Adapt to Survive

Business schools generally consider large companies for their case studies in order to try and identify successful best practice. Looking at the companies that inhabit the FTSE 100 list, there is a general assumption that by copying the practices of these firms, smaller firms can replicate their success. In reality, small businesses can learn very little by copying the ways of large firms, because while the principles may be transferable, the practices generally are not, as the circumstances under which large and small firms operate are different.

In any business large or small, the commercial manager has the task of producing and maximising profitable income for the long term future of the organisation.
While their initial priority will the maximising of current profitable income, their major concern will be the source and production of future revenue. In consumer markets in particular, changes in fashion, technology and economics occur more quickly than ever. Product life cycles in many cases become shorter, so that the opportunity to produce profit is reduced while the costs of development, bids and proposals increase.

In a volatile commercial market, smaller companies can have an advantage over their bigger rivals by being or becoming more agile and adaptable. It is easier for small businesses to innovate and adapt quickly to changing markets and circumstances than it is for larger organisations. However to become more agile and adaptable in a volatile business world requires an element of analysis and foresight by the commercial manager.

In the absence of a crystal ball, commercial managers must rely on information obtained from market knowledge and internal data, on which to base their interpretation, judgements and decisions. Over the past decade or so, especially in consumer related markets, there has been an increasing use of information derived from social media and Customer Relationship Management (CRM) programs. In the Business to Business area, while there has been an increase in information derived from CRM, there is still a greater reliance on that originating from direct customer contact. The reason for this difference is that companies such as Amazon which deal directly with consumers, may well have many thousands of customers, while an engineering company in the business to business sector, might have a customer base of hundreds.

In order to secure business income for the future, the commercial manager has to have a detailed understanding of the vagaries of the market and the changing needs of the customer base. Changes in the customer base may be indicative of the level of demand for the type of product in general or the acceptability of the company’s product in particular. A falling customer base may indicate a reducing market, but a reduced customer base may result in an over reliance on specific customers.

What is generally known as the 80/20 rule, reveals that in any customer base, approximately 80 % of the profitable income comes from about 20% of the customer base. The convention is that businesses should then concentrate on the 20% that produce the revenue, rather than the remainder where profitability tends to be lower. However, it may be that the 20% are at maximum capacity for sales, and so more effort and resources concentrated on them would produce disproportionately little result. Alternatively, the other 80% might produce more with more attention, but equally, might be an indication of declining demand and different requirements.
For future planning, commercial managers need to be aware of their current position in the product life cycle especially for technical products, where development can be expensive but the life cycle short. Similarly, understanding the position regarding growing, maturing or declining markets is essential for planning investment requirement and income potential.

While on-line surveys may provide some insight into customer intensions, they may often be biased to those with strong views or complaints, as most customers will not spend the time to fill in on line questionnaires or paper based forms. However, there is still no real substitute for the personal connection to customers as provided by professional salespeople which can provide valuable insight into the customers’ requirements both present and future.

In order to understand the present situation and plan for the future, commercial managers need to:

* Encourage staff to continually seek ways to improve their service and efficiency
* Engage directly with customers to understand their current and future needs
* Be aware of the opportunities and threats in customers markets as well their own
* Consider alternative products and services their strengths a weaknesses and how to exploit them.
* Encourage staff to look for alternative ways to work and organise to maximise efficiency and flexibility.

In the current business situation, demand and markets are in frequent and rapid change.
If firms are to survive they need to be able to detect change and be adaptable to meet such change. Commercial managers are expected to produce income for long term, and thus must constantly be looking for the threats and opportunities that will affect it. To achieve this they need to look for and identify the indicators of change, to consider their implications and act accordingly.

© N.C.Watkis, Contract Marketing Service 12 Apr 17

April 18, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

Management Requires Performance Measurement.

How effectively business assets are managed may often be the difference between profit and loss. For the commercial manager with the responsibility of producing profitable income for the long term future of the business, being able to manage the customer related assets efficiently and effectively to anticipate and satisfy customer demand is essential .
There is no magic formula for managing the use of customer related assets in a business, but it was the world famous management consultant, the late Peter Drucker who said “ you can’t manage it if you can’t measure it”. Thus using performance measurements across all the customer related activities would seem to be the basis for their effective management.

