One of the biggest drains on your organization’s time and energy are “quick win” projects. These projects often emerge at the end of a team or departmental ‘away day’. Following a brainstorm of potential ideas to improve performance, each idea is reviewed on two dimensions: (1) its overall value impact; and (2) its ease of implementation.

Unfortunately, few, if any of the ideas are both high-value and easy to implement. Instead you end up in a discussion over whether to pursue high-value, hard-to-implement initiatives, or lower-value, easy-to-implement projects. More often than not, the low-value, easy-to-deliver projects win out.

The barriers to the big prizes just seem too big and too difficult – especially at the end of a long and tiring workshop. But pursuing the “quick wins” is mistaken, for three reasons:

  1. Their impact is too small to register on any performance scale. This means that the project is never at the top of anyone’s priorities and is never delivered.
  2. They consume more effort than you originally estimate. The lack of progress means that you have to spend more time managing your project and communicating with and influencing your reluctant stakeholders.
  3. They prevent you from getting on with more important projects. This is the biggest reason of all. As Apple boss, Steve Jobs, once said, “It’s only by saying no that you can concentrate on the things that are really important.”

So how do you ensure that you are focused on actions that are both valuable and strategically important? The simple answer is to get on with the important stuff. If something is valuable, but difficult, that is all the more reason to do it.

Here are three practical steps you can take:

  1. Stop, reduce, slow down, delegate or defer “quick win” projects that have neither a significant financial or strategic impact. One of the first acts that Sir Stuart Rose took when he became CEO of UK retail giant, M&S was to reduce the number of ‘strategic’ projects from over 30 to less than ten, so that the energy of the organisation could be sensibly focused.
  2. Refocus your time and effort onto high-value projects that are directly in line with your broader strategic objectives, even if they are harder to implement. As Jeff Bezos, CEO of Amazon, once commented, “It’s important to be stubborn on the vision and flexible on the details.” By this he meant that Amazon’s success came from relentlessly pursuing big strategic objectives and being willing to develop and test many different solutions before finding the best one.
  3. Break these projects down into bite-sized chunks, enabling you to create the focus, momentum and pace that is required to deliver success. This requires that you identify the major milestones the project should deliver, as set out in the next section.

Focus on your big projects, your big wins, not meaningless “quick wins” that will simply become a distraction for your organization. As your teams then break down these major, meaningful challenges into more focused sub-goals and milestones, they will increase their energy, motivation and enthusiasm and accelerate the delivery of your most important objectives.

© Stuart Cross 2017. All rights reserved.

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Business Rocks: The Danger of Bargain Dungarees

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This week’s riff: My wife came back from her trip to Lidl this week with a pair of dungarees. I know that Lidl is famous for its impulse offers, so that’s not perhaps so surprising, but the dungarees were a size 10. Given that my wife is 5 foot 2 inches, 7 ½ stones and a size 6, I asked why she’d bought them. “Because they look good and were such a bargain!” she exclaimed, a little exasperated with my poor appreciation of her shopping strategy.

The desire to believe that things will turn out well, despite warning signs and evidence to the contrary, can prevent effective decision making. When I worked for Boots the Chemists, for instance, the company wrote off over £100 million through a misplaced investment in dentistry and other ‘wellbeing’ services in its stores, even though the trial sites failed to provide any evidence that the investments would succeed. Similarly, Tesco managed to lose over $1 billion in its US business, Fresh & Easy, even though the early signs were that the offer was not suited to American shoppers.

Yesterday I helped a client understand that the company’s bespoke product range, although emotionally appealing to the organization, was a tiny, loss-making part of the business that should probably be shut down. The company’s management had historically simply wanted to believe it was a good idea – it has become a microcosm of the organization’s culture –  and it has taken a new CEO and other fresh pairs of eyes to see that the cost and effort of making bespoke, one-off ranges simply makes little business sense.

My wife is reluctantly taking her “bargain” dungarees back to Lidl and, as she does this, why don’t you ask yourself what you are doing to view your business activities and performance dispassionately so that you don’t invest in unprofitable and unrewarding activities and focus, instead, on where you, your team and your business can grow and thrive?

Off The Record: I Want You by Elvis Costello and the Attractions

The truth can’t hurt you, it’s just like the dark –

It scares you witless

But in time you see things clear and stark

© Stuart Cross 2017. All rights reserved.

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The 3 Drivers Of Strategic Success

All the CEOs I meet are clear that their top priority is to deliver their strategic vision and achieve their performance goals. And yet the evidence shows that successfully delivering a vision is the exception rather than the norm.

I have worked with dozens of organisations on strategy and have identified three critical factors that drive ultimate success, as set out in the chart below. At one level, these three drivers appear obvious and superficial, but by really understanding what is required and ensuring that both the executive team and the wider organisation remain focused on these three factors, CEOs can transform their chances of achieving their strategic ambitions.

