The 10 Questions You Should Never Stop Asking

Turnaround Tactics

 Really good article for anyone managing, developing strategy or entrepreneurs.
Steve

http://www.forbes.com/2009/11/20/ten-key-questions-entrepreneurs-management-kramer.html?partner=popstories

Maxwell: Oil Price Forecast

Energy expert Charles Maxwell notes that because of the recession, oil supply and demand are in balance, but down the road there will not be enough supply.

http://www.moneyshow.com/video/video.asp?wid=4022&t=3&scode=009597

My conclusion, there will be more demand for domestic and international drilling starting in 2012. This may hurt President Obama's reelection campaign since the energy policy has been discouraging more drilling.
Steve

Anticipating the Credit Crunch

Business has to adapt to the changing conditions and change your plans. Business conditions right now are transitioning into a more severe recession than expected. The shutdown and forced sales of US financial companies and banks. This is the reason for the bailout which really should be called a credit stabilization bill.

Inflation was the story at the beginning of 2008. Currently inflation is being reduced by the improving value of the US Dollar. It is not how much the US economy has improved, but the global economy has gotten worse faster than expected in Europe and Asia. Only the oil producer’s economies are doing well. The rest of the world is slowing down quicker than the US economy is.

Helping with inflation is the bursting of the bubble in commodity prices. Oil rose to a high of $145 per barrel, and now has returned to around $95 per barrel. This happened in only a few months. Oil price will be volatile depending on political and weather related interruptions, but is gradually dropping towards the $60 – 80 range in 2009. Demand for all commodities except food has dropped.

The real problem now is the credit crunch. Banks are trying to raise capital to survive, and are not giving loans they gave last year. Credit card companies are tightening their limits because of losses. This not only affects consumers, but lots of small companies use credit cards instead of a line of credit. Lines of credit are harder to get for larger businesses. Taking a second mortgage on your house is more difficult due to lower values and tightened lender requirement. These all will accelerate the credit crunch.

Keep your perspective. No recession lasts forever. There are a few steps to take right now to prepare.

Hang on to all your cash
1. Sell down inventory as low as you can. Sell excess and obsolete products by reducing prices.
2. Cancel all unnecessary expenses, subscriptions, software, and leases.
3. Sell and scrap unnecessary equipment.
4. Lease out or sell unused space. A sublet tenant can improve profits.
5. Pay credit on time and make sure your bank knows you are profitable. You need a good relationship for future credit needs.

Review your products and prices
1. Do you know which products create profit for you? What do they actually cost without overhead?
2. Increase prices or discontinue unprofitable products. Do you need all the finishes or colors? Increase prices on money losers to reduce demand, or…
3. Replace dated and noncompetitive products with new designs to improve margins. Design simpler products or combine two products to reduce cost and improve margins.

Improve your business

This is a major opportunity to improve. Focus your business on a mission. We need to serve our customers better and better. Measure your most important attributes for customer satisfaction and make sure you improve.

1. Advertise more. Stay in contact with existing customers more. Find new customers.
2. Expand by adding more products to sell existing customers. Partner with other suppliers to your customers.
3. Keep your key people and performers. It is too expensive to replace your best talent.
4. Hire better talent. Lose your weakest performers who slow down or move them to positions where they have ability. This is the best time to find the people you need to grow and be ready for the recovery.
5. Plan to grow more profitable over five years. Find new products, services, or profitable niches. Others are cutting costs only. The great companies grow more competitive.

Recessions are opportunities. Take full advantage of them for your benefit.

Real Strategy Versus Planning

Too many companies do their year end planning and call it strategy. Often the discussion at these meeting is simply how to incrementally improve the business. Everyone predicts they will sell slightly more product this year. It is a good business practice to have long term resource plans, but that is not strategic business development.

Real strategy is focusing your business. Strategy is finding potential opportunities, and enabling your resources to produce and sell new products, and services to grow.

Continuing operations have to be profitable and products updated. Equally important is to discontinue or outsource products and services no longer key to your success. The important idea is to concentrate your resources where the profits are. Work less and make more.

The best opportunities are market disrupters. All innovation flows from the unexpected combination of two or more things. You need to spot and exploited a change whose time has come. Not necessarily being the first mover, but be the first to get it right.

Steve Jobs says, “I am going to wait for the next big thing." Then he develops a position to take advantage of the opportunity. Look at the iPod. Lots of people in and out of the industry knew about music downloading, and people knew that MP3 players were coming along. The music companies and the music retailers had asset positions that were being threatened, and didn’t want to act. It was not a fantastic leap of imagination into the far future. He found a set of ideas that needed to be quickly and decisively acted upon.