Measuring performance other than sales levels has never been a strong point with those involved with marketing. Terms such as metrics, benchmarks and measurements are frequently used interchangeably as if they were the same, when they are quite different in meaning. However, the sensible and forensic use of performance measurements, not only enables a commercial manager to see and analyse how efficiently and effectively customer satisfaction is being achieved, and to produce business plans based on sound information.
When it comes to verifying their contribution to the business and justifying the investment, Commercial Managers must look at their contribution to the whole of the business getting and retaining activities and not consider their functions and contribution in isolation. Reporting on business performance must therefore be across the all the activities involved in getting and retaining customers and their profitable revenue. Commercial managers must include all areas of the business that directly relate to anticipating and satisfying customer demand, even if they have no direct management responsibility for them, which may for example include production and credit control.

The only measurements which have true value are those which are quantifiable which are usually of inputs and output; such as costs, investments and revenue. In order to achieve these, Commercial Managers need to list all the activities that provide direct and indirect support to sales and customer satisfaction as well as quantify separately all the costs involved in providing both direct and indirect support

Commercial Managers must provide a detailed analysis of the contribution that all the various business areas collectively make to the gaining and retaining of business. This should include an analysis of all sales made by: product, customer group, customer market, market sector, market segment, geographical area. In addition it should identify the source of sales including web produced, direct sales, agents, etc.

The overall cost of sales must be carefully analysed. This analysis should include all costs relating to product, customer group, customer market, market sector, market segment, geographical area. It should identify the cost of sales by direct sales, agents, and web page.

Commercial Managers should be able to report regularly on the general performance of business getting activities in terms of:

* Orders: number, average value, total value – to establish the productivity of the sales organisation
* Enquiry/quotation conversion rate –- to indicate the level of customer acceptance of the sales price with the sales proposition

* Quotation/order conversion rate – to establish the level of customer satisfaction with the sales proposition

* Analysis of lost orders – why lost – is there a trend?

* Levels of product return – does this indicate a problem in quality control.
* Order/delivery time – how long does it take, is it too long?
* Invoice to payment time – how much time is given for payment?
* Total marketing cost per order – what are the total costs involved in getting and completing an order?
* Operating Profit – what is it and how is it calculated?
* Net Profit/unit sale – are all sales profitable? If not why not?
* Debtors/sales- how much or the expected income is unpaid debt?
* Stock Turn – how many times is the stock turned annually?
* Growth in Customers – what is the annual growth/ shrinkage of the customer base?

Where Commercial Managers do not have senior executive responsibility for generating revenue, they must be the providers of all the quantified “sales and marketing” information on a continuous and regular basis to the senior decision makers. Reporting data for the sake of it is counter productive and wasteful. Always the marketer must ask “What do we need to know? Who needs to know? For what purpose is the information required and in what form will it be needed?” Commercial Managers must ensure that those decision makers have suitable performance indicators in order to prompt the necessary questions that enable informed decisions to be made.

(747) © N.C.Watkis, Contract Marketing Service 15 Feb 17

February 16, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, m, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

The past is but a prologue to the future’

While January may not be the start of an organisations commercial year, it is still an opportunity for the commercial manager, to consider the opportunities and threats which a new year might bring. Although it is important to continually be looking to the future, in order to prepare for situations and opportunities that present themselves, it is equally necessary to consider the performance of the previous twelve months.

Generally, most businesses appear to concentrate on their future business plans, and give little detailed attention to an analysis of their past performance. However, a proper critical analysis of commercial performance is essential if in future, mistakes are to be avoided and good performance identified, maintained and developed. While it is easy to criticize under performance, by asking obvious questions, over achievement against the business plan, may have equally bad repercussions, of which the commercial manager should be aware.

Commercial managers have the responsibility of producing and maximising profitable income for the long term future of the business, by anticipating and satisfying customer demands. Ideally, the commercial manager should have a range of relevant performance measures, in the form of management ratios to cover every aspect of the commercial activities for which they are responsible, so that performance analysis can be based on quantified data.

Looking back over the previous year, there are many things which the commercial manager should consider.
* How did performance compare with the relevant business plan?
* Where did performance vary?
* Were the results above or below the planned objective?
* Can the reasons for performance variance be identified?
* Were the reasons for underperformance internal, such as the commercial plan being over or under ambitious?

It is important to realise that while an underperformance of sales against target, has a negative effect on income, over performance of sales against target, can have serious repercussions on cash-flow and production, which can put a strain on company resources and customer relations.

