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What Do You Stand For?
By Andrew Ortyn
Triumph BooksCopyright © 2015 Andrew Ortyn
All rights reserved.
If you Google the rules of money, you will find page after page of references and links all dealing with the acquisition and spending of resources – money – on both a personal and a business level.
A colleague, leadership consultant, university professor, and friend of ours – Greg Winfield – has even trademarked what he calls the Rules of Money®. They are ...
1. More is better than less!
2. Sooner is better than later!
3. My pocket is better than your pocket!
4. When in doubt ... spend someone else's! ...
Greg has uttered the above 'tongue-in-cheek' in just about every joint professional setting in which we have ever participated. Usually his remarks elicit chuckles and laughter from his audience. However, we also know from personal experience that Greg is deadly serious when it comes to effectively marshalling organizational resources to the benefit of shareholders. Well before the economic woes of 2008 –2009, he was an absolute zealot when it came to making sure that CASH and the spending of CASH was not a subject to be taken lightly.
Not surprisingly, the topic of money engenders intense focus from just about everyone at all levels of society. How people and businesses obtain and part with their resources – their money – in the acquisition of goods and services is a decision that involves both mind and emotion.
Indeed, from a purely operational business perspective a transaction is never complete until the money changes hands. The key is in understanding the essence of this transaction, which is integrally linked to what the purchaser thinks about the goods and services and the company from which he or she is making the purchase. This linkage applies both to the 'mom-and-pop' corner store, as well as, to the largest international business.
What Do You Stand For?
In a very real sense, the decision of your customers to hand over their hard earned CASH is directly linked to what you, your products, your services, and your company stand for in their minds.
So what does your business stand for in the minds of your customers?
This simple, seemingly innocuous question – almost flippant in nature – has significant ramifications ...
Across every aspect of your business
Across every employee within your organization
Across every action you take
Across every dollar you spend to move your business forward in a complex multi-faceted business environment
In fact, lack of clarity around what you stand for in the minds of your customers will have significant adverse consequences for your business. Lack of clarity reduces the speed of your organization to respond quickly and efficiently to a dynamic marketplace. Lack of clarity reduces business flexibility as you spend CASH resources across a multitude of initiatives that may or may not be consistent with your business strategy. Lack of clarity on what you stand for means you will burn CASH – needlessly! In turn, burning CASH (a descriptive metaphor, we might add) reduces the capacity of your business for prudent risk-taking; thereby increasing the level of anxiety within your organization.
Conversely – if you are able to achieve a consistent uniform answer to the above question across all members of your leadership team, the organizational friction within the leadership team and across the business is substantially reduced. This frees up time and energy; and importantly, focuses the expenditure of CASH resources – money – in a targeted and cost effective manner.
So ... whenever we work with the leadership teams of companies both large and small, we ask the question.
What do you stand for in the minds of your customers?
Their answer helps us determine the willingness and the readiness of customers to show the money to purchase a company's products and services!
Statement of Market Position
In addressing the above question, the process begins with a simple fill-in-the-blank exercise. We call it the Statement of Market Position. There is only one constraint. We ask that each member of the leadership team provide his or her answer in five minutes or less. We don't want leaders to think too hard! What we are after is their perspective – top of mind. Top of mind is important because it represents, un-aided, the core of their belief regarding the identity of their business in the marketplace.
To__________________________, Target Customer
XYZ Company is a ________________________________ Competitive Frame of Reference
that ________________________________ Point of Difference
Target Customer ... We ask leaders to identify those individuals and (or) companies who spend CASH to purchase the company's products and services.
Competitive Frame of Reference ... We ask leaders where their products and services are grouped within the minds of buying customers. If not you, who else might address customer need?
Point of Difference ... We ask leaders what sets them apart – in a meaningful way – from all other customer options in the marketplace.
In most cases, when we ask the above question we receive a veritable cacophony of answers.
The following provides three different examples with three different companies in three different industries.
Wall Co. and the Target Customer
The President said ... To the key influencers and decision-makers of architectural firms, construction companies and end users, Wall Co. is a responsive, reliable and flexible organization that develops, manufacturers and services a quality product consistently, doing what it says it will do.
