Focus on the essential – Leica
It is imperative that businesses determine exactly who they want to serve, exactly what products or service they want to deliver. They must not try to be all things to all people. Previously on this post I gave the example of a niche product being the Savile Row Tailors. In this post I pass on some lessons from a company who has got it right. ( I have no inside information just a keen interest).
The company is Leica Camera AG.
Leica make beautiful cameras and if anyone wants to be generous I would love the new M9.
Lieca cameras are very expensive but they create an experience for enthusiast, artistic or professional photographers. They are made in Soims Germany and also a second location in Portugal.
They have focused on building the best lenses, the essential camera that serves a market. They employ about 100 people and last year turned over 156 million Euro. They are not an insignificant business that is focused on serving a particular customer with a specfic product. They are not trying to take on Canon & Nikon etc but rather they are creating a different product and charging a premium price. There are forums, user groups both online and offline the world over. These people get together to talk about the products and what they have been able to create with the product. This just reinforces the word of mouth marketing of the brand which adds to the premium price that can be charged for the products.
On Leica’s website they say the brand speaks for visual enjoyment and lasting value. Also state that their values are building the best lenses and focusing on the essential. It is this point of “focus on the essential” which I wish to cover a little more.
To quote from their website
“In today’s market, many products attempt to attract buyers with countless features and unusual forms. Almost anything is possible. But it is often the things that appear simple which prove to be the most difficult to attain. For Leica, the focus is first and foremost on the needs of the user. Innovations are never ends in themselves but are always the result of countless discussions with and feedback from users. Leica products are designed from the ground up as tools for creating completely unique visual experiences – nothing more and nothing less. For this reason since the very first Leica, the focus during mechanical and optical development of mechanics and lenses has been on providing truly relevant functions. It is this focus on the essential that lies at the heart of the fascination inspired by the Leica brand. “
If only this was the focus of all businesses. Leica not only say this but deliver. They have the focus of their customers. Their customers are not all photographers. They are not trying to be everything to everybody. Focus on the needs of the customers you want to deal with. How can you focus on the essential in your business, with your product or service.
Not all customers are equal.
Do you treat all customers equally? But not all customers are equal.
Even in businesses that have offered different service offering eg Platinum, Gold, Silver etc I still some blurring of the lines. In businesses where they don’t have these distinctions all customers get very similar treatment.
Why is this so? Why does it matter?
Treating all customers equally means that
- clients that are marginally profit are getting the same service as customers who are very profitable.
- we are not tailoring our service offering to the customers needs.
- we have not taken the time to understand the customers in detail
- there are not KPI’s in place to ensure that this behaviour would be detected.
- there are not adequate systems and procedures in place
We hear the blanket statement from business that we provide great, awesome, fantastic (some other adjective) customer service to all our customers. But unless they have taken the time to carefully select the customers they deal with and also have taken the time to understand in detail their customers then this statement would be of little use. Now I am not saying you give poor service to the marginal customers. I am saying that if you decide to keep them as clients then they need to be educated on what to expect and it can not be the same level of service as the very profitable, high referring advocates.
Remember not all customers are equal.
One KPI Is Never Enough to Manage… A Country? | BI Questions Blog
One KPI Is Never Enough to Manage… A Country?
Posted by Timo Elliott on Wednesday, September 16, 2009 · Leave a Comment
This article in the International Herald Tribune (slowly becoming the “global edition of the New York Times”) gives an overview of why gross domestic product (GDP) is an inadequate measure of a country’s success.
There are some interesting parallels with corporate KPIs and the use of profit as an indicator of corporate success:
“The panel, chaired by two Nobel economists, Joseph E. Stiglitz of Columbia University and Amartya Sen of Harvard University, concluded that G.D.P. was insufficient and that measures of sustainability and human well-being should be included.”
“There isn’t a single indicator that can encompass everything,” said Enrico Giovannini, the chairman of the Italian national statistics agency, Istat. “It’s not a question of replacing G.D.P. It’s a question of complementing it with other indicators that can provide other measures of well-being.”
“What we measure affects what we do; and if our measurements are flawed, decisions may be distorted,”
Share and Enjoy:
http://bit.ly/EQJA7” title=”Post to Twitter with automatic URL shortening!”>
http://bit.ly/EQJA7” title=”Post to Twitter with automatic URL shortening!”>Was this interesting? Share with others on Twitter with automatic URL shortening!
–>
![[Post to Twitter]](http://timoelliott.com/blog/wp-content/plugins/tweet-this/icons/tt-twitter.png){kind=icon}
Interesting Post. Numbers matter to business as much to running the country.
Posted via web from Major Focus Group – Posterous
KPI’s are not just financial measures.
To be effective KPI’s can not just be composed of financial metrics. Metrics derived from the financial statements have a place but they need to be complemented with other measures that are derived from a true understanding of what is important to the customer.