Looking at how the market and the market environment developed over the past year,
* Were the changes anticipated?
* If not anticipated were there indicators that could or should have been identified at an early stage?
* What trends in the market, technology, or competitor activity were identified in the past year that may be expected to continue and develop into next?

* How did the market perform – was it growing, contracting or steady?
* What was performance like in comparison to the market, – was it better, the same or less?
If business growth was less than that of the market, it would suggest that sales resulted from increased demand rather than effective selling. Any growth in sales should at least be in step with any growth in the market, if market share is to be maintained.

Commercial managers are responsible for producing and maximising profitable income by anticipating and satisfying customer requirements. It is important therefore that they should consider the state of customer relations over the past year.
* How many new customers were gained?
* How many old customers were lost?
* Is the customer base growing or shrinking?
Such information is a good indication of the state of customer relations, and their satisfaction.

Similarly it is important to know:
* The numbers of bad debtors?
* The total value of bad debt

This information gives a good indication of the quality of the customer base and the reliability of its cash flow. It is as important to understand why customers are gained as it is to know why they are lost. Continuing to win new customers is necessary to replace those lost through natural wastage. However, it is also more cost effective to maintain the existing customer base than have an expensive drive to gain new customers at the expense of the existing ones.

Considering the economic outlook for the New Year, commercial managers should seek forecasts from many differing sources, before making their own assessment.
It should be remembered that economics is more of an art than a science and that 2016 saw the predictions of many economic “experts” confounded, by events. Thus all economic forecasts have limited reliability.

Sir Winston Churchill said: ‘the past is but a prologue to the future’. While the past does not define the future, analysis of past performance, provides indicators for the commercial manager to improve potential results.

© N.C.Watkis, Contract Marketing Service 12 Jan 17

January 17, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

The past is a prologue to the future

The month of January marks the beginning of a new year. Originally the first month of the Roman calendar, Januarius as it was known was the month dedicated to Janus, the Roman god of doorways, gates and beginnings. Janus was depicted as having two faces looking
forwards and backwards simultaneously.

While January may not be the start of an organisations commercial year, it is still an opportunity for the commercial manager, to consider the opportunities and threats which a new year might bring. Although it is important to continually be looking to the future, in order to prepare for situations and opportunities that present themselves, it is equally necessary to consider the performance of the previous twelve months.

Generally, most businesses appear to concentrate on their future business plans, and give little detailed attention to an analysis of their past performance. However, a proper critical analysis of commercial performance is essential if in future, mistakes are to be avoided and good performance identified, maintained and developed. While it is easy to criticize under performance, by asking obvious questions, over achievement against the business plan, may have equally bad repercussions, of which the commercial manager should be aware.

Commercial managers have the responsibility of producing and maximising profitable income for the long term future of the business, by anticipating and satisfying customer demands. Ideally, the commercial manager should have a range of relevant performance measures, in the form of management ratios to cover every aspect of the commercial activities for which they are responsible, so that performance analysis can be based on quantified data.

Looking back over the previous year, there are many things which the commercial manager should consider. First should be how performance compared with the relevant business plan.
Where did performance vary, and were results above or below the planned objective? Can the reasons for performance variance be identified? It is important to realise that while an underperformance of sales against target, has a negative effect on income, over performance of sales against target, can have serious repercussions on cash-flow and production, which can put a strain on company resources and customer relations. Were the reasons for underperformance internal, such as the commercial plan being over or under ambitious?

Looking at how the market and the market environment developed over the past year, were the changes anticipated? If not anticipated were there indicators that could or should have been identified at an early stage? How did the market perform – was it growing, contracting or steady? What was performance like in comparison to the market, – was it better, the same or less? If business growth was less than that of the market, it would suggest that sales resulted from increased demand rather than effective selling. Any growth in sales should at least be in step with any growth in the market, if market share is to be maintained. What trends in the market, technology, or competitor activity were identified in the past year that may be expected to continue and develop into next?

Commercial managers are responsible for producing and maximising profitable income by anticipating and satisfying customer requirements. It is important therefore that they should consider the state of customer relations over the past year. The numbers of customers gained, lost and especially retained, can be a useful indicator of customer satisfaction. Similarly, the numbers of bad debtors, and the total value of their debt, give an indication of the quality of the customer base and the reliability of the cash flow. It is as important to understand why customers are gained as it is to know why they are lost. Continuing to win new customers is necessary to replace those lost through natural wastage. It is also more cost effective to maintain the existing customer base than have an expensive drive to gain new customers at the expense of the existing ones.

