3 Steps to Refocus Your Business for 2009
by Richard Barrett
In last week’s article we discussed the tsunami of changes engulfing the business world this year and the next. However, the real issue is not external changes, but rather the internal changes you will make in your business. How will you adjust your business to take advantage of the opportunities that these external pressures will create? Ironically, even though these changes are unique, your responses to each have many common aspects. Consider five specific elements of your business:
- Customers
- Products and services
- Employees
- Processes
- Suppliers
Each element provides a distinct opportunity for restructuring and realignment with the changes which will buffet your business now and on into 2009.
1. Restructure your customers.
You have a loyal customer base, which has served you well for many years. But you know that each customer has a different value profile. Use this opportunity to upgrade your customer base. Be ruthless in your expectations of customers.
- Fire your lowest 10% customers. The marginal costs to serve them may already exceed any profits they generate. Raise prices to cover the marginal costs to serve these customers, and simultaneously invite these customers to shift a web-based, self-service model. Let the low-value customers walk away.
- Shift your mid-range customers to self-service. Move these customers to your web-based, self-service model. Charge for any special services not available from the website. Charge for human interactions, especially for services that are already available on a self-service basis.
- Expand services to your top 20% customers. Increase your direct interactions with these customers. Learn more about their needs. These customers will lead you to new services and increased value.
2. Redefine your products and services.
Move the entire order/fulfillment cycle to a web-based, self-service model. Expand high-value services and eliminate low-value products. Customers want complete customization, self-service, and immediate fulfillment. Be ruthless in your expectations of your own products and services. Specifically, consider these adjustments to your products and prices.
- Information is more valuable than physical product. Increase the information content of your products. Include more services and analysis with your products.
- Move the entire order and fulfillment process to the web.
- Redesign your services for self-service customization, fulfillment and delivery.
- Provide automated reporting of production and fulfillment status.
- Negotiate long-term contracts with built-in price adjustments.
- Offer additional value or services in return for price increases.
- Offer reduced services in exchange for fixed prices.
- Use your high-value customers to identify and develop new services.
- Use your mid-range customers to understand and implement self-service order and fulfillment models.
- Use your lowest 10% customers to find new products for price-sensitive users.
3. Redesign your internal business operations. Move your entire business online.
Your internal business already operates online, but a few hold-out processes may still operate manually. Be ruthless in finding these laggard processes and drive them online.
- Increase automation across every aspect of the operation. Automate every manual operation. Us the automation tools already built-in to your computerized business systems.
- Eliminate paper. Pieces of paper are visible red flags that indicate manual processes and extra expenses. Production and storage of paper is a significant operational cost, especially considering the cost of manually finding and retrieving information on paper. Use automation to eliminate paper and reduce manual processes.
- Eliminate exceptions. Each exception requires significant time from an employee. It’s no surprise that exceptions create considerable paper. Eliminate or automate exceptions to reduce costs.
- Charge the user for every exception. Whenever a customer or supplier creates an exception, charge for the extra service. If an employee creates an exception, charge that department. Better yet, assign the employee to eliminate the exception.
- Drive reports online. Investigate every report your business produces. Is it necessary? Is it generated automatically? Is it delivered by email? Does it go to a customer? Why not?
- Reduce your IT department. Make each employee responsible for configuring the applications that employee uses. If an application is not configurable, replace it.
- Increase the training budget. Use external courses wherever possible. Develop your own internal training courses to teach employees how your company works.