SuccessfulStrategies

For the past five years, for instance, I have worked with the leadership team at Topps Tiles, the UK’s leader in the ceramic tile market. Over time, the strategic approach of the team has evolved to focus on these three factors, enabling the company to grow its share from 25% to 33% and to more than double its profits.

The three drivers of success are these:

  • Strategic Clarity. At Topps, for instance, Matt Williams, the CEO, coined the phrase ‘out-specialising the specialists’ to help colleagues and stakeholders understand what the strategy is all about. Underneath that heading, however, is real clarity on the key goals, a rigorous focus on the scope of the business (Topps came out of wooden flooring, for instance, when Matt and his team became focused on being the #1 tile retailer) and the creation of a focused agenda for action that builds on its advantages and delivers on the company’s ambitions.
  • Shared Commitment. A strategy cannot be delivered by the executive team. It can only be delivered if the entire organisation is committed to its success. Like random iron filings being aligned by waving a magnet over the top of them, the leadership group must work to point colleagues from across the organisation in the same direction. This involves shared goals, developing an environment where cross-functional collaboration is encouraged and rewarded and ensuring that teams are genuinely involved in determing what the strategy means for their own priorities. Critically, alignment and collaboration start at the top and I have yet to see effective organisational commitment to a strategy without true partnership and collaboration in the executive suite.
  • Delivery Discipline. A strategy is not a plan and, as Jeff Bezos once said of Amazon, ‘we’re fixed on the vision, but flexible on the journey’. That said, the organisation from the executive team down must be disciplined in reviewing progress and addressing performance issues head-on to ensure that their key initiatives and the wider results, remain on track. Some otherwise effective executives can become bored by the discipline of review and follow-up, but without monthly (or more frequent) reviews of strategic progress it is unlikely that the necessary changes will be fully delivered or exploited.

The key take-out to understand is that each of these three factors are equally critical to strategic success. Remove any one of them and the chances of failure are rapidly increased. The chart identifies four potential positions:

  1. One-Hit Wonder. In this situation, the company has a clear strategy and has built the engagement and commitment of the organisation, but fails to follow up on its plans in a disciplined way. Many times, the CEO becomes bored with delivery and assumes that it will happen without close supervision of the leadership team. As a result, early successes and excitement is replaced by a lack of activity and broken promises, creating an environment of cynicism where colleagues my literally own the strategic t-shirt, but where real change and results are thin on the ground.
  2. Top-Down Push. Where you have strategic clarity and delivery discipline, but have not created the shared commitment that encourages broad involvement and cross-functional collaboration, you will end up with a situation where the leadership team must continue to exert pressure on the organisation to deliver the desired changes. Without that pressure, little is achieved. I remember working at a UK retailer where a new top-down strategy was not supported by the vast majority of middle managers. I would use the term ‘passive resistance’ to describe the stand-off, but the lack of involvement and engagement of the wider organisation ensured that the new strategy – and the leadership team – was consigned to failure.
  3. Incremental at Best. Where you have commitment and discipline, but lack a clear, compelling or coherent strategic direction, you have created an environment that will deliver continuous improvement. You may not see major improvements in performance, but you will see marginal gains. This is fine in relatively stable market conditions, but in more rapidly changing markets, continuous improvement is insufficient to withstand structural shifts. Nokia’s share of the global smartphone market, for instance, fell from nearly 50% in 2007 to 3% in just five years. A lack of strategic direction meant that the company was impotent in the face of new competition from Apple, Samsung and a host of low-cost Chinese OEMs (although low levels of shared commitment and delivery discipline also contributed to the company’s demise!)
  4. Strategic Acceleration. It is only when all three factors are present that you are able to build the moment and truly accelerate results. Any sustained success requires a clear and continuous executive focus on each of the three factors.

In simple terms, these three priorities – strategic clarity, shared commitment and delivery discipline – are the fundamental jobs of leadership. How well does your leadership team and organisation rate on these critical tasks?

© Stuart Cross 2017. All rights reserved.

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Cross Shots – Cracking The Growth Code

All too often, management teams end up focusing all their time and efforts on delivering the current year’s results. Here’s a tool you can use to balance your time between managing your current year performance while also developing ideas that will deliver your future growth.

© Stuart Cross 2017. All rights reserved.

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Business Rocks: How Constraints Drive Creativity

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This week’s riff: Following on from last week’s post about the new, higher standard SATs that my 11-year old son will soon be sitting, I was talking to a client about her son’s school. The new tests mean that 99% of schools fail to get all of their pupils to the ‘required’ standard in all subjects, but the school my client’s son attends is in the 1%. All the pupils at that school have achieved the target grades, despite it having its fair share of “statemented” children (i.e. those children with specific learning or behavioural difficulties).

