Screen Shot 2016-03-31 at 22.18.44                                                                                                                                            If you ever stepped onto a banana skin you know what happens next.

You either just manage to avoid a fall or you are indeed in free fall.

And preparing for a hard landing.

I found this similar to working with my clients on Generating Value for their customers or clients.

 

 

 

Creating value can be a tricky thing and I’ll recommend 2 things:

  1. Do the numbers
  2. Check your processes

Do the numbers
Check the internal process chain and ensure value (for the customer or client) is indeed created.
Beat me with a stick BUT if there are process that don’t add anything in value. Get rid of them. Eliminate. Say Good-Bye. Even to pet processes or my favourite “we always done it like this”…

How to 
Simple. Use the old Activity Chain Analysis – this tool has proven the test of time. Even in our digital world it remains very useful.

So what – give us a specific example?
One of the best examples I know: IKEA – the Scandinavian furniture designer that sells products that are simple, practical and at low cost to the consumer. I would estimate that 90% of German households have a least one item from IKEA.

How do they do it?
Constant review of their Activity Chain. The whole economic basis of IKEA’s is focussed on targeted cost. The relentless pursuit of optimising all processes in the company.

Wasting resources is a mortal sin at Ikea” Ikea founder Ingvar Kamprad

Activity Chain Analysis in action
If IKEA encounter a problem in their Activity Chain Analysis, they attack it and turn into an opportunity.

Solve big problems in small steps” Ingvar Kamprad

A strong focus on cost-optimised manufacturing. Yet they still sell attractive furniture for the mass market.  A fine balancing act indeed. IKEA also optimise processes with their suppliers and communicate closely with their customers.

Can I also use Activity Chain Analysis?
Yes, you can. The principles apply to small and big. Manufacturing or service industry. Online or ‘bricks and mortar’.  All organisations can benefit from this powerful analytical tool.

 

PDF24    Send article as PDF   

ElephantNot all business ventures can be successful.
The reasons for failure are varied.
In New Zealand 7% of incorporated companies go into liquidation.
This excludes companies that just cease trading and there are a lot.

There are 3 key areas that support success.

 

Companies Incorporated in New Zealand
 (Limited companies only)
Company incorporations NZ

 

 

 

 

 

Company Liquidations in New Zealand (Limited companies only)
Company liquidations NZ

 

 

 

 

 

Reasons for failure
1. Lack of Industry Experience and Knowledge
Knowledge in one particular field does not make a business owner automatically a good business manager.

2. Insufficient Start-up Money
The start-up typically consumes more financial resources than anticipated – cost control and effective budgeting are often neglected.

3. Failure to Understand Market and Customers
Lack of obtaining customer feedback. The successful business is dependent on the extent the owner/manager understands the needs of the market segment(s).

4. Poor Employee/Management Skills
The saying goes ‘people are the most important asset’. This is often overlooked and underrated.

5. No or poor Cash-Flow Forecasting
Unfortunately most small and medium sized companies do not use cash flow forecasting.

3 Key areas ensure success

1. Cash Flow
This is arguably the most significant success factor for any company. Very applicable to smaller and medium sized companies. Whether start-up or expansion phase, the old saying ‘Cash is King’ is as valid as ever.
Cash-flow forecasting
I am a strong believer in a rolling 12 months cash flow forecast. Perhaps even 18-24 months. And I still have a preference using the old Excel spreadsheet method.
Why?
Because it forces one to think and manually enter every possible future transaction: revenue, expense, tax.

2. Process Review
This goes hand-in-hand with a robust cash-flow forecast. A systematic internal activity/process analysis and review is Must-Do.
How to?
The challenge for owner/managers is to allow (quality) time to review and fine tune processes.
Best to use flow diagrams and keep testing assumptions.
There are a number of (software) tools available that track processes, however I find the old whiteboard and coloured pens are great to get started.

3. Share the data
It is not always easy for business owners & managers to share data, particularly financial data. It does require a little trust in your staff – but the benefits are worthwhile.
Why ?
The more your staff/team understands the bigger picture the better. The more people own the data the greater the motivation. It may require some training to get everyone up to speed.
I have seen huge turnarounds in motivation to support a company’s direction.
I have seen people with relatively little formal education exploding into action to support and drive the business forward.

Do the 3 key areas really ensure success?
Yep, It certainly will go a long way to align all the internal factors. Cash flow forecasting, process analysis and staff involvement provide an platform to put the business in a sound position.
However, it is not a miracle cure. It remains vitally important is to understand customers and markets.
And business owners need to be able (and prepared to) to delegate some tasks.
As the saying goes:
“Jack of all trades, master of none, though oftentimes better than master of one.”

Curious? Contact me for an FREE assessment of your business
PDF24 Tools    Send article as PDF