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1. VISIT US AT www.shirlawscoaching.com
More money
More time
Less stress
The business owners’ guide to creating
a profitable, sustainable business that
rewards you richly in time and money
John Rosling
2. 2
“Your motivation is never money, money is
only an end result. Your motivation is more
likely freedom.”
Simon Sinek
Acknowledgments
This book would not exist without the business insights and knowledge of Darren
Shirlaw and the development team at Shirlaws, the international business performance
and coaching organisation of which I am UK CEO.
Darren is one of the world’s most highly regarded experts on what makes a mid-sized
business succeed and what makes the owners and CEOs of these businesses achieve
their goals and ambitions.
Both as a business owner who has implemented Shirlaws’ principles in my own business
and latterly as a member of the Shirlaws team, I am deeply indebted to Darren and all
the partners and coaches at Shirlaws in the UK and all around the world. They are a
remarkable group of people who change the lives of business owners every day.
www.shirlawscoaching.com
www.shirlawsonline.com
3. 3
In this book
SECTION 1: STEPPING UP TO A LEADERSHIP ROLE
Chapter 1 - Understanding context
Chapter 2 - Understanding the power of ‘why’
Chapter 3 - Understanding your role as leader
Chapter 4 - Leadership in action - creating the why
SECTION 2: UNDERSTANDING YOUR BUSINESS
Chapter 5 - Understanding your business cycle
Chapter 6 - Understanding risk in a strategic context
Chapter 7 - Becoming a great communicator
SECTION 3: CREATING REVENUE TODAY
Chapter 8 - Product - the foundation of your business
Chapter 9 - Your intellectual property - the rocket-fuel in your business
Chapter 10 - Positioning - your key focus
Chapter 11 - The salesforce that never asks to be paid
Chapter 12 - Driving energy into relationships
Chapter 13 - Creating revenue – A final thought
SECTION 4: GETTING YOUR BUSINESS TO WORK FOR YOU
Chapter 14 - The fully functional business
Chapter 15 - Capacity planning - the secret of controlled profitable growth
SECTION 5: BUILDING EQUITY VALUE AND EXITING YOUR BUSINESS
Chapter 16 - What really drives equity value
Chapter 17 - Leaving your business in good hands
SECTION 6: MANAGING YOUR OWN ENERGY
SECTION 7: ABOUT SHIRLAWS AND THE AUTHOR
APPENDIX: THE RECESSION AND WHAT TO DO ABOUT IT
The five mistakes of a recession
The five growth opportunities of a recession
The five ways to prepare for the recovery
4. 4
“There is more to life than increasing
its speed.”
Mohandas K Gandhi
5. 5
Shirlaws works with hundreds of mid-sized, owner-managed businesses in 26
countries around the globe. Our job is to help business owners and CEOs to achieve
success for their business. Our goal is to see our clients’ businesses reward them
richly in wealth, time and fulfilment.
Our clients own and run successful businesses. Yet the most common things we hear
new clients say are “I want the business to work for me, not the other way round”, “I’m
not making the money I want”, “I want less stress”, “I need to scale”, “I want to exit”.
It is to address these issues that we have developed, over the last 12 years,
knowledge, experience and unique business frameworks and techniques.
The purpose of this book is to share this approach to business management with you.
I hope this make your business work for you (not the other way round). And give you
wealth and choice about how you spend your precious time into the future.
Whilst we see hundreds of SME and owner-managed businesses, and every one
thinks the issues they face are unique, what is remarkable is that almost all the blocks
to a businesses’ progress can be traced back to a few key issues.
My belief is that if you can address these “source” issues you can unblock almost
any business to achieve its potential – and the dreams of those who founded and
run the business.
My intention in this short book is therefore to examine each of these source issues and
offer some perspective on how we help businesses overcome them. In doing so I hope
I can help give you some valuable insight and perspective on your own business.
If you are interested in learning more about Shirlaws you’ll find more information about
us in the back of this book. If you are interested in having a chat and a coffee, you’ll
find my personal email address at the back of the book too.
John Rosling
Autumn 2010
6. 6
STEPPING UP TO
A LEADERSHIP
ROLE
“There is no map. No map to be a leader.”
Seth Godin
7. 7
CHAPTER 1:
UNDERSTANDING CONTEXT
“The main thing is keeping the main thing
the main thing.”
German proverb
As CEOs of small and medium sized businesses, most of us have had the experience of
being so firmly embedded in the day to day issues of running the business that it is difficult to
find sufficient time to grow the business.
We can get stuck in the detail with the result that the single greatest impediment to the growth
of our businesses and the realisation of our dreams can be ourselves. This is not a comment
on skills or capabilities (although we could probably all do with constantly learning new skills)
but it is a comment on what we choose to focus our time and energy upon. It is a comment
on the belief we have created that we have to manage everything because no one will do it
as well as we do.
The challenge, if you ever want to have your business deliver the wealth and leisure you set
out to achieve, may be to find a new way of working. A way of working that really successful
entrepreneurs who have built vast and complex businesses - but still seem to have time for
ballooning and boat racing - have learnt to do instinctively.
You have to find a way of working that manages your business not in content but in context.
Context is that which brings meaning. It provides a common language within the business
process. It gives clarity to all the content and allows a business conversation to unfold,
resulting in aligned decision making and understanding.
Imagine a conversation between three directors of a business. Let’s imagine the discussion
is about fruit; which is the best fruit between apples, bananas and oranges. Without any
context to give meaning to the word “best”, imagine how long that conversation could last
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and how much energy, management time and focus it could use up. Now imagine the same
conversation if a clear context of “Vitamin C” was agreed. How long would the conversational
have to last?
It is a simple analogy, but how many of us have the experience of management or team
meetings where issues become muddled and decisions are difficult to reach. I find working
with boards and teams that if they can set a clear context, decision making can be remarkably
accelerated - and relationships improved. In fact, most problems in business stem from the
fact that there is normally plenty of content, but no context.
Context is the wood, content the trees.
The context you choose to run your business, project or meeting is, of course, down to you
and what you are seeking to achieve. As an example, we are working with a fast growing
business that has chosen to work with a context of “learning”. Having this context supports
decision making in how the business treats its people, takes decision, and invests money. The
result is an ambitious and creative business where mistakes are not a cause for blame but for
learning and where the team is motivated and productive. It’s also a great place to work.
Context is one of the three key skills that all effective leaders have learnt.
So how do you get context into your business? The first and primary piece of context in your
business is called “why” and I’ll look at that in detail in the next Chapter.
TOP TIP
• Learn the trick of the greatest entrepreneurs; manage in context
and leave the content to your team.
9. 9
CHAPTER 2:
UNDERSTANDING THE POWER OF “WHY”
“Knowing the why can inform your actions
as a brand, your brand voice, its character,
and everything else that helps build it
into something people want to have a
relationship with.”
Simon Sinek
When I took over as CEO of Shirlaws I was fortunate in that I inherited a well managed
business. But it was one that had just lived through the worst recession in 80 years.
The first thing I focussed on wasn’t revenues or internal cost structures – the content.
My first priority was to refocus everyone in the business on their core belief in the busi-
ness – the context. I reasoned that if this core belief was strong and shared by all, the
commercial success of the business would follow. It would also be a fun place to be.
Belief is context because belief in the why makes sense of the what.
All business understand “how” they do what they do (their manufacture, sales, delivery,
service, admin. etc.), and most but not all truly understand “what” they do (the funda-
mental intellectual property and rocket juice that sits at the heart of the business, what
makes them famous and what customers “buy” rather than what they sell). But very few
businesses really understand the “why”.
Which is a pity because the “why” is where the power is.
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If you think about all the most successful businesses, the ones people would most like
to work for, they all have a strong and well understood “why” in their business. It’s this
“why” that staff buy into figuratively - and customers buy into literally.
Simon Sinek explains this brilliantly using Apple as an example. Apple understands why
it exists in its bones and has invested huge amounts of time in instilling this belief in
its staff. This “why” is distinct from “what” it does. Apple believes that everything they
do challenges the status quo. It believes in solving problems for people through great
design. Making and selling computers is just “what” it does. This fundamental belief in a
“why” drives everything the business does – it creates the context for all the decisions
the business makes. Go into any Apple store and you’ll see the outcome in a powerfully
motivated staff who love working there and believe passionately in the product they sell
and communicate that passionate belief to customers. Sinek draws the comparison with
Dell, a company with a clear understanding of “what” it does but not “why” and shows
how this limits Dell. Since Dell has a clear “what” (make and sell computers) and Apple
has a clear why (solve problems through great design) customers will only buy comput-
ers from Dell whilst they’ll buy computers, music and telecommunications from Apple.