As we talked further, it became clear that the head teacher of that school has taken a very different approach to achieving these educational goals. Her actions include creating an ‘army’ of (mainly retired) volunteers who help teach the children in small groups of 4-6 pupils on specific topics, setting aside one day each week to entirely focus the whole school on music, and being willing to change a day’s teaching plan for the entire school if something interesting happens.

In other words, she has focused on the goal, rather than the generally accepted processes, in delivering her pupils’ education. There is plenty of evidence that creativity is increased in constrained environments, and it seems that this head teacher’s creativity has been unleashed by the constraints that her budget, curriculum and other external expectations have placed on her.

As I work with my clients I see major differences between those managers who embrace constraints and seek creative solutions to their issues, and those who simply throw their hands up in the air and say that nothing can be done without more money, or better systems, or more people. The only real differences between these two types of leader are their attitudes and perceptions, but I’m sure I don’t need to tell you which group deliver the better results!

What about your organization? Do your managers use the constraints they face as an excuse for poor performance or as a springboard to higher levels of creativity and superior results?

Off The Record: The Logical Song by Supertramp

When I was young, it seemed that life was so wonderful

A miracle

Oh, it was beautiful, magical

© Stuart Cross 2017. All rights reserved.

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Business Rocks: The Standard Clause

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This week’s riff: My youngest son, Louis, is now 11 years old and is in his last year of primary school, which means that he is taking his SATs in the summer. I don’t know if you’re aware, but the SATs syllabus has changed significantly in recent years. In particular, the standards and levels of difficulty in English and Maths have increased faster than a Chinese football players’ salary!

The English syllabus is now full of testing – to me, incomprehensible – grammatical terms and definitions. Louis delights in my ignorance of the difference between embedded, relative and subjunctive clauses, my incorrect use of prepositions and the simple fact I have no idea what the term ‘modal verb’ actually means. It’s not that Louis and his cohort are any more intelligent than previous years’ students; it’s just that they are working within a higher set of standards and so are working harder and learning more.

Earlier this week I alos spoke to the CEO of a company that is in the process of buying a struggling rival. His explanation of his competitor’s malaise focused on one simple factor; the low performance standards set by the leadership team. He believes that by raising the level of performance standards, which he called the professionalism of the organization (I think that is a relative clause!), he will create the conditions for a turnaround of the business. And, listening to him, I think he may be right!

What about your business? What are the performance standards and expectations that you set and what levels of performance improvement might you expect if you raised them further?

Off The Record: The Logical Song by Supertramp

But then they sent me away to teach me how to be sensible

Logical, responsible, practical

And they showed me a world where I could be so dependable

Clinical, intellectual, cynical

© Stuart Cross 2017. All rights reserved.

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How DFS Step-Changed Its Level Of Customer Focus

Fast, agile companies are relentless in using customer feedback to drive improvements and to make the necessary changes to accelerate growth and performance. In my latest book, First & Fast, I met with Andrew Stephenson, who created a market-leading approach to customer-centered management at DFS, the UK’s leading sofa retailer. Here is a short extract from Chapter 7 of the book, Allowing Your Customers to Navigate:

On the back of some effective marketing, and despite some academic criticism about its superiority to other customer satisfaction measures, the Net Promoter Score (or NPS – see details here) has become a common metric in many corporate boardrooms. Few companies, however, have embedded NPS into an organization’s ways of working as far as DFS has achieved.

Stephenson admits that the metric isn’t perfect, but he believes that its simplicity and the ability of everyone across the business to focus around a single metric significantly outweigh any downsides. As a result, NPS has become as important as the sales and profit figures throughout DFS, from front line sales teams, to head office support teams, to senior executives and non-executive directors. By 2014, DFS’s use of NPS looked something like this:

  • The company now collects over 200,000 separate customer reviews each year, covering various stages of its customer experience – pre-sale, point of sale, point of delivery, 6-months post-delivery and following any customer service issue. This represents a response rate of over 10%;
  • Each sales consultant, store team and manager, area, region, delivery team and individual members, the in-house factory teams and the on-line team and call-center service team receive weekly NPS reviews, and their performance bonuses are directly based on their average NPS scores;
  • The executive team review overall NPS performance each week alongside sales, with actions identified for immediate resolution. Similarly, the monthly board meeting contains a review of the company’s NPS performance;
  • Any individual customer score of 6 or below results in a notification to the relevant store manager, who is expected to follow up with the customer, with central management follow-up of how the issue has been dealt with taking place shortly after;
  • Stephenson ensures that customers’ answers are as honest as possible. Here are three steps they’ve taken to ensure the integrity of the data:
    • DFS provides a charitable donation for every response received. Stephenson found that the previous method of encouraging responses, which was to enter respondents into a prize draw, had slightly skewed responses upwards, whereas a charitable donation had no such impact;
    • The entire system is administered by an independent third-party marketing agency, which is highlighted on all emails. Again, this has been found to improve the quality and integrity of customer responses; and
    • The system is email based, but for those customers where no email is collected, the marketing agency takes their mobile phone numbers to gain a sample of results from these customers to ensure that their views are in line with the majority of email customers and also ensures that individual sales consultants are not ‘gaming’ the system.