A value denial is a business opportunity. Every change and innovation creates new value denials. These are products or services that are both desired and feasible but are not being supplied to the market.

What makes a business unit healthy? Operating efficiently and having a good strategy. A good strategy, in turn, is one that is responsive to change and that builds, builds upon, and stretches the resources that yield competitive advantage. Be focused on going after changes.

How do you actually plan strategy? For that, you need a small group of smart people. Strategic insight is essentially the solution to a puzzle. Puzzles are solved by individuals or tight-knit teams. With big groups and complex processes you can select the better solution to the puzzle, and you can get consensus and buy-in and even commitment. But that comes later.

Start with a SWOT analysis. It is time to look at your strengths, weaknesses, opportunities and threats. Basically as a group evaluate your business internally and externally. Where do you have advantages, and where do you have to improve? What opportunities are there and what weaknesses do you have?

Write three coherent paragraphs about what is changing in your industry and why. Having to link your thoughts, giving reasons and qualifications, makes you a more careful thinker and a better communicator. No bullet points.

Other questions to ask include: Where are the profits too low? Are the margins low? Can we increase margin with a new design? Can we partner with a competitor? Does someone else do it better? Can we minimize expenses on mature products? Do we just raise prices and give up market share? Do not underestimate the inertia of buyers. Can we sell part of the business without damaging the whole unit? How will the customers react?

Speculative judgments are the essence of strategic thinking, and they can be the starting points for taking a position. Strategic thinking is essentially a substitute for having clear connections between the positions we take and their economic outcomes. You have to determine where to invest in projects with a goal.

Companies create competencies by making bets, and putting the right resources in place to develop those competencies. Companies get good at something by doing it, and that give you a sustainable advantage.

You job is to figure where your resources are best spent. The most important job of any manager is to break down a situation into challenges that subordinates can handle. Absorbs a lot of the ambiguity in the situation and gives less ambiguous problems to others. That is the heart of strategy.

This article is based on the research and studies of Richard Rumelt.

Turnaround Business and About Me

My catch phrase is "Turning Opportunities into Profits". I enjoy business and business is about being profitable. Quite frankly, with no profit there is no business. Only a charity that will eventually fade away.

Business is about serving the customer so well they don't want to work with anyone else. You want to solve their problems for them.

Problem Solving is my core skill. Before I had a degree in Engineering, I could fix some of my family's and friends toy's. I fixed my and their bikes, put chains back on the sprocket, adjusted the gear changer so chains would not fall off the ends of the gears.

My father is a do it yourselfer, so I learned by watching and helping. Watching Dad change the tubes on the television (the black & white one), building and painting sheds, gardening, maintaining pool filters, building a trellis for mom, and of course maintaining the cars. It is amazing the patience he had to let us try what he could do in seconds so we would learn.

At fifteen I started working on cars. I insisted on taking Auto Shop as an school option for one semester. Dad bought a meter and a timing light to interest me in taking care of the cars, and was shocked as I taught him what it was for and how to use it. Typical teenager I was car crazy and fascinated with them today. Hybrids are cool, and I have been waiting for hydrogen cars for to come for over 25 years. Thank you BMW for answering that desire. Can't wait for a ride in one.

At sixteen I learned to use computers. I started with teletypes and punch cards. Yes I am an antique. Same time I learned about cars and computers, I also learned to swear. Not sure which one led to that :)

My engineering education and experience taught me how to solve more problems. The facinating thing to me is how little it was calculations to do things, and more about common sense and working with people. Then again my favorite professor in college only taught one formula per semester, and probably needed a calculator to balance his checkbook. So computers can only help us do our work, not think for us.

Now I enjoy growing and fixing businesses. Great products and great services only happen when a small committed team infects everyone to do it together. Someone has to decide lets do it, and the leader has to commit to make it happen. Then magic happens. Airplanes fly, cars get safer, air gets less pollution, more food gets grown, and man can walk on the moon.

So how does a business turnaround from losing money? From losing customers? From having poor quality products and services? It is the same thing. Someone commits to doing it. A leader creates a small team that decides it has no option but to succeed. People don't feel sorry for themselves, and do the hard work it takes to make the customer happy. The team grows, struggles, succeeds a little, fails some, learns and improves. The team solves a couple problems, grows some more, and tackles bringing out new products or services. Along the way, more problems get solved, customers get made happy, and pride comes in being part of a successful business.

That is how you can turnaround businesses.
Steve

PS - Look forward to more thoughts on business, life and problem solving...