And they’ll make every purchase decision when buying Dell partly on price (since it’s a
rational “what” choice) but price hardly features when buying Apple, which gives Apple
a very healthy margin and a massive valuation. This is the power of position which I’ll
cover in detail in Chapter 10.
The key reason behind Apple’s success is that people buy values and beliefs over
benefits. That applies to the customers you want to attract and the talent you want to
Why What How
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employ and it is as true in the corporate and B2B market as it is in the SME and B2C
markets. I’m sometimes asked why I joined Shirlaws when I already had a reasonably
successful business and a comfortable life. I had had the experience of applying Shir-
laws coaching in my own business and had seen the tremendous commercial return.
But what attracted me was the strong “why” I saw in the organisation – the clear intent
to help change the lives of business owners through coaching and the transfer of skills
and knowledge.
It doesn’t of course mean the “what” isn’t important. The quality, effectiveness, and
value of what we supply and how we do it is vital - we all make rational (what) purchase
decisions every day. It’s just that the “why” is often forgotten in the content-driven, busy
world of the SME. And by forgetting it we are missing a major trick.
Incidentally, there is a strong and compelling practical reason why people make most
decisions in a why (values) rather than what (benefits) mode. To be simplistic our
brains are effectively an evolutionary map of development – almost analogous to tree
rings. The core or “limbic brain” (sometimes called the “crocodile brain”) was formed
before the development of language and what we consider “rational thought”. It is in
the limbic brain that “feelings” reside and key decisions are made. The outer layers
(“neo-cortex”) are used for language, rational thought, processing etc. So, simplistically,
relationship choices (with people and “brands”) are made at a “feeling”, pre-language
level and then post-rationalised to satisfy our thinking mind.
Clearly, this is highly simplified and everyone is different (which has spawned a whole
industry from Jung to Myers Briggs and beyond - we’ll look at this in Chapter 7). But for
us, as business owners, it is important to note that beliefs and values are vital for creat-
ing effective and valuable customer and staff relationships – far more so than facts on
websites, price promotions, or the prospect of pay bonuses (all of which could play a
supporting “rational” role). As a bonus you’ll get a fun place to work and marketing and
sales will be easy giving you spectacular revenues as well.
We’ll look at how this impacts on buying behaviour – and most interestingly our ability
to create effective referral networks in later Chapters.
So if you want powerfully motivated staff who will take your business to where you want
it to go, allowing you to stop “running” your business, you need to create fundamental
belief in the “why” in your business.
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The “why” is about vision and dreams and possibility – not about logical strategies.
When Martin Luther King stood in front of a quarter of a million people on Washington
Mall in August 1963 he didn’t say “I have a Plan”.
So how do you create a “why” in your business? We’ll look at that in more detail in the
next Chapter.
CASE STUDY: APS
When Brian Armstrong and I started APS (www.aps-advance.com) in 1998 in .Australia
and the UK it appeared to most that it was just another software company to provide
practice software around the individual business requirements of accounting and con-
sulting firms.
We had both worked in, and left, a more established organisation that was a toxic envi-
ronment for employees and clients. We were clear that APS needed to prove that it was
possible to build an ongoing and sustainable business in our chosen market place that
was truly successful from both a cultural and commercial perspective.
That was and is our “why”; the question we asked of ourselves and one which contin-
ues to govern our business model today. To us, life is a journey not a destination so we
continue to focus on the ‘why’ – as do our teams in the 3 countries in which we now
operate. No one is perfect and to say that we have attained a 100% score and maintain
it would not be truthful. It does however remain our Intent to never lose sight of this
purpose.
But for us it was not just the “why” part of the conversation – we also had to get clear
about “what” we were going to do to achieve that and “how” we were going to execute
it – both culturally and commercially.
Culturally our strategy is quite simple – FAMILY – a context that binds core values, we
recruit people who are aligned with these and want to be part of this structure. Similarly
we form relationships with clients who want the same thing – to be a client not just a
customer as is so often the case.
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Commercially our strategy is also simple – what we do is implement systems that give
professional service firms the Information they need to serve their clients and to run
their own business. Key to this outcome is developing and maintaining a sustainable
Relationship.
How we do that is through the provision of Software, its Implementation, ongoing
Consulting, Support and regular software Upgrades. Fundamental to this provision of
software and client service is the shared and agreed values that are part of our every
day language and behaviour – internally and externally – to be Caring, Flexible, Open,
Passionate, Safe, Honest – To have the 100% conversation within our team and with
our clients.
But, for us, understanding the “why” set the whole context and purpose for our busi-
ness and enabled us to agree the “what” and “how” easily and with focus. These
haven’t changed.
Brian Coventry, CEO, APS.
TOP TIPS
• Find the fundamental “why” in your business - and create a
strong sense of belief around it.
14. 14
CHAPTER 3:
UNDERSTANDING YOUR ROLE AS LEADER
“While Management is operationally
focused, setting priorities, allocating
resources, and directing the execution,
Leadership is more forward thinking,
more about enabling the organization,
empowering individuals, developing the
right people, thinking strategically about
opportunities, and driving alignment.”
Randy Komisar
People who run businesses use various titles but you’ll have noticed I use the term
Chief Executive or CEO. That’s because I believe it is your role is to be the Chief – to
Lead and not to Manage. That’s why I prefer not to use the title “Managing Director”.
If you want to grow your business and have it working for you and not the other way
round your role should evolve so that you are not “managing” the business at all. In
other words you live as much as possible in “why” and less in “what”; more in belief
and less plan; in context not content. Therefore in my own business I am CEO not
because it sounds grander but because it describes the role I do and how I want to see
it develop.
So what is that role? At Shirlaws we believe that the role of the CEO of any business –
15. 15
including SMEs – can be described in three simple concepts:
• Set the context.
• Manage the energy.
• Coach don’t play.
Set the context means it is your job to understand the “why” and know where you are
going. You create the dream. It means you are “above” and often 6-12 months “ahead”
of the business, allowing your team to run the today. It also means you hold the context
so that every decision in the business is simple to make in a contextual not content-
driven space. It means you understand where you are in your Life Cycle, understand
and hold the business to the contextual choices you have made in terms of Risk, Mar-
ket Position, Product etc. All these will be covered in later Chapters.
Manage the energy means it is your job to create the belief in your why and create a
compelling vision for your team. You sit above the business and your job is “feel” your
business like an organism and know when things are not right. It is to support the en-
ergy and enthusiasm of the team and the key relationships you have outside the busi-
ness. I think about it like this. All employees in the business possess a certain amount
of energy that can be devoted to progressing the business. If this energy is aligned and
“flows” easily through the business there is a greater chance of success. Alternatively if
the energy gets dissipated, for example in managing processes that are not working or
where departmental heads have different contexts and hence work against each other,
energy gets expended inside the business and is not channelled into activities that will
result in the growth and success of the business.
Coach don’t play means you’re not on the field any more. Your job is to build the con-
fidence and skills of your team (over time) so that they have the ability, belief and are
given the responsibility to play the game – you create the big picture and then support,
observe, and encourage. You coach. That way your team runs the operations of the
business and you get to grow the value and scale of the business.
You’ll notice that none of these says “run the business” or “deliver the bottom line”.
That’s because to have your business work for you, you will need, in time, your senior
team to do these management tasks for you. In fact my whole theme so far (manag-
ing in context, setting the why) has been about getting your business into the position
where it is bigger than you and is not dependent on you. That means your role changes
to the fascinating and stimulating role of entrepreneur - and not manager.
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For many SME owners that may not seem possible right now but if you follow the ideas
set out in this book I believe it will become possible. At any event you will have the
choice of how much day to day management you want.
CASE STUDY: YRM
YRM (www.yrm.co.uk) is an architectural company with offices in London, Vienna and
Bucharest. Established in 1944 YRM has completed over 800 design projects in 37
countries. YRM is renowned for high quality functional and durable design delivered to
agreed budgets and timescales. John Clemow joined YRM in 1978 and leads the fourth
generation of YRM’s leadership.