Looking forward to the New Year, commercial managers should consider the economic outlook from several sources. However it should be noted that 2016 saw the predictions of many economic “experts” confounded, largely because it is often forgotten that economics is more of an art than a science. Thus all economic forecasts have limited reliability.

Sir Winston Churchill said: ‘the past is but a prologue to the future’. While the past does not define the future, the commercial manager will benefit by identifying the successes, failures and missed opportunities of the previous year, with a view to learning from mistakes, and building on success in order to develop and improve performance in the coming year.

© N.C.Watkis, Contract Marketing Service 10 Jan 17

January 11, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

The unexpected happens or did you miss the signals

The apparently unexpected result of the Brexit referendum last June, and the U.S. Presidential election in November, seem to have stunned and surprised the world. Both outcomes were not predicted by either the media or the political establishment, and yet all the signs were there that the unforeseen outcomes had a high probability of happening.

In business as in other activities, the unexpected can happen, sometimes with disastrous consequences. Part of being an effective manager is the ability to manage risk. For the Commercial Manager, responsible for producing and maximising the flow of profitable income for a business, the successful management of risk is of major importance. It is therefore useful to see what lessons might be learnt from the Brexit referendum and the U.S Presidential election.

It would seem that any similarities between the Brexit referendum and the U.S. Presidential election were superficial. The subjects of each vote were entirely different. However, there were similarities, the most obvious being outcomes which were not contemplated by the media or the political establishment. In Britain, successive government administrations had discouraged including the public in any debate about the nation’s involvement in Europe, after joining in 1972. This resulted in an alienation of increasing numbers of the electorate, who saw their rights and freedoms being eroded by European laws that were not of their making.

In America, it appears that there were large groups of the electorate who had good reason to feel increasingly forgotten and ignored by political organizations that seemed unconcerned about their living conditions and future. In both Britain and America, it was these two groups that separately produced the surprising result. But why was it a surprise? The result was only a surprise because the political establishments in both countries, and to some extent elements of the media that had become less independent minded and more politically biased, had become blinkered in their outlook and refused to acknowledge unpalatable truths. In both countries, “the powers that be” had come to believe their own rhetoric, such that there could only be two opinions, – theirs and the wrong ones.

In any business, it is all too easy to become blinkered in outlook, and to believe your own view to the exclusion of others. For the commercial manager, it is essential to be open minded to alternative possibilities, in order not be caught out by the unexpected or to make wrong decisions

One of the prime sources of commercial information is provided by market research on which many a business decision is based. But how much reliance should be put on that research? Election opinion polls are a form of market research, but recent results have shown them to be significantly unreliable, predicting the wrong result in both the Brexit referendum and the U.S. Presidential election. In principle, market research correctly carried out is usually accurate in its result, but it does depend on how well it is enacted in selecting a representative sample and the suitability of unbiased questions. Market research ought always to be corroborated from other sources to verify its findings.
In order to reduce the risk of making wrong assessments and subsequent decisions Commercial managers should:

* Develop and maintain strong customer relations in order to fully understand their requirements both current and future.
* Use market research, but always treat with caution and seek to verify its findings from other sources.
* Keep up to date with economic reports.
* Review political reports that may affect the economy or the particular market.
* Review relevant market reports especially regarding current and future trends.
* Maintain intelligence on competitors.
* Regularly undertake a SWOT analysis on own business, major competitors and the market in general.
* Seek to identify and consider all aspects that could or do affect the business.
* Seek peer group review of any assessment as it is easy to be deceived by one’s own opinion.

Commercial managers need to be confident in their decision making based on a careful assessment of the commercial situation, drawn from an analysis of all relevant information.
The most important questions regarding accepted truths and opinions is “How do you know? Where is the evidence?

Wishful thinking or the avoidance of inconvenient facts or opinions, leads to bad decision making for which there is no excuse.

© N.C.Watkis, Contract Marketing Service 29 Nov 16

January 2, 2017   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

Maintaining the balance

For the past 40 years or so, businesses have increasingly been dominated by financial control to create the “bottom line”. This is understandable because the sole purpose of any business is to make money, but for whose benefit? Is it only to provide shareholders with an income or is it to grow the business so that the value of the shareholders’ investment is increased? What about investment in the business? What about the customers who provide the income or the workforce who make it possible? Commercial managers have the responsibility of producing and maximising profitable income for the long term future of the business, by anticipating and satisfying customer demands, but also of maintaining the right balance of the competing requirements of shareholders, employees and customers.

