Recently we discussed the impact of change on the business system. This month we talk about three business critical success factors that need to be monitored for impact. Pricing, customer experience and talent. Last month’s discussion focused on creating a function or position to manage change in the business. But we didn’t discuss specifically the objectives and key results that are most critical to prioritize. The most powerful drive of growth in a business is customer experience. The most powerful driver of earnings is pricing. And the key to making everything else work is people. You win with people as Woody Hayes once said.
How Squirrels Make Chaos
If, as the author wrote last month; “At the heart of the challenge in turbulent times like these is the business system.” Then squirrels, or outside factors, make chaos by disrupting our beautifully crafted processes and plans for turning time, material and capital into value. They confuse the team, so they don’t know how to operate the business. They don’t know what’s next. They freeze up because they can’t imagine taking the steps that seem obviously to be next because they will be so painful, costly or different.
Some of our clients have experienced 35% increases in the cost of critical inputs. Some of our clients have experienced quadrupling lead times. Or worse yet, they have been told they simply can’t get materials they at any price. Some of our clients are experiencing pain bringing on new staff. The candidates they receive from recruiters haven’t held a job for longer than four months. These changes make it difficult to just get business done. It is difficult to obtain material and equipment. It is difficult to expand or even keep the team you have. Material and talent cost more putting downward pressure on earnings.
The Impact
The result, as we said last month, is severe impact to earnings and customer relationships. Both of which can have negative consequences for long term sustainability of the business. Increasing costs will strain customer relationships as they are passed on in the value chain. Unseasoned staff attempting unsuccessfully to meet customers’ needs will also strain the customer’s patience. The reader has probably experienced this directly when communicating with customer service organizations recently. An inability to resolve an issue which seems all too clear to you, the customer. These challenges, unabated represent an existential threat to the business.
There are businesses, however, that are threading a path through this. Adopting the strategy of last month’s MBR and viewing this as a change management challenge. Teams can view challenges from a non-linear perspective. Matching up challenges with solutions and applying them rapidly. Here are a couple of examples, but the real solutions to your situation are probably unique to your business and will require an open mind and broad perspective to address.
The converse of the labor shortage and mobility issue is the underlying cause of this. People, for whatever reason, have become dissatisfied working where they have been working and are seeking something new. But the churn rate and rapid turnover suggest that they aren’t really finding it. This is backed up by recent studies showing that about 50% of the people who made the jump in the last 18 months regret it. A strategy to exploit this fact is to reach out to people that have left, and see if they would be interested in returning. One business is touching base with people who are not currently looking and making friends with them now. In this way, they are likely to get the first call if or when this person begins looking.
An alternative approach to responding to supply chain cost issues and delays is to manufacture inputs needed by the business in a vertical integration strategy. I have seen this applied by businesses that have been trading with China and are now unable to get material or get it in a timely fashion. Intel and Taiwan semiconductor are two large examples of businesses creating or expanding their U.S. footprint in the wake of awakening to serious supply chain risk. Similar approaches can be taken without fully integrating the supply chain simply by meeting with vendors and working to ensure supply stability.
The Strategy
In order to address threats to any critical success factor, begin rethinking segments of the business value chain and seeking new, out of the box resolutions to these challenges.
One last word on priorities. These issues are typically not quick fixes. The successful business leader will need to pick and choose between challenges vying for their attention. Some lower priorities may need to be sacrificed to address more important issues that are directly related to survival and being an on-going concern.
Call To Action
Prioritize critical success factors that deserve the business’ primary focus.
1. Inventory the challenges facing the business and prioritize them based on their impact on earnings, talent and customers.
2. Brainstorm on solutions to the top three critical success factors, making sure to incorporate non-traditional solutions.
3. Establish teams to address challenges.
4. Allocate resources to the teams.
5. Include the teams and their progress in your weekly, monthly and quarterly business reviews to monitor progress.
For more information on Objectives and Key Results, see John Doerr’s excellent book: Measure What Matters (2018).
If you would like a thought partner in working through these challenges, Redbank can help. I hope you found something to apply to your business in this MBR. Let me know either way.
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