“In mid 2007 as the economic storm was looming, I heard Peter Harford of
Shirlaws speak at a seminar about sluggish leaderships, succession fall out, and
underperforming businesses. It felt like I was the only person in the room, with a laser
dot on my forehead. Our top table was an operationally circular partnership model
and, as Managing Director, my role was mainly cleaning up the mess left behind by the
owner-managers enjoying their own games. I recognized I was in the classic Managing
Director position of being well and truly stuck in the content and I brought Peter in
initially to coach the Board. We realized we needed to operate as a proper company
Board, with a CEO supported by a business structure with defined functions, lines of
communication and delegated decision making. I realized I needed to act differently if
I was to be a genuine CEO, to take more of a leadership role; to be “in the context” as
Peter would say!
Peter helped me understand, implement and ultimately enjoy my CEO role. To get the
leaders focused and on track, we needed to develop and crystallize our vision and
strategy which was both motivating and enjoyable. This gave me a positive framework
for dealing with some difficult problems to reverse our trajectory. I selected emerging
17. 17
leaders to prepare strategies for some priority areas of the business. I saw my primary
role in energizing and supporting these rising stars. Great work was done which
continues on the next set of issues to tackle. Our conversations are mainly on how
these strategies tie in to our vision and overarching strategy.
It took two years of hard work to embed the changes in thinking, action and attitude.
There is inevitably some occasional backsliding which means I have taken my eye off
the ball. The panic and frustration that I and my colleagues felt has been replaced by
calm determination and a clear sense of purpose. I wake up in the morning knowing
what I need to do today and looking forward to the steps needed ahead. We have
weathered the storm so far, and I only occasionally need to do a bit of light cleaning”.
TOP TIP
• Set the context; manage the energy; coach don’t play.
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CHAPTER 4:
LEADERSHIP IN ACTION – CREATING THE WHY
“How do you get people to come together
around a goal and objective and be great?
It’s establishing a sense of common
purpose. Greatness doesn’t come from
a tactical sense of execution. Greatness
comes from having a vision that goes
beyond yourself and even beyond the
organisation”
Randy Komisar
“When people believe in what you believe
in, they work with their blood, sweat and
tears. When they don’t believe in what you
believe in, they work for your money.”
Simon Sinek
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We have established that having a strong “why” in the business is fundamental to cre-
ating spectacular success and a satisfying and rewarding environment for everyone in
the business. “Why” businesses are great businesses – and great places to be. In this
section I’ll look at the key elements that create the “why” and how you can build them
in your business. We’ll look at “what” and “how” themes in later Chapters.
i. Culture
As CEO it is your job to build and nurture the culture of your business. This isn’t some
fluffy bolt-on but is fundamental to your success. It is the reason talented people will
work for you, stay loyal to you, and create wealth for you. It also makes your business
a fun place to be. It’s a fundamental building block to your market position (see Chapter
10) which is what ensures customers continue buying from you and pay more for your
services than that of a competitor.
ii. Intent
To create the culture you need to know very clearly in your own mind the fundamental
purpose or intent of your business - why your business exists. People want to feel
part of something with a purpose more compelling, more important, than just making
money. Making money is the outcome of doing what you do brilliantly. The source of
getting everyone to be brilliant is rooted in an aligned purpose. It’s vital to understand
why you get out of bed every day and come to work – and it’s equally vital to discuss
this with your key team to get agreement as to what the intent of the business is. If you
feel daft doing this, get some external facilitation.
iii. Values
A common and aligned intent can be an incredibly strong motivator for everyone in the
business. But it needs to be supported by a very strong set of shared values. I meet
businesses all the time who have their values written down and filed somewhere. It’s a
waste of time. If no one knows what the values of your business are, how can they be
used to create a powerful culture? How can those values be used to align your people
into a powerful force to deliver brilliantly?
Why do most businesses fail to leverage their values – to create value from values if
you like? It isn’t because they don’t have values. In my view, it is because they misun-
derstand what values are for. Your values are not to bung up on a website to demon-
strate that you are a business with integrity. They are the building blocks of your shared
culture, and they support your intent. They are the common principles that drive your
business and all your people to success.
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And the secret of unlocking this potential sits in three simple steps:
• You have to agree, as a team, what your shared values are (and review these
choices annually). These are not your values to impose on the business (remem-
ber the plan is to get the business working for you). And ideally you shouldn’t have
more than three.
• You have to make them real. You must associate each value with a set of behav-
iours that you will use to check-in that your values are being lived.
• You must consciously live by your values, publish them and use them, making
them integral to the business.
With these three steps you will create values that will genuinely support the cultural and
commercial success of your business.
iv. Vision
Having founded your powerful culture on a shared set of values and with a common
intent, your job as CEO is now to paint a picture of where you are going as a business
that is so compelling and exciting that everyone in the business will buy into and carry
your business to where you want it to be. I have a dream, not I have a plan.
Of course, almost every business has a vision. But very few ever get there. In my view,
that’s because no one in the business really believes in the vision or feels the vision to
be theirs. As with values, if the vision of your business is your vision and is not shared
and owned by your team, then the business will always be dependent on you and can
never reach your ultimate goal (unless of course that goal or vision is pretty modest).
So how do you get your team to own the vision, to hold it as their own and drive your
business towards it? The vision has to be compelling. “To be the premier widget manu-
facturer in the West Midlands” is an intention (or a mission, if you insist). It is unlikely to
get your team champing at the bit on a Monday morning. You need to find a vision that
they will immediately understand and buy into.
Then, here’s the trick, you have to take them to that vision and get them to really feel it.
What it would smell like and taste like to be there? If the vision is powerful enough and
relevant enough to them, once they have experienced it they will want to get there and
enthusiastically work towards that goal.
If all this sounds like a lot of work when you are just trying to run your business then
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you have made my point for me. If you really want to grow your business and have it
work for you, you need to (progressively) stop managing your business and start lead-
ing it. Culture, vision and values are vital elements of leadership. It will create a power-
ful “why” for your people and your customers.
Have you ever reflected on how officers get their soldiers to put their lives in extreme
danger? The answer is that they don’t “get” them to. They lead. The army, the regi-
ment, the platoon create a strong culture based on a shared set of values and intent.
The officer or NCO then sets a clear vision or “objective” and the unit, literally, goes
through fire to achieve it. That is exactly what you are trying to do. But with fewer
bangs and less bloodshed.
A final word
Culture and vision are not easy things to achieve. Most businesses fail to create either
in a way that will really drive value in the business. In my experience, the only way to
design and build intent, values and vision that everyone really, really buys into is to
invest in some outside help. An outside perspective helps ensure everyone is able and
comfortable to express themselves and be heard.
Leadership needs constant work. Culture needs your constant attention. “Manage the
energy” is your day job. Checking in with your people, doing little things that will keep
their energy positive (see Chapter 12). This is important because it’s the only way you
will reach the goal you have set for yourself.
Your intent is likely to stay the same but the business needs to be reminded of it. Your
vision needs to be kept fresh and alive to your people. Your values need to be
re-visited about once a year.
An absolute cardinal rule of leadership in an ambitious business that really intends to
grow is to get the senior team off site and out of the business at least once a year and
preferably twice. This is your Strategic Retreat and is the time to review and refresh
your vision and values and work on the key strategic initiatives that will fundamentally
grow your business.
How are you ever going to have time for all this? That we will cover in Chapter 14.
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CASE STUDY: UnLtd
UnLtd, The Foundation for Social Entrepreneurs www.unltd.org.uk is a charity which
supports social entrepreneurs - people with vision, drive and passion who want to
change the world - by providing funding and support to make their ideas a reality. The
UnLtd Ventures team has a strong sense of its purpose which they were finding difficult
to articulate succinctly. The team felt pulled in many directions and was somewhat
unfocused.
They were aware they were not communicating as effectively as they could with target
clients and unable to share agreed criteria on whom to support.
UnLtd Ventures asked the Shirlaws Foundation for help and together we worked on
clarifying what the team really needed to achieve, the values the team shared, and the
clear intent or purpose around which they could align. Nynke Brett of UnLtd remembers
the problem was not articulating their values. The challenge was they had so many.
“We knew it was important to get these clear as a team so we could focus effectively on
helping our clients but we all felt overwhelmed. For us it was incredibly useful to have a
knowledgeable facilitator to steer the conversation. I remember the breakthrough came
when we were asked “if you were “unlimited”, what would you be?” and it suddenly
seemed so easy – that’s when we agreed on our values of “fearless, caring and chal-
lenging”. These values were then built upon to create a compelling “intent” for the team,
with an agreed purpose or context, in their case “to transform how business is done
(one entrepreneur at a time)”. Nynke concludes “Having these values and an agreed
intent has been incredibly important and helpful to us, and using them has changed our
behaviour and effectiveness as a team”.