The owners of a business are the shareholders, who provide the initial finance that initiates and enables the business to operate. Shareholders invest for both the long and the short term, with the intention of gaining a profit or income. The value of the shares generally depends on the performance of the company and its ability to make profits in both its short and long term future. But for the short term investor, it is the immediate profits of a company, which may affect the share value or the size of its dividend, and dictate how and when they buy and sell. Other shareholders see shares as a long term investment which they hope will produce a good return when ultimately sold, based on a growth in the value of the business, with “interest” paid in the form of dividends.

Customers are the life blood of every business because they alone provide the source of income. Satisfying the needs of its clients is how businesses make income but how well they do it dictates whether they make a profit or loss. Customers have to know that they have entered a fair exchange in their purchase transaction where they receive the value in goods and services that equates with the money they have paid. When customers are convinced of a fair exchange of goods and services for their money, they become repeat customers. However, if the customers thinks that they have been short changed in the transaction, they are unlikely to become repeat purchasers. In addition, in and age of increasing use of social media, while good service may be lauded by satisfied buyers, what is perceived to be poor service can quickly be widely broadcast, doing serious harm to a business operation.

Growth of income only comes from customers buying more or through an increase in the number of customers. Maintaining and increasing the customer base is a prime requirement of the commercial manager, but there will always be a natural wastage of customers through time, change of requirement or of circumstance. Thus it is incumbent on the commercial manager always to be seeking new customers if only to offset the natural wastage and maintain the number of customers on which the business income is based. Good customer relations are the basis of retaining customers and the foundation for obtaining new ones. However, problems can arise when businesses take their customers for granted by changing their product or service, to the disadvantage of the purchaser, thus undermining the relationship. In a competitive market, the dissatisfied customer can always go elsewhere. Obtaining new customers is always more expensive that retaining existing ones.

While the objective of the commercial manager is to maximise profitable income for the long term future of the business, it is counterproductive to do so at the expense of existing customers. Although there may be short term gains in such action, the long term consequences can be seriously negative. Increasing the level of profit for the bottom line is important, but money is only made by satisfying the customers who provide the income. Satisfying customers is only made possible by the employees who make it happen.

Employees are at the centre of every business. They have the essential knowledge of the customers, the product or service, and the business process. Companies rely on their employees to understand their customer’s requirements and to deliver the product which produces the income. A business cannot function without employees. Retaining and rewarding good employees is cheaper than finding recruiting and training new ones who will still take time to acquire the essential experience of the customers and the business.

To grow and maintain a successful business, the commercial manager must ensure that

* Profitable income is maximised for the long term.
* The requirements of Customers are anticipated and satisfied.
* The morale and motivation of the workforce is maintained to ensure efficiency.

Businesses make money not only for the benefit of the shareholders, but also for re-investment in the business. Developing a profitable business provides income and security for the workforce, and also provides products on which the customers rely. Balancing the requirements of the shareholders with those of the customers and the employee, on whose work the income, profits, share price and dividends depend, is essential if the commercial manager is to maximise profitable income for the long term’

© N.C.Watkis, Contract Marketing Service 28 Oct 16

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November 1, 2016   Posted in: business development, business efficiency, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

Sales and Marketing should not be in separate silos

About every five or ten years, articles appear in the business press on the subject of how to align sales and marketing. Why this subject should arise with such apparent regularity would suggest that old outdated ideas of business still prevail and that a silo mentality still persists amongst many involved in business development.

Whatever maybe the perceived importance of specialist business activities, the prime purpose of any business is to make money, for the benefit of the owners and the workforce, regardless of whether it is a business for manufacturing, retail or professional services. Businesses make money by producing goods and services which customers want to buy. Whatever a business makes or type of service it provides, money is only produced when the goods or services are actually sold to a customer. It is only from the act of selling that income is derived for the business in question, thus the ability to “sell” is crucial to the success of every business.
Although the term “selling” is clearly defined in The Oxford English Dictionary as “making over or disposing of in exchange for money,” there is no universally accepted definition of Marketing. The Chartered Institute of Marketing (CIM) defines Marketing as “the management process that identifies anticipates and satisfies customer requirements profitably”. Anticipating and satisfying customer demands requires many customer related activities including, advertising and promotion, marketing research, product development, brand management, and distribution but also includes making the sale, which is the executive function that ultimately brings in the money.

