Book 6 is the second book in the Personal MBA book list by Ram Charan. It is a great book for helping anyone to think about how to grow a business. I highly recommend it.
Here are some of the best quotations from the book:
"The biggest challenge in business is the translation of ideas into action". Weirdly, this is one of the prime reasons why I chose to leave Microsoft
and to join Channel 4
. Microsoft’s scale and centralised resources make for a wide gap between ideas and action.”What are you doing to make your customers prosper?”. He’s talking here about Sales …
"Without (business) growth, personal opportunity is a zero-sum game, that is, for me to win, someone else in the company has to lose. With growth, the organisation expands and people can build a career and a future with a company they have faith in." Kind of obvious but I had never considered that before when thinking about small ventures I’ve been involved in when, beyond a certain size, I’ve mainly sought stability."Growth requires creativity and the ability to look at a business from the outside in."
Four quadrants of growth:
- Existing customers with new needs
- New customers with new needs
- Existing customers with existing needs
- New customers with existing needs
"How can you redefine the scope of your market so that 90% market share in the old definition becomes 10% in the new definition?" Strikes me that the SNAFU of corporations means that practically everyone would shy away from doing this. More reason to do it.
"Obviously, growth of any kind increases revenues. Good growth, however, not only increases revenues but correspondingly improves profits and is sustainable over time. It is primarily organically (internally) generated from the ongoing operations and business of the company and is based on differentiated products and services that meet new or previously unmet customer needs."
"Organic growth in most cases has its genesis in the development and launch of ideas from within the organisation."
"No matter how commoditised your business is, good-growth companies find a way to differentiate themselves. To do that, they see things through the eyes of their customers and potential customers."
"The only way this growth is going to occur is if everyone in the organisation believes it to be possible. It is up to the organisation’s leader to create the right mind-set."
"The leader determines the strategy, positions the business, ensures customer needs are fulfilled and develops and inspires people. But [she needs to be] connected to growth projects [too]."
"In every industry there are segments that are growing and declining. The question, of course, is whether you can move into those segments that are growing."
"Traditional cost productivity is almost always about reducing expenses. Revenue producivity on the other hand, increases revenues from the same level of cost. Alternatively, one can increase revenues dramatically without increasing costs on a proportionate level."
"Today’s customers demand that the salesperson know their industry well enough to bring them relevant, innovative ideas. The sales force therefore needs to specialise. […] Organising by customer segment is almost always higher in cost but the payoff can be worth it."
"Revenue productivity doesn’t need to be dramatic. It can be as simple as a hotel clerk reminding a guest that two-hour dry cleaning is available."
“The growth budget is a plan that lays out not only how the organisation intends to find growth, but how it proposes to fund that quest. It should be made transparent to everyone in the organisation, so that each employee knows there is a serious ongoing commitment to find additional revenues.”
Making the growth budget:
- Develop a list of the sources of revenue growth and classify them as short, medium or long term
- Prioritise each list and develop into separate projects
- Associate costs
- Identify roles and responsibilities
"Are rewards (for staff) tied to the accomplishment of growth goals?"
"A growth budget is an indispensable tool in a company’s quest to increase revenues. It shows everyone at a glance just how much the company is spending to achieve growth and it makes it very easy for the company to support innovative ideas."
"The critical foundation for revenue growth is upstream marketing. It is the ability to create or pinpoint the specific needs of chosen customer segments and satisfy them on a profitable basis better than the competition. Upstream marketing not only helps create profitable revenue growth - it is also a competitive differentiator that creates long-term value for both customer and company."
"When people in business think about marketing it is usually in terms of downstream: brand-building, promotion and advertising; timely delivery of goods and provision of customer service; and CRM."
"Focusing on the needs of your customers - both present and potential - is the starting point for marketing."
"Once you know who your customers are, then you need to learn all you can about their purchase decision process, through focus groups, visiting with them and observing them in action."
"The underlying premise behind segmentation is this: Every market for a product or service is made up of many different groups. The buyers are not all identical."
An example of a segmentation chart might have “needs” as rows and “distribution channels” as columns.
"The purpose of segmenting and resegmenting is to find where to put more resources and, also, areas where you could reduce your investment."
"To become and integral part of your customer’s day to day business life, you have to be there physically."
"Customers should feel that you are supplying them with innovative ideas that will help them succeed against the competition."
"Marketing is about (a) figuring out what a customer wants and (b) designing products, services and programs to give it to them."
"Most companies and marketers lack experience on the front end, identifying what customers, and potential customers, want." Ram Charan does not seem to have a high estimation of most marketeers he’s come across. It is interesting to note how often Marketing = Advertising.
"Given the choice of selling what they know to an established customer base, or offering something new to people with whom they have no relationship, the sales force will choose the familiar every time."
"Build enthusiasm for a new approach by making sure there are easy wins - momentum built." He is keen on what he calls "singles and doubles" rather than what he calls "home runs" because home runs are notoriously difficult to hit and businesses need a momentum of success to succeed.
"Most ideas are generated when people exchange information."
"How much feedback is your sales force gathering from customers about (a) what they like and don’t like about what you sell and (b) what new products they’d like to see?" This, for me, is the heart of the matter.
"To satisfy your customers you will need to create horizontal flows of information […] People who are at the same level in your organisation will need to work together directly […] The job of the business manager, of the leader, is to create that synchronisation. You need to create the mechanisms that lead to the necessary dialogues and interactions."
"Execution is something that cannot be delegated."
When evaluating people you must do so against three criteria:
- Do they have the necessary skills?
- Are those skills current?
- Do they have the right attitude?
Focus on growth in multi-departmental meetings: “What do we have to do to get a slightly larger piece of the customer’s wallet?”
"All revenue growth starts with an idea."
Ideas cycle: Ideation -> Selection -> Nurturing -> Launch -> Kill failures early
"You need to make sure that employees feel safe taking risks."
"Don’t look for reasons why it (a new idea) can’t be done […] Pinpoint what will be required to turn this idea into a reality."
"The best nurturers […] are constantly flipping through their mental address book to find the names of people - both inside and outside the company - who can help shape and grow the idea."
"Reward the innovators. Celebrate them. But don’t expect them to run what they create. That, most likely, will require a different set of genes."
The three screens for a new idea:
- Does it fit?
- Are we good at it?
- Can we make money?
I really enjoyed reading this book. It made sense of things that I had experienced but not modelled. It taught me things in a simple way.
In terms of getting close to customers (end users I mean, not advertisers) I do stumble slightly when it comes to Internet-based media businesses though. Getting close to end users’ needs is possible through data-mining and / or through groups / observational studies. Having tried both I am not convinced that either satisfactorily answer the question: “what do our customers think of what we are giving them and what else would they like?”. The former method is too distant and the latter, through cost, too infrequent. Food for thought anyway.
Next up is “On Competition" by Michael Porter. I’m sure it’s a great read but the picture of the author on the cover makes me think it may be a little .. stern.
I decided a few weeks ago to take up reading fiction again alongside all this learning. On holiday I re-read 1984, shuddered, and have since quaffed Bonjour Tristesse . I’m now on the road with Stone Cowboy thanks to a long-ago recommendation from this man here, whose blog is just marvellous.