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TOP TIPS
• A strong culture will drive your success by recruiting the
best people and most loyal customers. Culture comes from a
discussed and agreed intent based on shared values.
• Leadership is about creating the dream – the vision thing is
your job.
• All successful Leadership Teams get away on a Strategic Retreat
every 6 months.
• Get outside help.
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CHAPTER 5:
UNDERSTAND YOUR BUSINESS CYCLE
“We reach quite inexperienced the
different stages of life in spite of the
number of our years.”
Francois de la Rochefoucauld
In Section 1 I have set out some broad principles of managing in context and not content and
how being stuck in the detail of our businesses is often both stressful and unproductive. But
how much detail you should have in your in-tray obviously depends on where your business
is in its lifecycle and on its size.
A CEO of an early stage business has a very different job to one running a mature business.
Your role changes year by year and to understand your priorities at any one point it’s vital to
know where you are and what’s coming next.
All businesses have a natural lifecycle and go through clearly identifiable growth stages.
These stages are not based on set periods of time, but rather on “energy” within the
business. It is this energy, or ‘feelings’, of the key players in an organisation that will dictate at
which stage a company is and when it moves from one stage to another.
At Shirlaws we have worked closely with hundreds of businesses all over the world and using
this experience have created a model of this progression we call the “Stages model”. This
model applies to every company, regardless of size or sector.
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how well everything is going. These are the good times when you begin to reward yourself
for all your hard work in establishing the business. Perhaps you move house, buy a second
home, a new car or boat – you deserve it after all. It’s payback time.
But now you still seem to be working seven days a week, taking work home, going in at
weekends - and the business is not growing at the same rate. There are more people in the
company, so more day-to-day problems to solve. You are doing everything you did before
– and more. At this point your feelings can best be described as frustration and stress and,
eventually, disillusionment. You are at, what we call, the ‘Second Brick Wall’.
Now this is a crucial stage for any business. There are three options: you can get through the
wall and take the business forward, the business will plateau or it will decline.
The crucial element to get you through is further investment, and this time it needs to be
investment in skills. The business has changed and, unless you had a planned strategy for
growth, you need to assess what your role should be (you shouldn’t still be responsible for
running everything in the business) and assess the roles of everyone in the business – how
well are you delegating responsibility? You need to reassess how the company is positioned
in the marketplace against the competition and customer expectations. Sales methods need
to be reviewed. Are there the right skills in the organisation for the business you now are?
And what about your plans for the future – do you have a planned succession strategy?
If you recognise the needs of your business at this stage and invest in putting the right
strategies in place, then you move into ‘Advanced Growth’ and start to feel contented with
work and will have achieved a good balance with your life outside the office. In fact most
business owners simply say they feel enormously “proud” at this point. It’s the feeling that
successful serial entrepreneurs have. They have worked out how to get their business to
work for them.
So, how does your business feel today? Is it an excited and frantically busy place? Calm and
relaxed? Or stressful and increasingly frustrated? Understanding that will tell you what you
should do now and what is coming up in the future.
How do you feel? You may be in a different stage than your business or your key team.
Understanding that will help you know how to manage your relationship with your team
(manage the energy) and give you an insight into what skills you might personally want
to develop.
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Naturally, the capabilities and skills needed to shift through the Second Wall can be
planned into the business as you accelerate up that growth curve. The more of these
you build in while times are good, the less painful the Second Wall will be. Culture is also
hugely important, as businesses with a strong culture and a clear vision avoid much of
the stress and disillusionment.
But to really invest in these core long term capabilities you need some genuine
perspective – to be ahead of and “above” the business. The trouble, of course, is that in
the good times phase we are all too busy in the content, focused on clients and revenue
creation (and having a good time), and as we move towards that Second Wall we are
still in the content but now too busy fighting fires. That’s why managing in context is so
important (and difficult to achieve).
In the next two Sections we’ll look at these skills that need to be developed in more details
and outline the behaviour required by the company and its senior management team to move
the business forward and recapture that excitement of the early days. But first let’s look at a
couple of other tools to help you better understand your business today.
TOP TIPS
• Know where you are in your business lifecycle and plan ahead.
• Know where your key Directors or Partners are and understand how
this impacts on your relationships and decision making.
• Build in now the skills and capabilities your business will need to
grow in the future.
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CASE STUDY:
A couple of years ago we were asked to help a UK Phoenix printed circuit board
manufacturer. The company had started again with the same shareholders/directors and
the same staff. The issue they faced was of a deeply divided board and shareholding that
threatened to destroy the business before it was fully established.
When we started coaching the directors we talked to them all individually and it became clear
that two of the directors were excited and energised about the opportunity to start again and
threw themselves into the startup phase enthusiastically and were producing results, while
the third director/shareholder was, privately, just not energised by the phoenix opportunity.
This unspoken reluctance was driving an increasingly wide rift between the directing
shareholders.
This needed addressing before we could help the business progress any further. The
challenge was to create an environment and a framework where an honest conversation
could occur without it descending into blame and recrimination. Our approach was to work
through the business cycle model Stages examining where the old business had been before
it was closed and where the new business was on the Stages cycle. We also then talked
about where the individuals were on this cycle. Within half an hour there was an honest
acknowledgement from all around the table about the differing places and the impact that had
on them working together and building a new business together.
Within a week a new arrangement was agreed which essentially gave a part of the business
to the third Shareholder to run on a small scale – leaving the two energised directors with
the shared vision with the bigger business to scale appropriately. All were delighted with the
outcome.
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CHAPTER 6:
UNDERSTANDING RISK IN A STRATEGIC CONTEXT
“Take calculated risks. That is quite different
from being rash.”
George S. Patton
“There are risks and costs to a program
of action. But they are far less than
the long-range risks and costs of
comfortable inaction.”
John F. Kennedy
The concept of Risk/Return is well understood in investment circles; the higher the risk the
higher the potential return (and importantly but normally forgotten by the investor; the higher
the risk the higher the potential losses). For the CEO, risk is often the “hidden variable” in
many business decisions. Risk touches on every area of a company’s operations and yet
the case of “cost versus return” is considered by the board and yet the variable called “risk” is
often not discussed.
The term “Risk Profile” is also heavily used in investment circles. The Financial Adviser will
want to measure a client’s Risk Profile before investing their funds. It is often a score out of
10; with zero indicating highly conservative and 10 indicating ‘willing to take any bet’.
Equally, an Executive Team can have a Business Risk Profile that they can measure and use
as a strategic and contextual metric to manage risk-based decisions in the business.
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This can be a vital measure. It can create a contextual understanding when serious divisions
at board level occur. And it can help create a benchmark to support decision making when
circumstances change. For example, most businesses experience a severe drop in risk
profile after a serious economic downturn just at the moment when the business needs to be
decisive and proactive.
In the first instance, let’s look at debilitating differences of opinion within the senior team,
for example between the CEO and the CFO. We often see boards where the CEO might
have a Risk Profile of 7 or 8 but other members of the team have a profile of 4 or 5. But this
knowledge is hidden without a metric to measure it. All that shows up is that the board think
the CEO is impetuous and he or she feels frustrated and constrained.
The same can occur at different levels in the business and even between businesses; a
supplier/customer relationship for example. How useful would it be if you had a way to
measure the relative risk profiles of yourself and your bank manager for example – and a
sensible basis to have this conversation?
And what of the impact of a serious change in circumstances? More often than not during a
downturn the entrepreneur or CEO reduces their Business Risk Profile without being aware
of it. When the market starts to move the CEO needs to aggressively start to reinvest into
the business to get the uplift in the next phase of the market. But many will hold off until the
market has moved. The fear (called lower Risk Profile) that they may invest too early causes
them to hold off on investment and therefore they don’t get the revenue uplifts. The language
used revolves around “when the market improves then I will…” It is these fears that naturally
evolve from the recession that ultimately holds the business back.
So how do you fix this? How do you create a metric to measure the risk profiles of your
key team to aid alignment and understanding – to create the context that leads to quick
decisions? And how do you create awareness of the business risk profile so that you can use
that to benchmark vital decisions such as when to invest in the cycle?