While the ability to sell is fundamental to business success, businesses frequently refer to “marketing” goods and services when they actually mean advertising and selling, as though there were something wrong with the action of selling. Articles in the business press would also suggest that many marketers seem confused about their role, appearing to have limited objectives, in the highly specialized disciplines of social media, communications and brand image, but having little or nothing to do with selling.

However to be effective, the generation of sustainable profitable income for the long term future of any business requires the collective management of all the customer related activities under a single manager.

The internationally famous management consultant, the late Peter Drucker once said” if you can’t measure it you can’t manage it”.

If managing assets and resources to produce profitable income is the responsibility of a commercial manager, then using performance measurements not just for sales but across all customer related activities is essential for their effective management. In all probability the majority of businesses would be hard pressed to quantify how much they actually spend or invest in getting and retaining business and might be surprised at the true costs involved.

If marketers aspire to reach senior management as commercial managers with the overall responsibility for producing profitable income, they must learn to speak the language of senior management, namely profit, revenue and costs. Marketers must be able to quantify and demonstrate in relevant performance measurements, the contribution to the business of their various customer related activities, both for the immediate and the long term, and not confine themselves to their own particular specializations. This means that they must be able to understand and manage all the resources necessary for producing income, including the sales function, in an integrated manner. In short, if marketing is a management function, then it requires professional managers to operate it. To that end, marketers will have to prove themselves be good leaders, managers and motivators, able to think strategically for the long term development of the business.

Sales managers are taken seriously by senior management because they can produce clear measurements of their performance in sales figures that relate directly to the levels of profitable income produced. Effective commercial management also relies of relevant performance measurements. Those who consider marketing to be about brand and communications, especially through social media, limit themselves and the importance of their contribution. Such performance data that they produce rarely relates clearly to income produced. Business is about profit and profit is about revenue and costs, not brand and image.
If marketers confine themselves only to the language of brand, image, and CRM they are unlikely to qualify themselves for higher management.

© N.C.Watkis, Contract Marketing Service 16 Sep. 16

September 26, 2016   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, marketing ROI, performance management, performance measurement indicators  Comments Closed

Does Group Think compromise your decisions?

Small businesses by their nature have simple organisations, but as they become larger with greater manpower, they are organised into specialist departments that collectively contribute to producing income. Much of an organisation’s planning and projections will be based on information provided by these departments to the commercial manager, responsible for producing the profitable income on which the future of the business depends. As these departments evolve, so a corporate culture, mentality and team spirit develop and while this is in general a good thing, it also brings the potential danger of the phenomenon known as “Group Think. “

What is Group Think? It is the term given to a group of people who collectively tend to like and use the same assumptions and thus hold the same collective opinions. Group Think manifests itself with collective answers to situations without considering alternative solutions or recognising changed conditions.

The Cambridge Dictionary defines Group Think as:

the process in which bad decisions are made by a group because its members do not want to express opinions, suggest new ideas, etc. that others may disagree with:

Group Think is plainly visible when governments enact and continue with policies that are plainly failing, or when companies adopt foolish strategies that produce massive losses.
While team building is good for promoting and delivering business objectives, close – knit teams have danger of group think. Where Group think develops there is a tendency to develop assumptions that are both wrong and without foundation. What everyone in the team knows to be true, frequently isn’t and may be a false and outdated assumption.
For the commercial manager, responsible for input into the corporate plan and for the delivery of income to meet the corporate plan objectives, being aware of group think and its dangers is especially important, in order to counter its potential effects.
Since first described by Alex Osborn in the 1950’s Brain Storming has been considered an excellent way to generate ideas. However, more recent research tends to show that people working in groups actually produce fewer ideas that are innovative and actionable than would have been produce had worked individually alone. As soon as one person states a potential solution, it tends to influence the memory of everyone else in the group in ways that make them think about the problem in a similar manner, which is the basis of Group Think.
To counter this problem of potential group think, there are a number of actions that the commercial manger can implement.
1. Build a critical thinking culture. When people stay silent in group discussion, they do so because they think that their reputations will suffer and that they will be punished, not rewarded, for disclosing information that differs from the majority’s position.

