Winning companies make a habit of doing things that are good for their health.  That means choosing work (whether they be projects and clients, or products and market sectors) that adds to the company’s bottom line, assets, and general happiness.

What do you need for a track record of smart choices?

1.  Knowing what works for you.

2.  Evaluating projects (or clients, or products, or market sectors) before you pursue them.

3.  Pursuing only the projects that make sense.

4.  Working the projects you win to make sure you’re doing what you intended.

5.  Measuring your results, during and afterward.

6.  Tuning the process to make it better each time.

If you don’t care where you’re going, it doesn’t matter where you go.  But I suspect you care where you’re going.  And please, remind everyone on your staff (including yourself)  — financial success is measured by net income, not gross income.  And if your staff don’t know how to tell whether their work is yielding red or black net income, think about how to change that.  Pronto.

More on demarketing:

In the mid-1990s, I read a book (title long forgotten) in which the author quoted an interview with the CEO of a large and venerable Japanese company. When asked, “what is the difference between Japanese and American businesses?” the CEO replied — after a long pause — “Japanese companies have a stronger sense of what businesses we will not do.”

– Thank you in advance to any reader who can point me to the original citation.

Elisabeth Sullivan at the American Marketing Association recently interviewed me for an article on Demarketing.  I’ll be writing more on this topic throughout this month.  Here’s a first brief entry:

What is demarketing?  As I think of it, demarketing is (1) about making a conscious decision about the things you don‘t want to do, and then (2) making your decision clear to anyone who might otherwise be interested in hiring you for them.

The first part is strategy.  The second part is communication.

If we do a good job of marketing (i.e., making a conscious decision about the things you do want to do and then making your decision clear to anyone whom you’d want to hire you for them), we don’t have to spend too much time on demarketing.

That said, the market is full of temptations, and we need a shot of demarketing every now and then to avoid several traps, among them:

(1) the “yeah, we could do that, too” trap — in which we see a market we might chase because it looks fun and because it looks like it could generate some cash flow, even if the opportunity costs of pursuing that market are too high.

(2) overeager (or poorly managed) sales staff who see only their commissions on any sales, rather than the company’s profits on good sales.

(3) poor-fit potential customers who might show up, take a lot of time and energy, and end up giving you no business or, worse, unprofitable business.

More on this topic all this month…

Schmoozing is not Selling.

Sorry I can’t remember the source of this very smart quote.  And I’m even sorrier that I didn’t learn this lesson in my early twenties rather than my (late?) 30s.

In my first job as a consulting engineer, I worked with another twenty-something engineer whom I’ll call “Susan”.  Compared to the other young engineers at our office, Susan and I spent a lot more time visiting with our firm’s various clients, and I rightfully felt that she and I were a notch better at the business side of things than our engineering-only peers.

But when our firm moved to a new building, I couldn’t help but notice that Susan got assigned to a nice private office while I was relegated to one of the large shared spaces.  So why did she rate better?  Turns out that I was spending most of my “relationship” time getting to know our clients personally and building an amicable bond.  By contrast, Susan was spending her relationship time finding out what our clients needed to get done, and telling them we could take care of it in exchange for a large chunk of money.

Schmoozing is not Selling.

And when you get right down to it, while those clients may have liked me more, they were getting a lot better service from Susan.  I was getting to know them, personally.  She was solving their problems, professionally.

Stay tuned for a followup post: Selling is Helping.

I’ve just discovered a surprisingly good book for aspiring entrepreneurs. In Kick Start Your Dream Business: Getting It Started and Keeping You Going, business consultant and teacher Romanus Wolter documents the process he uses to help previously untrained entrepreneurs clarify and deploy their ideas for anything from publishing businesses to juice bars.

What’s so impressive about Kick Start Your Dream Business? Here — from a sidebar in his chapter “Getting it Made” — is an example of how Wolter melds the “touchy feely” with practical and sophisticated business advice:

GO TO THE SOURCE

Sherry was producing custom gift books commemorating weddings and other special events. Her books were like scrapbooks for special events. However, she was having trouble making a profit because the covers she was using were very expensive.

I mentioned that she could save money by sending an RFQ for the covers directly to manufacturers. She asked me where she should send the RFQ. I talked to her about finding manufacturers in the library and on the Internet, and then another idea came to me.

One block from my office was a great bookstore. I suggested she go to the bookstore, use her 30-second commercial to tell the staff about her product, and then ask for contacts for book cover manufacturers. She went for it.

In less than an hour, a clerk provided her with a list of book cover manufacturers. After developing and sending out an RFQ, one of the manufacturers offered the exact covers she was using for half the price! She ended up saving over $6 per book just by asking for help.

However, Sherry did not stop there. She sent a nice thank-you flower bouquet to the bookstore clerk and mentioned that she was going to send her friends to the store. Guess what? The clerk offered to put her marketing materials in the bookstore, opening up a great marketing channel. Remember, what goes around, comes around.

This one example illustrates two of the key things that Wolter does better than most “how to follow your dream and start your business” books.

First, the “follow your dream” attitude is linked with solid business techniques. Solid business concepts like “RFQ” and “saving over $6 per book” are often sadly missing from other touchy feely business books.