Firstly, be aware of risk and your relative attitudes to it. Be aware of how that may have
changed. If you want to measure the board and entire management team’s personal
Business Risk Profiles, you can do that at www.navitasip.com.
Then, as part of your Strategic Retreat agree a Business Risk Profile which you will use to
benchmark all your significant decisions. Openly discuss where the conflicts in the business
are likely to show up relative to each other and to that agreed Business Profile so that you
can manage these in the future without argument and misunderstanding.
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TOP TIPS
• Benchmark the Risk Profile of your key team and openly discuss the
implications of these.
• As part of your Strategic Retreat agree a Risk Profile for your
business
• Have the Board mandate the Business Risk Profile and Risk
Management processes to ensure that all future decisions are made
by looking at cost, return and business risk.
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CHAPTER 7:
BECOMING A GREAT COMMUNICATOR
And why 60% of your communications could be misunderstood...
“If there is any great secret of success in
life, it lies in the ability to put yourself in the
other person’s place and to see things from
his point of view.”
Henry Ford
“Give me the gift of a listening heart.”
King Solomon
Communication is a lead issue in most businesses today. Most people freely admit that they
would benefit from more effective communication. They also admit they do not have a clear
understanding of their communication style. They do know that they are often misunderstood
when they believe they have been quite clear in their communication.
Yet becoming a great communicator is actually pretty simple. There are two main principles
which underpin this skill.
The first is awareness; awareness of the differences in communication and processing styles
between you and the person you are communicating with.
The second is to be an effective listener, being calm and creating enough space to listen and
absorb what is being said to you. If you are too busy talking and preparing what you will say
next, how will you know what is really being said to you?
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A simple story might illustrate this. Consider a family eating out in a restaurant. The father
looks closely at the menu and at each item and analyses what he will choose based on what
he had to eat recently, the price of the dish, and whether he thinks this will represent value for
money in this particular restaurant. The mother talks a lot about what she feels likes eating
and looks at what other tables are having – even asking people if they’d recommend it. The
daughter hardly glances at the menu, asks for something that isn’t even on the menu, and
gets irritated that the others are taking so long. The father is a thinker, the mother a feeler and
the daughter a knower.
It’s important to understand that we all use these different ways to communicate and process
to a greater or lesser extent but each of us has a natural preferred style (or balance between
the three). No one is better than the other. Having the ability to recognise and understand
your own style and the style of others allows you to adapt your communication and connect
with others more effectively through verbal and written communication.
It can impact how business teams communicate, particularly where individuals have a strong
preference of style. A strong knower may find a strong thinker frustrating while the thinker
finds the knower impetuous and can’t understand the rationale for decisions made. Great
teams have a balance of each – and have the knowledge and awareness of their profiles so
that argument and disagreement can be avoided.
It can also influence the relationship between businesses and suppliers and customers.
A surprisingly high proportion of entrepreneurs and business owners are strongly skewed
towards knowing and feeling (they are intuitive, creative, and driven by why not how). Yet
many of their advisors (accountants and bankers) are predominantly thinkers. This suggests
that if you want to achieve real influence over the people you do business with it would
serve you well to understand and adapt your communication style. If you have advisors or
people in your team who are predominant thinkers, adapt your communication (verbal and
written) to include more data and information than you might normally do – and offer options
and choices. If you have a strong feeler in your team communicate with them using visual
material, stories and anecdote.
This doesn’t mean you have to change everything you do or that what you do now is wrong.
But having an awareness of this can help so that if you have a particular individual with whom
you don’t quite connect you could adapt your communication style.
36. 36
So what do you do with mass communications – websites or public presentations? It is a
good idea to review all your materials and consider whether the balance is right and whether
you have elements that effectively communicate in each style including data, imagery, and
short summarised bullet points for example. If you don’t, it’s likely that you are simply not
talking effectively to around 60% of your audience.
CASE STUDY: UK entertainment company
A large household name UK entertainment company was finding that each of its departments
worked as a silo with conversations between departments often misunderstood and too much
communication left to email. This was having a serious impact on the productivity and cultural
integrity of the business.
Through a series of individual interviews and workshops, employees and managers
were exposed to Think Feel Know as a discipline and given the opportunity to express
observations, concerns and beliefs.
The outcomes were that each employee had a greater awareness of themselves and the
people they worked with and the whole business learnt a common “language” to understand
and connect with people from all over the globe in the form of a quick and easy tool to apply
immediately and see instant results.
The client commented “This is far simpler and more effective than many of the profiling
tools available on the market today. We now have a common language to use with all of our
territories. Learning about this has been fun and the light bulb has gone on many times during
the session; now I understand why sometimes when I speak to people it is as if I have hit a
brick wall!”
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TOP TIPS
• Listen to the questions being asked, take a moment before you
respond
• Ask yourself what state/style the person speaking to you is in
• If the person asks you a “how” question they are in Think, a “what”
question they are in Feel, a ”why” question they are in Know.
• Get yourself and your team profiled. It costs less than £25 and is
both fascinating and incredibly valuable information (www.navitasip.
com)
38. 38
CREATING
REVENUE TODAY
You may recall right at the start of this book I made the slightly surprising claim that not all
businesses really understood what they did, although all businesses understood how they did
it. Of course, all businesses know what they do – but do they really understand it? Do they
understand the true and full potential of what their business does for customers?
In looking in detail at the “what” of the business let’s first look at product, then turn our
attention to the mysteries of intellectual property, and then market position. Finally we’ll
look at effective commercial relationships.
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CHAPTER 8:
PRODUCT – THE FOUNDATION OF YOUR BUSINESS
“Make your product easier to buy than
your competition, or you will find your
customers buying from them, not you.”
Mark Cuban
“The essence of a successful business
is really quite simple. It is your ability to
offer a product or service that people will
pay for at a price sufficiently above your
costs, ideally three or four or five times
your cost, thereby giving you a profit that
enables you to buy and to offer more
products and service.”
Brian Tracy
What you sell - be it a product or service - is the foundation of your business. Most of us
would accept this unquestioningly. But for most smaller businesses their product is a given
and the board doesn’t spend a lot of time thinking really strategically about what else the
business could do to leverage its resources (intellectual and financial) to drive more revenue
more profitably.
40. 40
For a start, many small and mid-sized companies have one product or service – let’s call this
P1 – and distribute it to one channel or type of client or “distribution” base (see Chapter 11),
which we’ll call D1. But what is obvious is that the more products and distribution channels
you can build the more profitable and valuable in equity terms your business will be.
What is key is that when you introduce another product (P2) to the same customer base,
you are lowering the cost of that sale because you already have the loyalty of customers
who know you and will be ready to accept the product. You are therefore able to get a higher
margin on your P2 products.
Sometimes organisations think they have diversified in a market when in fact they haven’t.
For example an accountancy practice may think it has three products (P3) ie tax returns,
audits and a company structures and advice service, but as far as its clients are concerned
these are all seen to be the same thing, just one product. If however, the accountancy
practice establishes an IFA division selling financial services to the same customer base, then
it has developed a second product.
A client we recently worked with is a distributor of organic vegetables and it was looking for
ways to expand its business. Stocking a few more varieties of vegetables would not constitute
a multiple product range – selling vegetables is what it did. To develop real, profitable growth
it needed to look for something else it could sell to its existing customer base, many of whom
were catering outlets. Its solution was to set up a training section teaching chefs new ways to
cook vegetables, particularly the more exotic varieties. It had already established credibility
in providing quality produce and had loyalty from its existing customers, so the new training
division proved successful quite quickly.
P 1
P 2
IFA Services sold
to Accounting Clients
42. 42
Which business model you choose has implications for the value of your business. In terms of
building equity these models rank like this (from most valuable to least valuable):
1. P5/D5
2. P1/D5
3. P5/D1
4. P2/D1
5. P1/D1
Obviously, a multiple product and multiple distribution (P5/D5) growth plan for an SME
business would be a fairly long term strategy and one that would need careful implementation.
The key point is that if you are currently a one product, one customer base (P1/D1)
business then introducing a second product will positively impact on growth and
profits and hence the value of your business.
So, what else could you do to drive the value of your business from the foundations up? You
could usefully reflect on what your product or products look like. Your product can be defined
as what customers give you money for. It sounds obvious, but for most of us our product is
a whole bundle of different offers some of which we charge for and some of which we give
away. By getting really clear about what it is that customers are actually paying you for you
may be able to unbundle your product and charge very profitably for the bits you currently
give away (advice or consultancy for example). You may of course choose not to charge for
these services as you derive value in other ways from giving them away but this needs to
be seen within a strategic framework based on your position (Chapter 10) and your client
servicing policy (Chapter 12).