2. Initially decline to express an opinion.
Commercial managers should decline to state a firm view at the start of any discussion, in order to allow others to share their thoughts more freely. By emphasizing their desire to hear all points of view, including dissenting opinions commercial managers are more likely to learn what they need to know. Numerous studies suggest that a group’s opinions are frequently swayed by information that is common to most or all their members regardless of whether it is right or wrong.
3. Concentrate on group, not individual, success –
Group members often fail to disclose what they know because they believe they won’t personally benefit from speaking up. People are far more likely to disclose what they know when they feel that they have everything to gain from a correct group decision. But if group members concentrate on their own prospects, rather than that of the group, the group is far more likely to make an incorrect decision…
4. Give group members distinct roles
If a commercial manager wants to know what group members are thinking, it helps to give people distinct roles and to tell members, before deliberation begins, that everyone has different, and relevant, information to contribute. Encourage team members to test decisions and opinions with alternative ideas and questions.
The most important questions for any commercial manager to ask should be:
* What do I need to know, even if I don’t want to hear it?
* “How do you know?”
* Where and what is the evidence?
For the commercial manager it is essential that decisions that affect the income and the future of the business, are not adversely effected by group think mentality but are reached by unbiased and clear assessment of all available information

© N.C.Watkis, Contract Marketing Service 29 Jul 16

August 3, 2016   Posted in: business development, business efficiency, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing performance measurement  Comments Closed

Budgets and Plans go hand in hand

Every business organisation needs to a detailed financial plan or budget for the effective control of financial resources in order to operate efficiently. While financial controllers are responsible for the management of financial resources, commercial managers have the responsibility of producing the profitable income on which the organisation depends. Planning how that income is to be produced is fundamental to deciding what financial resources will be necessary for its production, and what returns will be generated as a result.
Although budgets and plans should be prepared from the bottom up rather than imposed from the top down, for the commercial manager, it starts with a financial objective, which is derived from the corporate plan. The corporate plan will set out the income and profit objectives, together with a corporate budget that will outline the uses of financial resources and investment.
The commercial manager has the responsibility of preparing and executing a commercial plan for the achievement of the financial objective. While corporate plans are usually set to cover for a period of three to five years, with perhaps an annual progress review, commercial plans are normally considered to be short term, usually for twelve months.
The purpose of every business is to make money, by anticipating and satisfying customer requirements profitably, for the benefit of its owners and for the employees on whom the operation depends. The commercial manager’s responsibility is to produce the profitable income on which the business survives. A commercial plan, is therefore a necessary tool for the effective management of resources to achieve the objectives, and against which performance may be continually compared.
Preparing a commercial plan, requires input from all those different activities involved in producing profitable income from customers, so that as far as possible the plan should be prepared and written by those who have to execute it. That way, having been given an objective by the commercial manager, they have the responsibility and ownership of the pathway to achievement.
Ideally, a commercial manager would be given a financial objective, and would then prepare a plan and propose a budget for its achievement. This would then be submitted to the senior management for acceptance and funds allocated accordingly. In practice, it is more often the case that the financial controller, on behalf of the senior management hands down a “Departmental budget” to the commercial manager, which is simply an allocation of money for the commercial operation, This allocation may have little to do with the actual commercial situation, but the commercial manager has to make a workable plan within the financial limits.
The financial target of the commercial plan needs to be clearly stated and understood by everyone involved in the plan’s production. While targets for product sales, market share and other market related objectives are important, it should be remembered that income comes from customers, thus the target customer base must be clearly defined, as well as the strategies to be employed to engage the customers.
A commercial plan should ideally contain the following elements:
* A clear statement of the financial objectives.
* A statement of the commercial objectives in terms of product, market, promotion and price,
* A description of the markets over the 12 months of the plan, with an appreciation of the economic and other trends.
* A statement of the commercial policies to be followed over the period, e.g. the markets to be engaged and the methods of engagement.
* A list of principle contracts to be achieved over the period on which the greater part of the income plan depends.
* An appreciation of the critical internal factors that could adversely effect the commercial achievement of the next 12 months
* An Action Plan listing what commercial actions have to be taken , by whom and when.
* Sales/Revenue forecast prepared as a Profit and Loss account by month.
* Commercial Budget comprising an estimated schedule of commercial expenditure for the period, including travel vehicles, living expenditure, advertising, P.R., exhibitions, entertainment etc. N.B Having got to this stage in the planning, if the estimated budget required for the plan exceeds that of the Departmental allocation, the commercial manager will either have to revise the plan within the allocation, or use the plan to request additional resource from senior management.
Commercial managers need to ensure that the assumptions on which the plan is based are clearly understood as are the adverse external risks. If anything can go wrong it will. Therefore there should always be a contingency plan and fund to deal with unexpected circumstances.
© N.C.Watkis, Contract Marketing Service 30 Jun 16

July 3, 2016   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement, performance management  Comments Closed

The Key to Future Business?