Second, the business research methods are tied to dream-fulfilling work. Many “how to start your own business” books stick to standard businesses: restaurants, consulting, widget-making. Wolter shows you that he’s working with real, unique people with real, unique dreams. It’s a lot easier to believe his advice because he shows you all the places it’s getting used.

Lastly (and not illustrated in the above quote), Kick Start Your Dream Business seems to be a very well-designed and practical tool for the aspiring business person. Each chapter includes both exercises and reference information. From what I can tell, Wolter presents the exercises and information in a sequence that will really help the entrepreneur effectively explore, refine, and lock down what s/he needs to know and do.

By comparison, other books that do the “series of exercises” approach don’t seem to have the same coherence and thoroughness. While other books that use the “complete reference” approach fail to give the reader a good path for walking through and using all the information contained.

I have a new client who I think will really benefit from the Wolter approach — “dream like a child, decide as an adult.” I look forward to giving her a copy of Kick Start Your Dream Business and helping her work through it in the coming months.

Do more of your customers love you than hate you? You better hope so, because that is the number one equation that points to your profitability. So say the researchers at Bain & Co:

Research conducted by Bain & Co. established that one question reliably indicates customer loyalty (as evidenced both by repurchase behavior and by referral rates) in most industries. The ultimate question: “How likely is it that you would recommend this company to a friend or colleague?” Customers who rated a company high on the “likely” scale bought more goods and services, bought them more often, gave the company a greater share of their wallet, and were more likely to talk up the company to others.

USEFUL NUMBER. We also discovered that some simple arithmetic yielded one particularly useful number. Ask customers to score your company on the “would recommend” question, using a 0-to-10 scale. Label those who give you a 9 or 10 promoters—they are the assets that drive your growth. Label those who rate you from 0 to 6 detractors—they are the liabilities that eviscerate growth. Subtract the percentage of detractors (liabilities) from the percentage of promoters (assets) and you have your net promoter score.

Tracking NPS month in and month out—by branch, division, product line, or whatever else makes sense—helps focus organizations on the basic engine for profitable growth, getting more promoters and fewer detractors.In fact, NPS correlates well with growth among competitors. In airlines, for example, no airline has had superior growth without a superior ratio of promoters to detractors. In warehouse retailing, Costco (COST ) has the highest NPS and by far the best growth. A new study of retail banking shows the same pattern, with growth rates closely matching NPS scores. The leader here is New Jersey–based Commerce Bank.

– Fred Reichheld in NPS: The Next Six Sigma?, Business Week, September 22, 2006.

So how’s your NPS? If you’ve got no idea, it might be time to ask.

“It is not unusual for extraordinary sales professionals to communicate demarketing messages via the mass media. James C. Hansberger is an ESP and senior vice president for Shearson Lehman Hutton, Inc. A recent article bout investment counselors defined his target market as follows; “His client’s net worth ranges from around $2 million to $20 million, with a very few in excess of $100 million”… Demarketing messages of this type are very important for many ESPs Communicating to the general population one’s ability to provide services will generate many inquiries from persons who will never qualify as profitable clients.”

– Dr. Thomas J. Stanley, in Marketing to the Affluent (1988 edition)

Your numbers may be different from the 1980s financial advisor’s, but the idea is the same and twice over. You only want to attract business from people who are going to be good for your business.

Sophisticated marketers incorporate this principle into their decisions on where to invest attention — they choose the right trade shows to exhibit at, the right cities to open offices in, and the right prospects to mail to. But the extra-deft marketers also incorporate this principle into their “demarketing”* efforts to discourage unsolicited attention from people they don’t want to work with. By broadcasting messages like the financial advisor’s example, above, businesses can preempt wasted efforts without hurting anyone’s feelings or wasting anyone’s time.

——-

*”demarketing”. I love that word. It sounds almost Seinfeldian.

A common piece advice in retail: “Differentiate yourself. Then let the market know how you’re different.”

That’s good advice, but here’s more: It’s easy to be different. It’s much harder to be distinctive.

“Distinctive” means you’re different in a way that gets positive attention.

Remember: it’s useless for a retailer to be different in a way that no one can notice.

It’s worse to be different in a way that people notice but don’t like (”Hey, we’re the only bookstore in town that plays really loud music.” Or “We’re the only cafe in town where all our staff smell bad.”)

But it’s great to be different in a way that people notice and like (”Hey, we’re the only bookstore in town that has an extensive collection of Spanish-language books and international newspapers” or “We’re the only cafe in town where all our coffees are fair-trade and all our meat and dairy products are free-range.”)

That’s distinctive. And if you do a good job of getting your distinctives noticed, you’ll soon enough be distinguished — that is: well-known, well-respected, and sustainably profitable.

On advice-giving:

People don’t care what you know until they know that you care.

– source unknown

One of my favorite Far Side cartoons shows a man in his bedroom getting dressed for the day. A sign by his mirror reminds him, “First Pants, Then Shoes”.

This cartoon and the above quote remind me that there’s often a sequence to things. Knowing how to do the last step and knowing that the last step needs to be done are not enough if other things have to happen first.

Related blog: David Maister on Being Helpful