The opposite approach, of course, is to bundle a set of products together, to create a
competitive advantage to capture share and increase the volume of sales. You’ll see
McDonalds following this strategy with “happy meals” for example and will recall that is what
Microsoft did with Office when competitors offered word processing and data packages
separately.
It’s a good idea to look carefully at what your main competitors are doing – and consider
adopting the opposite approach to create competitive differentiation.
This is of particular importance as the economy moves towards a recovery phase as it’s
43. 43
exactly the right time to be innovating product. I’ll look at this in more detail in Chapter 9.
A simple exercise can be very helpful in understanding how you can innovate your product
packaging to react to changing market conditions. The reality is that it is hard work and
expensive, generally, to create completely new products; but relatively easy to repackage
your existing offer.
If you haven’t significantly repackaged your offering over the last two years, using the
diagram below may be helpful.
PRODUCT PACKAGE OUTCOME
2 Years Ago (boom)
Now (recession)
2 Years Time (boom)
Insert a description of the product you have been selling over the last two years, how you
have packaged it, and what the customer is really buying – what the outcome of the purchase
is for them. For example customers of a training company may have wanted to get as an
outcome staff development and better team alignment two years ago.
In the next line start by describing what your customers really want today as an outcome. In
the last two years this is very likely to have changed. For example the clients of the training
company now want cost savings and efficiency – so they want training that delivers that or
they won’t invest in it at all.
You can then describe how you could package your product to meet this demand. The
training company will have to repackage what they deliver and how they deliver and charge
for it. For most businesses who have not repackaged their product in the downturn the
chances are they are selling a boom proposition in a bust market and are likely to be driven to
compete on price which will obviously undermine margins.
Package OutcomeProduct
2 Years Ago (boom)
2 Years Time (boom)
Now (recession)
44. 44
While you are about it, you might also look to the future and consider the output your
customers will seek in two year’s time – hopefully as markets are back in growth - and how
you might repackage to meet that demand.
A proactive strategy to product development is key to any growing business. By looking at
your Product Portfolio you will enable your business to grow its customer base and span
wide-ranging markets, a necessary requirement not only for immediate profit but also a
strategy to develop longer term equity.
CASE STUDY: La Playa Insurance
La Playa (www.laplaya.co.uk) an insurance company operating out of London and Cambridge
asked Shirlaws to work with them to design their product extension strategy.
The starting point was to understand the business from a Product / Distribution perspective. At
the time they sold a huge variety of insurance policies and programmes, some bespoke and
some off the shelf, to four different markets; Private Client, TV and Media, Agri-Business and
Technology. The list of products sold to these four markets amounted to around 27 (P27/D4?)
which felt complex and difficult to manage.
Through coaching the business the approach to Product was simplified and it was agreed
that they were actually P1/D4; they simply sold general insurance in differing forms. This
enabled the CEO and Board to clearly define what product extension opportunities would be
attractive and appropriate for the business (Financial Services, Accounting, HR, Recruitment
etc) and what other markets they might over time want to move into (yachts, sport and leisure,
bloodstock etc).
The next stage involved the business writing a detailed strategy with Shirlaws’ support. In the
short term this defined exactly how each distribution channel should have full access to all
of the product menu, which proved a good revenue generator building on internal referrals.
In the longer term the strategy created an implementation plan for future product roll out with
budgets and RoI so that the business could genuinely focus on how to get there.
45. 45
TOP TIPS
• The more products and distribution channels you can build, the
more profitable and valuable in equity terms your business will be.
• It’s a strategic choice whether to focus on building products to sell
into a single distribution channel or to develop multiple distribution
channels for a single product.
• By getting really clear about what customers are paying you for you
may be able to unbundle your product and charge very profitably
for the bits you currently give away. Or take an opposite approach
and bundle a set of products together to create a competitive
advantage to capture share and increase the volume of sales.
• Look carefully at what your competitors are doing – and consider
adopting the opposite approach to create competitive differentiation.
• Innovate your product packaging; it is hard work to create
completely new products but relatively easy to repackage your
existing offer.
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CHAPTER 9:
YOUR INTELLECTUAL PROPERTY - THE ROCKET-FUEL IN YOUR
BUSINESS
“Our value is basically our IP and its
deployment.”
Rob van der Meij
“The traditional business designs a product
and sells it to create a major product
stream. But the more advanced business
model is built on intellectual property (IP)
to generate much higher value than the
traditional “product only” business.”
Darren Shirlaw
In the previous Chapter we considered the importance of strategically examining the potential
product, packaging and distribution opportunities available to create profitable growth in your
business. In this Chapter we’ll look at an allied concept and one that supports this activity and
can free up tremendous creativity in your approach to product. That concept is Intellectual
Property – or IP.
The IP in your business differs from your product; it is the set of fundamental skills,
knowledge, expertise, experience, relationships and physical resources that supports your
position and allows your product to exist. It is the fundamental rocket-juice of your business
47. 47
and it is what makes your business unique. For a lot of businesses it can be an elusive
concept – but well worth getting to thoroughly understand.
IP is your company’s “know-how”, it’s what you build your reputation around. Let’s take a
household name as an example, McDonald’s. What they sell is hamburgers – but what
is their IP? Are they known for being good at building hamburgers? No more than another
hamburger company. So what in particular does McDonald’s do well? McDonald’s IP,
or know-how, is around franchising – it’s what sets them apart from other hamburger
companies. McDonald’s actually makes money from franchising, which gives them much
higher equity value.
By contrast, Manchester United reportedly has over 75 million fans around the world
– and so they must have some IP. But have they worked out what it is, and are they
leveraging it? Or are they stuck with only making money from the original product (gate
sales and sponsor’s cash).
Companies make more margin from commercialising their IP than from their originating
product. It’s like making more money out of your second, third and fourth product than
your first.
To pin this difficult idea down, an example of its power in action may help. I was recently
asked by a large accountancy practice to advise a client of theirs who had come to them
for help in selling the business. The company concerned was in the asbestos removal
business; the business owners felt trapped in their business and wanted an exit; the market
was in decline, margins were under strong pressure as competitors brought in foreign
sub contractors and had additionally been strongly impacted by the recession. This was
a classic P1/D1 business which was additionally very reliant on the business owner (see
previous Chapters!). The valuation the accountants were able to place on the business was
consequently not attractive which trapped the owners in the business. The accountants felt
we might be able to help.
When we met, I asked the business owners to describe their IP - what was uniquely valuable
in the business. The initial answer was that the IP was “asbestos removal” but this, of course
was the Product IP. After considerable discussion the owners of the business began to
articulate the genuine IP and came up with an impressive list that included: the removal and
transportation of hazardous waste, the profound understanding of complex legislation and
compliance with European and UK regulation, Health and Safety Training, the recruitment
48. 48
and deployment of specialist trades people, strong relationships with local government and
agencies, project management in a complex regulated field..... The next step was to ask the
business owners that, if they came across a business with those attributes but with no
idea of the product the business sold, what product would they imagine such a business
could deliver. The answer (which ranged from specialist consultancy, through Health and
Safety and other specialist training, recruitment and specialist transportation) gave the
business a huge choice of new product (P2, P3 etc) ideas based on their own IP and
therefore highly likely to succeed.
It’s a great idea for businesses to carry out an exercise like this with or without outside
support. The diagram below will help with the process.
PRODUCT IP OUTPUT
In understanding your own IP you need to get very clear about what makes your business
really unique amongst your competitors whether it’s your systems and processes,
knowledge, intellectual resources, people or relationships; or a unique combination of these.
This knowledge will help power your innovation strategy and drive profitable growth and
burgeoning equity valuation.
And what became of the asbestos business? It was clear simply repackaging the offer would
not solve the fundamental problem. But understanding the IP allowed the business to create
a whole new, and highly profitable, product suite away from asbestos, or even the building
trade, in the collection, transport and disposal of low hazard council waste, leveraging the
existing relationships the business had and the unique proposition contained within the
company IP. The business goes from strength to strength and the owners are revitalised
having re-examined position and functionality strategies and planning an exit in about five
years. They are on a roll.