In other words, the NPS system that DFS has developed has become the oxygen that is breathed across the business. Rather than pursuing the development of large but intermittent initiatives that tend to follow annual customer surveys, the DFS system allows managers and colleagues from across the organization to make thousands of individual decisions every day that, together, have transformed the company and enabled it to be truly customer-centered.

How well does your organization match up to the customer-focus standards set by DFS?

© Stuart Cross 2017. All rights reserved.

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Business Rocks – How To Build Strategic Commitment

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This week’s riff: How do you build wider commitment to a new growth strategy? After all, it’s highly likely that some people are going to be negative about whatever you come up with and will be resistant to the changes you propose.

In essence, you have only three options. Option 1 is simply to tell people to support the new strategy and give them a JDI ultimatum. The problem with this ‘enforcement’ approach, even when delivered sensitively, is that, at best, you will end up with reluctant, rather than enthusiastic supporters.

Option 2 is to point at others who already support the new plans and suggest that if that group supports the new way forward, others should too. Again, however, you will have done nothing to remove any underlying doubts and resistance.

The third option, and the one I pursue with clients, is to actively involve and engage the organization. Executive teams should never outsource their strategy work, but do the hard yards themselves. Your wider management teams should also have the opportunity to challenge, refine and influence the emerging direction and priorities, and your wider teams should be able to determine how they can best deliver the aims of the strategy within their own areas of responsibility.

Involvement breeds commitment. How are you ensuring that as many people in your organization as possible are able to become genuinely and actively involved in your strategy and change initiatives?

Off The Record: The Sound Of Silence by Simon & Garfunkel

People talking without speaking,
People hearing without listening,
People writing songs that voices never share
And no one dared
Disturb the sound of silence

© Stuart Cross 2017. All rights reserved.

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How Richard Baker Put “The Chemists” Back Into Boots

As part of my research for my latest book, First & Fast, I interviewed Richard Baker, the Chairman of Whitbread plc. I had worked with Richard when he was the CEO of Boots and during our conversation Richard emphasized the importance of establishing strategic focus as a route to growth.

Below is a short extract from First & Fast, that describes how Richard used the heritage of the Boots business to help accelerate its growth:

“My first impression was that Boots no longer stood for anything,” explains Baker. “The company was a jack-of-all-trades and was going nowhere. It sold health and beauty products, but it still also stocked pots, pans and even homebrew! Unbelievably, Boots was no longer the market leader in pharmacy prescriptions, and it didn’t even have the green pharmacy cross on the outside of the stores. My priority was to refocus the retailer on health and beauty; I wanted to put “The Chemists” back into Boots.”

As Baker sorted out his office in the weekend before his first day, he came across a 100-year old advertisement for the retailer, which read:  Boots The Chemists – Biggest, Best, Cheapest, Stores Everywhere.

“I realized that the answer was in front of me,” said Baker. “It may have been created a century ago, but it summed up perfectly what we needed to do. I shared the advertisement at my very first public briefing the following day, and the five strategic priorities we created for the business a few months later – Healthcare First, Boots For Value, Only At Boots, Right Stores Right Place, and Expert Customer Care – were really only restatements of that sign.”

The focus on retail health and beauty led to some immediate growth initiatives. Store opening hours were extended, many pharmacies were kept open until midnight, prices were dropped on everyday toiletries in line with the rest of the market, and greater investment was put into Boots’s own brands, particularly No7. Top-line performance responded to this renewed health and beauty focus, reversing the declines of the previous leadership team.

Profit performance lagged revenues, as a result of the impact of lower prices on margins, but the sale of non-core assets, including the disposal of the healthcare products business, Boots Healthcare International, to Reckitt Benckiser for $3 billion, created a far leaner pharmacy and retail chain that enabled the subsequent merger with Alliance Unichem, a European pharmacy wholesaler, in 2006.

Strategic focus created both speed and growth, or, as Baker put it when we met, “You can’t spray and sprint!”

How could you create greater levels of strategic focus for your business and accelerate your growth and profitability?

© Stuart Cross 2016. All rights reserved.

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