The financial statements are records of history. Thus financial metrics also reflect what has happened. They are not in any way predictive of what is to come. Financial measures have important uses including cashflow management, efficiency, productive use of resources. But financial measure must not dominate the KPI’s as the focus will be distracted from delivering value to the customers.
We need to focus on what is success in the eye of the customer not just past profitability.
The first step in this process is to have a complete understanding of the customer and what they value. A business must invest the time and effort to be armed with the facts and data on the customer. From this the business needs to ask the customer and to observe their behaviour to get the understanding of what is important to the customer. Once this information is to hand then indicators that measure this value delivery can be designed and implemented.
The key measure of this post is not just have financial metrics as KPI’s.
Lessons from Savile Row.
Recently Ingrid Cliff of Heart Harmony posted in her newsletter wrote about niche businesses and the success possible from pursuing a niche. Following on from this then saw an article in Business Week which detailed a conversation with a Savile Row Tailor.
Savile Row is famous for its independent tailors. These tailors provide a specialist product (bespoke suit) with precise customer service. Tailoring is a business which has had significant competition from a wide range of companies selling suits from off the rack companies, major brands eg Armani, to online businesses but Savile Row has survived and thrived. In the article Richard Anderson said how this conversation from the ready to wear market keeps them on their toes. They have to keep doing it better than them. The other aspect of this conversation was that they have a deep relationship with their customers. Also they are willing to travel the world to their customers.
The lessons from this article was that a very successful way to compete is to find a specific niche and deliver a fantastic product with extreme customer service. (Simple) But really small businesses can’t be everything to everybody. But if you have a niche product or service you must deliver a great product / service. It can not be just a little better than what the general competition is. The bespokes suits tailored on Savile Row are exquisite. But the other important aspect is to have a deep relationship with your customers. In this way you will be more than just a provider of a product or service, you will be a valued friend of your customer.
Savile Row tailors are never going to have the mass market but their product is unparalleled and there is a sufficient market available for these tailors to have a great business.
So in summary find a niche, deliver a great product / service and have a deep relationship with your customers.
Flickr Photo – Mike_fleming
5 Reasons why businesses end up with poor KPI’s
Unfortunately performance measures or KPI’s can get a bad impression because the prevalence of some terrible KPI’s in many businesses. The phrase “what you can measure you can manage” which came originally out of a McKinsey strategy has been belittled by many. I am not saying that you can measure everything (that is for another post). The failure of KPI’s and perception that has been generated I believe has come about from poor implementation of performance measurement.
The reasons that business have poor KPI’s include:-
- They do not exactly know what is success in the eye of the customer. We must start with the customer to know what we should be focusing on measuring and tracking.
- Lack of a complete understanding of the operational drivers of the business success.
- Having KPI’s that are at odds with each other. For instance if there is a KPI on customer value delivered and then a KPI on employee productivity then there can be a tension as to which one is the most important.
- Too many KPI’s. Some businesses I have encountered have had more than 50 KPI’s at senior management level. This just means that none of them will be focused on.
- The design of the KPI has been delegated a low level person in the finance department. The KPI’s are too important not to designed by CFO or senior management.
I am sure that there are many other reasons why inappropriate performance measures end up being designed and implemented however these are five I have seen to0 often.
Your thoughts please.
A Real Brand – Real Customer Loyalty
I love to hear of stories of great companies who have built a real brand. This is a brand that has a loyal customer base and when the brand is mentioned people can tell you stories (great stories) of this brand. Recently Peter Day of the BBC interviewed the CEO of WD-40. Yes those distinctive blue and yellow cans with that spray we use to solve all sorts of problems.
As Peter stated in his notes – ” it starts off as a lubricant and then generates all kinds of other uses, most of which give the users the wonderful feeling that it’s their cleverness to spray on the WD–40, rather than the product’s versatility.”
Originally WD-40 was designed to stop space rockets corroding. This formula was the 40th attempt to come up with a water dispersant. However as some of the people who worked for the company started taking the product home it started to gain other markets.
There are a number of lessons that can be learnt from the business.
It has been a business significantly built on sampling. They give a sample to someone to try which has led people to purchase. From this word of mouth has done a lot of the business building.
But this word of mouth has been helped by the company. It you visit their website you will fine a fanclub and a page devoted to 2000 plus uses of the product. The 2000 plus uses are full of stories that people can tell each other, try out and otherwise create word of mouth marketing.WD40 ask people to continue to send in examples of how they use the product.They are fostering the word of mouth.They are creating a tribe around a spray can.
The brand has a promise of being able to solve all those little lubricant issues around the house or business. But more than that even keep squirrels from climbing a pole. Read some of the 2000 uses for some crazy examples.
Also it is interesting how little detail is important. The smell that comes with the spray is added. It is not necessary to make the product work. But the smell is important for us to remember the product.