IP Output
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TOP TIPS
• Know your “IP”; it is the fundamental rocket-juice of your business,
what makes your business unique and is the source of profitable
growth through product innovation.
• When you’ve articulated your IP, take yourself out of your own
business and ask yourself what a business with this unique set of
attributes might theoretically do (what products would it sell). It’s a
good idea to get external help with this as you are probably too close
to your business.
• Understanding and leveraging your IP will create a fundamental
building block to accelerated equity value of your business.
50. 50
CHAPTER 10:
POSITIONING – YOUR KEY FOCUS
“In almost any industry, the big winners
are companies that consumers instantly
associate with a single highly-focused
concept - like Heinz and ‘ketchup’, Volvo
and ‘safety’ and Federal Express and
‘overnight’. ”
Ries and Trout
The stronger your position or brand, the easier it is to attract the best talent to work for you;
the more other organisations want to be associated with your company and importantly,
the more you build customer loyalty, which in turn makes any new offerings you introduce
attractive and desirable.
There is a market understanding that words like positioning and branding sit in a marketing
space. This can certainly be the case in many businesses but, in my view, for most midsized
business, the purpose of positioning is to get laser focus on what the business is all about –
what it is famous for in the eyes of its clients. In other words it is the strategic conversation that
takes place before any operational marketing activities.
Positioning your business is a strategic activity which impacts the whole of your business
model. So, the key question behind any positioning strategy is an understanding of what
you stand for - who you are. Being able to answer this succinctly enables you to move into
a contextual explanation about your business – fast tracking sales opportunities, distribution
52. 52
The product or distribution choice is a very strategic one. Of course, all companies do both
operationally and therefore if you approach this choice from an operational or content view
point then it will be hard to draw the distinction and be clear what to really focus on.
Have you ever wondered why many large corporations continually restructure their
businesses? One answer is that they will often find it hard to understand the strategic focus of
their business.
• A Distribution company has a focus on developing relationships with its market place.
• A Product company has a focus on product research and development.
This key strategic choice of your primary position informs the whole of your business model.
Once you are clear on your focus you can create a further choice. Are you focussed on
market, service, product or price?
Lets examine this in more detail. If you have a Distribution foundation to your business you
could choose a primary position of Market or Service.
A Market focused business (“who you serve”) tends to be strongly identified with a market
category, strong at building markets, or a business whose partners would have a strong
sense of belonging to “my market”. Saga is a good example of a business that developed a
primary Market position. They have a business model based on their knowledge of the needs
of a particular market demographic and have chosen to focus on this market and build the
asset base of the business by developing P2/P3/P4 into this market place. Saga started with
a single hotel and is now as much a financial services and media business but still within a
single market.
A Service focused choice (“how clients experience what you do”) tends to provide a lot
of extras to the client base, has an over-riding service (as opposed to a sales) ethic, and
focus on the customer feeling well looked after. This is about being famous for how you do
something, more than what you do or who you do it to. The choice informs the whole PandL,
driving where investments should be made and what priorities should be given. Harrods has a
clear primary Service position.
A company with a Product foundation tends to make a choice of either Product or Price as
their primary position.
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A simple grid can be used to instinctively map your industry and all the players. This will tell
you how you sit in comparison to your competitors and more importantly it will show up any
industry gaps that you could choose to fill. There’s an old marketing adage of “cherchez le
creneau” (find the niche or gap) – that is often where the easy wins are. In the 1950s, VW
noticed that all the car manufacturers in the US were in the same market area and moving in
the same direction – big and flashy with fins and chrome. The creneau was in a small car and
they positioned the Beetle with the phrase “think small” neatly capturing an overlooked market
sector and associated the brands with intelligence and discretion.
The power of a clear position understood by customers and lived by staff is vital for profitable
growth and equity valuation (see Apple). And although it’s easy to use corporate brands we
are also familiar as examples, the lesson is the same for any business.
Years ago, I worked in brand development in a large spirits business. We undertook some
research asking 50 brand loyalists of our main competitor’s brand to switch for a month
to our brand and visa versa. In product and price terms the two brands were essentially
indistinguishable. We paid them a modest amount plus their bar bill. After a month every
single consumer returned to their preferred brand. But what was really interesting is that we
asked the customers not to reveal to anyone the reason for their change in brand. Within
hours of the research starting we had participants begging to be released from the trial
because they felt so uncomfortable with a different brand and not being able to explain why;
one man’s wife thought he was having an affair!
All very interesting and you may feel it is far removed from your business, but let me ask you
this; if I paid your best customer to switch to a competitor who matched you on product and
price, and paid the costs of the service, how likely is it that customer would be begging me,
within hours, to return to you despite the cost?
That is the power of positioning.
The key to positioning for mid-sized businesses is to understand that it is all about focus. But
it is your choice what you focus upon given the capabilities of the organisation, the nature
of what you do and, critically, the competitive situation. A client said recently that he was
really engaged with innovation but didn’t want to be a Product company – his answer was to
develop a focus around innovating the Service he offered his clients – he is loving it.
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CASE STUDY: Craster Woodworking
Craster Woodworking (www.craster.com) started out in 1992 as a family joinery
business. When Alex Craster took over the business from his father in 2004, following a
career in corporate business, all of a sudden he found himself running a small business
on his own for the first time and it felt lonely at the top. He had no external assistance
at that time and was running around doing everything in the business and uncertain
about where he was going with it or how to get there. Alex was introduced to Shirlaws
by a contact of his and was immediately attracted to them. “They were different to any
other consultant firm I’d experienced before and my coach had great energy that I felt
was the right match for me,” he says.
Early on, the coaching focused on what the business was known for in the market place and
more importantly what it wanted to be known for. By getting clear on where Alex wanted to
take the business the coaching helped him clarify how to get there and got him and his team
to focus their time and energy on the activities that built the position he wanted the business
to occupy in the market.
The result saw a huge increase in the product range the business offered its clients. It also
resulted in an acquisition – the first the business had made in its history. which allowed
the company to further boost its product range, enter new markets and take on new and
prestigious clients.
A key output was the launch of a digital product development platform which provides buyers
with a secure login system where they can see what’s being designed for them and keep up
to date with the progress of their orders. It’s helped the company build stronger relationships
with their clients which supports where the company wanted to be, moving from being a
manufacturer to being a partner working with clients to design bespoke hardwood products
that define the hotels they serve. This helped Craster build their own unique brand identity – a
high value proposition in such a competitive market. It has also seen revenues more than
double and margins improve too.
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TOP TIPS
• For mid-sized business positioning is about getting customers and
employees focused on what the business is all about – what it is
famous for. Being able to answer this succinctly enables you to fast
track sales opportunities, distribution channels, potential acquisitions,
mergers and joint venture opportunities.
• Understand your primary position - if you cannot get the distinction
between Distribution and Product then get some assistance from
outside.
• Know whether you are focussed on market, service, product or
price. Come up with words that define your market, your service,
your product, your price. Get it down to one word per area and then
one single word that positions the whole of the business.
• Cherchez le creneau….
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CHAPTER 11:
THE SALESFORCE THAT NEVER ASKS TO BE PAID
Having examined strategies around product portfolio and positioning we obviously need to
look at gaining more customers or clients. Clearly your business already has a successful
marketing and sales strategy and this will be specific to your sector or market (and if not there
are many advisors, not least my own firm, who can support you in developing these skills). In
this Chapter I’ll therefore concentrate on other routes to winning profitable new business.
First, let’s look at “networking” as an approach to winning profitable new business. Referrals
are often the best source of new customers so it makes sense to look at maximising
opportunities from networking and from existing contacts. The hardest parts of a sale –
creating awareness and credibility in your company, products or services – is already taken
care of when someone is referred to you by a third party that they trust. Plus a referral is “pre
sold” – they are coming to you because they genuinely need what you offer.
Yet, despite this, surprisingly few businesses take a truly strategic approach to developing
their network of contacts into a fruitful source of revenue. Networking and a pro-active referral
strategy will quantifiably contribute to your bottom line - if you are prepared to devote senior
resource to it. This is a strategic activity and may well fall to you to lead. You need to develop
a plan of action with set targets that you are prepared to monitor actively and to which you
have committed sufficient resources.
The first step is to identify the type of new business you want to attract. Should you take
on any business that comes your way? Most of us accept that there is some business that
is more profitable than others. Your referral strategy can proactively develop these more
profitable clients and the way to recognise them is to develop a planned approach to client
management. The initial task is to analyse your client list to identify those clients that produce
the most ongoing business revenue and then agree and design a profitable client rating and
categorisation system.