The Chief Financial Officer said ... To general contractors, Wall Co. is an architectural / interior finish wall manufacturer that is price competitive and delivers on time.
The Vice President of Product Management said ... To End Users, Architectural Design Experts, and Government, Wall Co. Office Systems is a manufacturer and marketer of integrated interior office solution walls and systems furniture that offers turn-key solutions, space management, quality products, competitive price and service.
The Vice President of Sales said ... To companies and organizations that have offices, Wall Co. is a flexible product line that let's you accommodate physical change to make your office more productive, increase communication and profits.
The Vice President of Administration said ... To progressive change driven corporations, Wall Co. is a manufacturer and service provider that helps corporations manage change.
An outside board member said ... To large office buildings, Wall Co. delivers flexible office layouts with good quality and nice solutions that are cost effective in the long run.
In reviewing the above, there is great variability across answers related to target customer, competitive frame of reference and point of difference. The implications for spending money – CASH resources – are both simple and significant.
The disparities also unleash a host of questions. For example, who really is the target customer? ...
Key influencers and decision-makers?
Architectural design experts?
Companies and organizations that have offices?
Progressive change driven corporations?
Large office buildings?
All of the above?
A segment of the above?
None of the above?
With the above target profile, how does the business provide direction to the sales organization? What will they do when they get up in the morning? What are the marketing support requirements? How will this business measure success? How will the business spend its CASH in meeting the needs of its various customers?
All of these questions, in one way or another, link back to the essential question ...
What do you stand for in the minds of your customers?
Answering this question impacts the ability of your business to generate CASH. Answering this question determines how your business will spend CASH. Answering this question is at the core of business viability in good times and in bad times.
Service Co. and the Competitive Frame of Reference
When asked, different stakeholders identified the following responses as they filled in the blanks regarding the Statement of Market Position for their business.
To company decision-makers, XYZ Co. is a full service objective partner that creates alignment between your strategy, marketplace, systems, structure, and performance.
To company senior management and decision-makers, XYZ Co. is a specialist that helps companies build a vision and define the performance resources to achieve it.
To small to medium sized company decision-makers, XYZ Co. is a strategic partner that helps clients assess, diagnose, plan, and execute world class business practices.
To CEOs of middle market and mid-cap companies, XYZ Co. is a business growth advocate that provides access to state-of-the-art business concepts and processes, oriented to immediate and practical application.
Similar to the prior example, a variety of perspectives are identified in the above. In thinking of the competitive frame of reference (If not you, then who?), the organization might be a ...
Full service objective partner
A strategic partner
A business growth advocate
Each perspective will impact both the strategic and tactical direction for the business. Each perspective leads the organization down a different path relative to resource allocation ... and CASH expenditure.
We don't know about you, but in our book a 'full service objective partner' is very different than a 'specialist'.
Chemical Co. and the Point of Difference
The President said the business ... supplies, trains, and services distributors with a national brand image at a competitive price.
The Chief Financial Officer said the business ... delivers high quality national brand image liquid chemicals that allow customers to communicate a high quality image.
The Vice President of Sales said the business ... helps distributors secure higher profitswith their own brand of quality chemical products that they can get withthe fastest turnaround time in the industry.
A Regional Sales Leader said the business ... offers distributors their own brand identity with competitive pricing.
The Vice President of Quality said the business ... provides private branding of quality products that build customer loyalty to the distributor vs. the national brand manufacturer.
Again – a variety of perspectives. While the president is supplying, training, and servicing distributors (THINK .... HEAVY CASH INVESTMENT), the regional sales leader is selling lowest price!
What is the true point of difference for this business? Who do you think will receive the biggest share of mind in a competitive marketplace, the president or the sales leader who is face-to-face with the customer .. every day?
Divergent Points of View
While simple in appearance and execution, the Statement of Market Position exercise is incredibly valuable in helping drive divergent points of view to the surface and laying the groundwork for constructive dialogue. Interestingly, whenever we complete the above exercise, the passion manifested by all individuals within the leadership team is extremely high. Every leader, across every business function, is committed to both their point of view and the success of the business.