WD40 really take the time to understand the customers need and how their products can help.
So the lessons in summary -
- how are you fostering word of mouth
- how can you allow your customers to sample your product or service
- what little details can you do to your product or service that will leave a memory eg smell, touch etc
- how can you really understand the customers needs better.
7 tips on maximising your working capital (Good Post from All Smallbiz Pod)
By David Bloom
4th September 2009 at 10:10 amIn short the quicker you get cash in the door from your customers and the slower it has to leave to pay your suppliers, the better as that cash stays in the business and works harder for you. Some business models work a lot better than others in this regard.
If you’ve got large blue chip customers who don’t pay for 60 to 90 days and expensive staff who need a pay cheque every month, you’re going to have a bigger challenge managing working cap than say a restaurant where cash is in the till before you have to pay for food and wages – nice!
Here are seven tips to maximise your working capital assuming the business is trading normally and not in some kind of crisis or recovery situation.
1. Minimise your payment due date on your invoices
On your invoices clearly state “Payment due within X days”. Then ask yourself why this can’t be “Payment due on presentation of the invoice”. The answer may be due to industry standards for your line of business. Just remember if you say 30 days, you won’t get paid until Day 45 or later so you might as well put the earliest date possible.
2. Stay on top of collections
Cash is the lifeblood of your business. Those invoices you’re sending out need monitoring and collecting on. It is a fact of business life these will not get paid on time and you have to proactively manage the debtor’s ledger. Make this part of the job of your finance manager and/or admin support in the office, if one is available.
3. Margin – look for the 80:20
Make sure you know which products or services you provide generate the most gross margin. Often times 80% of your margin will come from 20% of your product or service. Unless there is some strategic reason why you need to, don’t waste time and effort on chasing in cash and paying suppliers for product that add nothing to the bottom line or worse, lose you money.
4. Stockholding – the cardinal sin
Related to margin, don’t keep cash tied up in stock. Knowing your sales volumes will help you keep track of how much stock you should be holding.
5. Keep a rolling weekly cash flow
Forecast your cash requirements on at least a rolling 12-month. Know when cash is tight which is usually around month end for salaries and quarter end for VAT and rent payments. If you don’t know where you are with cash it will bite you hard and possibly give you a fatal wound.
6. Communicate a payment policy
Let your suppliers know that you do one payment run a month and it’s on X date. Let them know that payment dates are in the month following receipt of invoice. Depending on the size of your suppliers, some will accept and some will dictate to you. Having one a month will also free up your finance manager’s time for collections.
7. Treat your preferred suppliers different to other suppliers
If you have key partners such as licensors, business advisers, treat them like employees and pay on time unless cash flow dictates otherwise. Do not let poor payment become a demotivator or bone of contention with people critical to your success.
Rate this post
David is the MD of FD Unlimited the providers of outsourced financial director services for SMEs. He is an experienced commercial international CFO in media and technology. He has over 20 years experience working with fast growth public and private companies including Getty Images (NYSE: GTY), Glu Mobile (NASDAQ:GLUU), Keystone Software PLC (AiM) and KPMG. http://www.fdunlimited.com/
Commenting Is Easy
Do you agree with these tips? Disagree? Have something to add that others might find helpful? Then please leave a comment by filling in the box below.
If you’d like to have your image included next to your comments here, then you can set yourself up with an avatar in just a couple of clicks.
Leave a comment
Posted via web from Major Focus Group – Posterous
Great Mark Anderson cartoon – this is not how KPI’s of a business should look.
Posted via web from Major Focus Group – Posterous
Engaging the employees – a key to success.
Staff Engagement
I was reading a recent article on Business Week website about employee engagement. I recommend the complete article to you.
The article quotes some research undertaken by Gallup which determined that less than 30% of the workforce is truly engaged
To quote from the article – “That’s less than 30% of employees who work with passion and feel a profound connection to their companies. Yet employee engagement leads to increased customer engagement, which leads to real revenues…”
The article goes on to give an of a store in the electronics retail chain Best Buy. The store management measured employee engagement and realised the store was not going well. This affected morale, employee turnover and profits. Using this information they instituted a number of changes which had the results of increased employee engagement, substantially lowered employee turnover and increased profits. Taking this it was translated across the chain. It was determined that for every one-tenth-of-a-point increase in employee engagement, each Best Buy store increased profits by $100,000 a year.
This highlights the fact that there is a huge profit motive to ensure management engages with the team.
As I have previously written on this blog we must tell the team exactly what is expected of them and then let them go to achieve this. We can get what we want if they know what we want. Employee engagement is one of the keys of business success. Ignore it at your business peril.
-
Subscribe to Major Focus Group
Or, subscribe via email:
-
Subscribe to our FREE newsletter, The Focal Point and get your FREE copy of How to have a Focused Business.
We respect your privacy: No spam mail and you can unsubscribe at any time.