Everyone connected with the sales process needs to understand what a profitable client
looks like in terms of minimum spend requirement and level of servicing required and any
other particular determinates.
To give you an example, one company that sells IT hardware found it was unable to
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sell profitably to the SME sector. It carried out some research to understand how SMEs
purchased IT and identified that the critical factor was not industry, company size, system or
applications, but rather the presence or absence of a full-time IT manager. Businesses with
a full-time IT manager spent between three and five times as much on IT as a business that
was identical in every way except the use of a part-time IT manager. The question on the
full- or part-time status was added to the start of every sales and marketing contact activity to
ensure that expenditure was focused only on potentially valuable prospects.
You will see that you will have to spend some time on researching your data in this area,
understanding the criteria for new business that will help you grow and then formally setting it
out by size sector, value etc.
You can then list those of your established contacts that can offer suitable introductions to this
type of business.
Individual directors and managers within a business often have their own relationships
with potential contacts and these need to be transferred from the individual to the
company database.
In addition, you can look at organisations outside your known contacts that could open up
the right type of opportunities for your business. As well as setting up your own network of
contacts you should also investigate established business networks in your area with member
companies that match your criteria. Good networking organisations will have an emphasis on
referring business and monitor how effectively the organisation is operating.
When looking at another company with which you could jointly refer business, it’s important
to ensure there is a similar ‘energy’ in both the businesses. Are you both in a similar growth
phase – or in a comparable stage of your lifecycle (Chapter 5)? If you are then there will be a
momentum on both sides to build business together. If, for example, one side is in a platform
state after a period of growth or close to the Second Brick Wall while you are early Growth
then the ‘high’ energy will be one-sided - that is with you - and the relationship will probably
stagnate.
The starting point for any network relationship is an open meeting between both sides to
discuss joint opportunities and benefits, and assess energy levels. But it is also the time to
be completely honest about any fears. To build a successful distribution strategy - that is
a programme of increased sales through referrals - then you have to fully understand what
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It’s often assumed that the only benefit that would make a third party refer customers to you
is the receiving of a commission. But there are many reasons the right partner will refer ideal
customers to you. I refer customers to other firms and have never sought a commission.
I have a network of exhaustively researched and matched partners to ensure I can make
the perfect introductions if a client would benefit from it. Our focus is on a happy client with
a growing business, and if other firms (accountants, banks, lawyers, marketing companies)
can help achieve that our “benefit” in referring the client to the right advisor is in terms of client
loyalty. We also learn a great from our at distribution partners so an exchange of knowledge
and expertise can be another powerful motivator to refer. It’s important when developing
potential relationships to fully understand how that relationship will benefit the other party. But
not before overcoming their natural fears.
Typical fears centre on whether the two potential partners can genuinely trust each other,
whether the other will deliver consistent excellent quality to important customers the partner
might refer, and whether by referring customers to the other, the partner may lose a sense of
control over the relationship with their customer.
To take this partnership seriously and genuinely overcome these fears is clearly going to take
time in engaging in a series of open conversations to establish if you have the potential for a
relationship, understand what reservations or fears each party has and look to address them,
understand the benefits to each, agree written guidelines so both sides understand what is
expected from the relationship and monitor and revisit the relationship on a quarterly basis,
keeping a check on the value of new business that is coming from the relationship.
The reason referral relationships usually don’t deliver is because fears are never properly
resolved (or even discussed) and not enough time in regular meetings is given to the
relationship. When I take my boys to rugby on a Saturday I’ll often get chatting to another
Dad. Imagine we meet again on a subsequent Saturday and the other guy asks us all back
for tea. And the following Saturday we reciprocate. Maybe after a few of these convivial
occasions he might suggest he picks up my boys one Saturday to save me turning out on
a cold winter morning and I may very well accept. But imagine another scenario in which I
meet that Dad and at that first game he offers to collect my boys the next weekend. Would I
agree?! Yet the only difference is in the time it has taken to overcome fears of trust, “quality”
and control. It’s obvious in social relationships but we disregard it in professional ones. For
most of us our customers are perhaps not quite as precious to us as our kids – but it can be a
close run thing.
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Of course, this is a significant investment in your time. But the reward can be a network of
partner businesses that understand the value that your business can offer their customers
(based on your culture values and position) and are actively and regularly referring pre-
sold, profitable target customers to you. I cannot stress enough the value of this. Before I
joined Shirlaws, I owned an outsourcing business and, under Shirlaws coaching, I created a
focused distribution strategy for the business. We doubled revenue in nine months and I was
able to re-task my sales team away from direct sales and into professional relationships. I
found I already had an unpaid sales force.
TOP TIPS
• Set down the criteria for potentially profitable clients i.e. what type of
business is going to grow your company profitably?
• Explore which companies might offer mutually beneficial
relationships. Check that both of you have similar ‘energy’ levels.
• Rigorously explore fears and benefits and ultimately formalise
guidelines on working together and monitoring progress.
• Review the relationship in terms of profitability. If it isn’t providing
business for both parties it’s not worth wasting resources on it.
• The more distribution channels you can build, the more profitable
and valuable in equity terms your business will be.
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CASE STUDY: FD Centre
The FD Centre (www.thefdcentre.co.uk) is the brainchild of founder and CEO Colin Mills, a
one-time corporate Finance Director. The firm, launched in 2001, provides experienced part
time FDs to SME businesses needing a high impact, low-cost solution to managing a their
financial affairs.
When Shirlaws were first introduced, the company employed 22 FDs and generated
revenues of £750,000. The company had a vision to reach £5million in revenue by 2010. At
the time Colin had spent two years searching for some form of sales training. Accountants
are not known for their sales skills and it was causing a block in the business’s ability to grow
at the pace Colin needed to fulfil his vision. He simply hadn’t unearthed the right solution for
his business until he got a call from one of his Partners to say ”I’ve met these people. They’re
really different. I think they’ve got what you’ve been looking for.”
Colin agreed to invite Shirlaws in to carry out a business review. It showed that 70 per cent
of sales leads were being generated fromadvertising while only 30 per cent of leads were
coming from referrals fromtheir strategic alliances. This was a fraction of what was needed to
reallypush the business into fast growth.
Working with Shirlaws, the business designed a distribution strategy in order to build new
channels tomarket. The FD’s started to meet and build contacts within other professional
services providers such as accountancy firms, law firms and banks. Within three months they
were already reaping the benefits. As well as quickly increasing the number of sales leads
they were getting, above all it gave the team confidence.
Colin Mills recalls one of the first meetings: “One early distribution meeting we had with
NatWest was outside in the gardens of a hotel one bright summer’s day with a flip chart. We
matched up people round the table, pitched the concept using the Six Step process Shirlaws
had trained us in. It enabled us to really engage key people and it went down well. It wascool
and we got a couple of referrals there and then. We knew then that implementing the strategy
Shirlaws had coached us to develop, was absolutely the right choice.”
Reflecting on the results achieved over 18 months, Colin Millssays: “After a year it was clear
the source of clients had shifted. Previously the ad campaigns were generating 70 per cent of
new business with 30 per cent coming from referrals. Now that’s completely switched around
with 70 per cent of business coming from referrals and 30 per cent coming from the ad
campaigns despite the number of those growing in that time too.”
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CHAPTER 12:
DRIVING ENERGY INTO CUSTOMER, DISTRIBUTION (AND
STAFF) RELATIONSHIPS
“Here is a simple but powerful rule - always
give people more than they expect to get.”
Nelson Boswell
“There’s a place in the world for any
business that takes care of its customers-
after the sale.”
Harvey MacKay
I’ve already talked a lot about relationships in business; with your key team and staff, your
customers and your distribution partners. We have explored techniques to understand and
better manage these relationships at different points of the business lifecycle and how to
communicate more effectively whilst developing shared values.
In this Chapter we’ll look specifically at driving energy into these relationships – and I’ll focus
on customer relationships primarily. Business is, after all, about establishing relationships and
managing those so they are mutually beneficial to both you and your customers. For a start,
every company should be monitoring customer satisfaction as an ongoing business function.
If your surveys show there is dissatisfaction or if you are losing business to your competitors
then look first at the type of service you are providing.
Managing the “expectations” of your client base is key to developing robust enduring
relationships. One way of explaining this is to look at your current contact with customers