Additionally – when we engage leadership groups in discussion on divergent points of view, the initial frustration level can be quite high as different team members discuss and debate a multitude of thoughts on what constitutes the ideal customer profile, competitive frame of reference, and point of difference relative to the business's product and service offering.
With respect to your company, responses to the exercise may force a re-examination of the mission and overall strategic direction of your business. Likely responses highlight the magnitude of differences across key members of your management team. Divergent opinions also provide fertile ground for constructive conversation, the basis for moving your business forward. If handled appropriately, these differences in position help catalyze your leadership to take a more disciplined approach to addressing market need. On the flipside – handled inappropriately – divergent opinions can lock your leadership team in a morass of indecision.
A morass of indecision ranks right up there with burning CASH needlessly!
Indecision kills opportunity. Failure to seize opportunity leads to reduced competitiveness. Reduced competitiveness adversely impacts employee morale in the short-term and nothing less than business viability in the long-term!
Addressing the So What?
By now you might be tempted to say the above is 'consultant speak'!
Let's crunch a few numbers and look at a simple profit and loss assuming:
$100 in Net Sales,
60% Cost of Sales,
30% S,G,& A (Selling, General and Administrative Expenses), and
10% Operating Profit as a percentage of sales.
Let's also assume a 10% reduction in expenses (CASH burn) between Year 1 and Year 2. If greater clarity around what you stand for in the minds of your customers allows you to be more judicious in how you spend scarce CASH resources to reach valued customers, your shift in Profit and Loss might look as follows:
Overly simplistic? Possibly. However, if you run the same calculations using the Profit and Loss Statement for a publicly traded company with a similar margin profile – whether they be $100,000,000 in revenues or $100,000,000,000 revenues – you will achieve the same results. If you ask a turnaround expert where he or she will 'go first' in a crisis situation, they will universally look to the expense side of the business – CASH burn – in search of relief to free up resources to stabilize the business.
In addition, the above considers only one aspect of your business – reducing the CASH burn rate. If you have greater clarity around what you stand for in the minds of your customers, you might even grow your business with less CASH investment because you are more targeted in how you spend money. In short, you might ...
Sell more products and services (increased VOLUME)
Sell different products and services (change in MIX), or even
Sell some of your products and services – heaven forbid – for more money (higher PRICE)
If you are more targeted in how you spend CASH, you might reach more decision makers, more quickly, resulting in a more favorable outcome with customers as they show you the money to purchase your products and services.
Business Complexity. Mind vs. Emotion.
What's wrong with the above picture?
As a colleague of ours once quipped, "If the process was easy, it wouldn't be called work!" If the process was easy, companies would not get into trouble. But – companies do get into trouble! While there are many facets to this difficult dilemma, two immediate issues come to mind.
Mind vs. Emotion
Business Complexity ...
Oftentimes, when we engage a group of leaders, they work the Statement of Market Position and they struggle. They struggle because one size does not fit all; they are not willing to waste time on what they deem a fruitless overly simplistic exercise. At the same time, these same leaders are not well prepared to communicate efficiently, effectively, uniformly and consistently the identity of what they stand for in the marketplace; and without this clarity, the business burns CASH – needlessly. Again, the business burns CASH – needlessly!
If your team is not rowing in the same direction, there is waste. So the challenge is to break down the Statement of Market Position into simpler, more manageable components. If the exercise does not work for your business as a whole, we believe you need to iterate and keep iterating until the Statement of Market Position makes sense for everyone involved in the process. For example ...
Excerpted from What Do You Stand For? by Andrew Ortyn. Copyright © 2015 Andrew Ortyn. Excerpted by permission of Triumph Books.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
ContentsIntroduction – Nimble Leader,
What Do You Stand For?,
Statement of Market Position,
Wall Co. and the Target Customer,
Service Co. and the Competitive Frame of Reference,
Chemical Co. and the Point of Difference,
Divergent Points of View,
Addressing the So What?,
Business Complexity. Mind vs. Emotion.,
Closely Held Beliefs and the Process of Determining,
Summing It Up,
Nimble Leader – Next Steps,