Innovation is a word very much to the fore, in the business press and media. So what is important about innovation, what does it actually mean and how should a commercial manager develop it?
Innovation can provide creative solutions to today’s commercial requirements in ways which yesterday’s answers cannot. Business growth and development is often considered dependent on future innovation.
The Oxford English Dictionary defines Innovation as: To make changes in something established, especially by introducing new methods, ideas, or products:
The results of innovation may be seen every day with new products and ideas being presented to the potential customer. In business to business markets, innovation often takes place along lines of technological improvements for efficiency and effectiveness. But in consumer markets, innovation is often driven by fashion promulgated through social media. A new IPhone appears every few months, with new features and apps, which appeals to customers who like to be first with the latest technology, and who therefore change their phones regularly in order to have the latest model.
Change and development in commercial markets is probably faster now than at any other time. Developments, especially in IT and communications, such as social media, have been rapid. The skill of successful entrepreneurs lies in their ability to have seen the potential of new ideas and innovations and to have exploited them profitably, in advance of their competitors.
Developing new products with new technology may often take a longer time than there is available in which to recoup the investment and produce profit, before being superseded by later models. This is especially the case in the IT and communication markets, where investment in product development is essential for organisations to maintain their place in the market, or risk becoming seen as obsolescent.
Business exist to make money for the benefit of owners and the workforce, by anticipating and satisfying the demands of customers, who ultimately provide the income on which the business depends. Satisfying customers is not the purpose of business, but is the way by which businesses make money.
Commercial managers are responsible for producing profitable income for their respective businesses with the objective of maximising profitable income for the long term future while minimising costs and the use of assets and investment. Innovation is not solely confined to the development of new products and services, but is about finding new ways to do things better, more productively, more profitably and more efficiently. Thus in a rapidly changing commercial environment, developing innovation is especially important to satisfy customer requirements, and produce efficiency in order to maintain the flow of profitable income.
While product innovation is often seen as the key to satisfying changing customer requirements, it is not in itself a guarantee of financial success and may require considerable investment. Maintaining and improving profitable income may involve the development of new products and services, but more often it requires doing things differently and more efficiently to meet changing circumstances and situations. Developing creative ideas involving doing things differently, through efficiency and productivity may increase profitable income at minimal cost.
How can a commercial manager encourage and develop innovation to maintain efficiency and sustain and increase levels of profitable income? If a commercial manager is by nature more analytical rather than creative, then it pays them to employ and encourage those with more creative abilities. Such creative minds should be encouraged to develop new ideas for the commercial manager to assess for their practicability.
To encourage an atmosphere in the workplace where innovative ideas can develop, commercial managers need to:
* Keep abreast of changes in technology, fashion, and customer requirements.
* Encourage staff to question processes and invite suggestions for improvement.
* Use “brain storming” sessions to review all the commercial processes that relate to satisfying the customer, including media communications, delivery, payment methods, product development and others, in order to assess the need for change and development.
* Realise that small and achievable changes in business processes can have cumulative beneficial effects e.g. By reducing costs by 1%, increasing prices by 1% and increasing sales by 1% the cumulative increase of profit can be as much as 24%
* Develop a working environment that encourages staff to develop new ideas, together with an organization which is adaptable enough to enable change to take place quickly and easily.
Commercial managers need to be aware that innovation requires being alert to changes and development that effect customers, the market environment, and their competition as well as their own business. Being aware of those changes can stimulate creative new ideas to ways of working as well as developing new products and services.

© N.C.Watkis, Contract Marketing Service 31 May16

May 31, 2016   Posted in: business development, business efficiency, Business Marketing, business performance improvement, business performance indicators, business performance management, business performance measurement, marketing development, marketing management, marketing metrics, marketing performance measurement  Comments Closed