At heart all healthy businesses are trying to do the same thing, says David Ollerhead
Linguists today think that all languages have the same purpose and deep structure. Basically linguists believe that all languages are at heart doing the same thing. This appears to be true of healthy businesses too.
All healthy businesses have the same purpose: to grow and maximise profitability within the markets in which they are operating. There's plenty of practical empirical evidence to suggest that healthy businesses also have a great deal in common in their structures and the way they organise their activities.
Management skills, after all, are widely regarded as transferable between different vertical sectors. Senior executives tend to be recruited (or appointed to Boards) based on their success in roles where it is their positive impact on a particular organisation that matters rather than the sector in which the organisation operates. This suggests that healthy businesses have in common organic things which good managers can consistently nurture and develop, whatever the nature of the vertical sector where the business operates.
Similarly, university and business school courses focus on management skills in a general sense. ‘Serial entrepreneurs' are, by definition, fabled for their expertise at forming, growing and then selling businesses in a wide variety of sectors. Indeed, the very existence of management consultants who are geared to consulting in any sector where managers need assistance or guidance is perhaps the most decisive evidence of all that ‘management skill' is a tangible, discrete and specific thing which is basically sector-independent.
Further evidence that healthy businesses are all doing much the same thing is found in how brands operate. Major brands positively exult in their ability to win a presence in markets that on the face of it are disparate but in practice tend to become linked when a brand successfully establishes a loyal, enthusiastic, customer base.
Taking two examples, the Virgin brand (including music, travel, publishing, communications, financial services and soft drinks) has come to be associated with fun, youthfulness, value for money and Richard Branson, while the Saga brand (including travel, publishing, financial services) is seen by many adherents as signifying reliability, good quality, and a square deal for the over-50s. Brand-loyal customers willing to buy from more than one and very possibly all the different businesses under one particular brand obviously feel that the brand is more important than what's being sold.
The science of linguistics that originated the idea of, deep down, all languages being the same, is a fascinating science, but ultimately simply an academic pursuit. Business, on the other hand, powers the world's wealth and is the source for most people of their income and economic security. Big-picture conclusions about business and how it works consequently have massive implications for all of us.
The route to growing and maximising profit is to sell more products or services to more customers, given that neither the business nor its customers will want there to be any negative changes in the quality of the products or services being delivered. Equally importantly, in the case of a service, the business will not want customers to be over-serviced, which will increase the quality of what is being supplied but make supplying it much less profitable. The organisation will also want to sell more things to more customers without disproportionately increasing the time taken to supply what is being sold.
For healthy businesses, a melodious and useful mantra is: ‘Revenue is vanity, profit is sanity, cash-flow is key'. Chasing revenue for its own sake makes no sense if the revenue does not come accompanied by a healthy profit and a correspondingly healthy and positive cash-flow. Above all, it makes no sense for a business to succeed in its aim of selling more products or services to more customers unless the business can do so without disproportionately increasing the cost of supplying what is being sold. Similarly, the business will want to avoid disproportionately reducing the prices of what is being sold. Selling more things to more customers by slashing the price (such as through a ‘buy one get one free' offer) can easily reduce profit and so be self-defeating.
Within the constraints of these qualifications a healthy business's aims are clear. All healthy businesses are trying to sell more things to more customers without:
- compromising the need for the business to supply products and services to the required (rather than excessive) level of quality
- incurring costs that make supplying the products and services unprofitable
- reducing prices to a level where supplying the product or service becomes unprofitable.
So, how does a healthy business achieve these vital objectives? Ultimately, the very nature of what a healthy business actually is suggests there can only be one answer to this question. The only way for a business to sell more products and services to more customers is to have a total focus on its customers. The fact that this answer, baldly stated, sounds straightforward does not make it any easier to achieve, or lessen its importance.
The first challenge in achieving this vital customer focus is knowing who your customers are, which includes your existing customers (i.e. the ones you've won already) and also your potential customers (i.e. the ones you could win.)
The second challenge is knowing what your existing and potential customers need, at least in the context of what you are able to sell to them. This challenge may well be more difficult than knowing who your existing and potential customers actually are, but mastering this second challenge is vital to your success, because until you truly understand what your customers need, it is always possible that:
- you might be offering customers things that they don't actually want, or that not enough customers want
- you might be focusing on irrelevant issues (eg cost-discounting things customers don't really want) instead of getting to grips with finding out what customers do want
- you might start improving areas of your business that have no ultimate effect on customers and the improvement of which will therefore not lead to you selling more things to more customers.
The third challenge, once you know what your customers do want from you, is to work out how you can meet these needs by profitably producing goods and services as efficiently as possible.
The fourth challenge is the need to commit yourself to ensuring that your responses to the first three challenges are subjected to a continual state of interrogation that involves making sure your responses are undergoing a continual state of improvement.
The four challenges are fairly easily stated but by no means easy to meet. They involve, above all, establishing and maintaining a focus on your customers rather than on internal matters at the business or on your own personal concerns. But businesses that really do rise to the challenges - businesses that become, in effect, experts at focusing on customer needs - can enjoy prodigious success.
Once you do know who your customers are and what they want from you, one particularly potent way to ensure that your business is really focused around their needs and meeting those needs with maximum efficiency, is to look hard at your business's processes.
In business, a process is a series of steps that produces a specified deliverable to meet a customer need. This definition is precise: the steps of the activity must actually meet customer needs (or, for organisations that have several processes, the needs of different customers) successfully. A series of steps that doesn't meet customer needs can't properly be regarded as a process, or at least not an effective one.
Whatever the precise nature of the process or processes a business carries out, the very fact that process is actually defined in terms of delivering a benefit to customers leaves no doubt that a business's process or processes lie not only at the heart of the business but are the heart of the business.
And make no mistake: all good businesses will have a healthy heart whose pumping creates maximum profit for you, and maximum satisfaction for your customers.
David Ollerhead is head of consulting within the Professional Services Group at Airwave Solutions Limited, and can be contacted at email@example.com