here‘s only one constant in business today. change. this is particularly evident in south africa where a government in defiance of world opinion drew manufacturers into a laager to protect them against foreign incursion.

that government is no more. the tariff barriers it so assiduously erected crumble with increasing rapidity. business is now a different ball game. foreign enterprises, well-versed in the tactics of cut-throat global trading, are pouring across our borders. the assault on the south african market that i predicted in my best selling book

Look Out is underway.

We can either lie down and die. Or we can fight the insurgents. Using the correct techniques, we have a very good chance of beating them at their own game.

Just what are those techniques? I describe them in detail in my popular presentations,I Was Your Customer and Passion Makes Perfect as well as in my previous books.

Consuming vast quantities of tea and coffee with my friend Esmond Frank while mulling over the problems our business people face as the century moves towards its close, I was struck by an idea. Esmond said it sounded good. The Whole Works is the result. Essentially it‘s a collection of the most potent techniques that I identified and wrote about, and Esmond honed, to help you blast your way through competing global forces into the next millennium and beyond.

I can‘ claim all the credit for the idea that led to this book. Your input was invaluable. Many of you attended the seminars and conferences at which I was invited to speak. You didn’t just accept what I told you. Indeed, you asked pertinent and challenging questions. I‘ve attempted to answer them in The Whole Works.

Therefore, I dedicate this book to you in the knowledge that you will use the ideas that I‘ve set out to guide you to even greater success and richer rewards. Long may you enjoy the fruits of your ongoing commitment to better business.

I value your input. Don‘t keep me in the dark. You can email me at peter@petercheales.co.za. I look forward to hearing from you.

Peter Cheales
Johannesburg

OUR business – any business – needs two classes of people to survive, let alone thrive.

Without them you don’t have a business.

This brings us to problem number one. Motivating them and keeping them motivated. Unless you can keep both groups enthusiastic about your business – in different ways, of course – you might as well shut up shot.

With the foolishness of youth, I once aspired to a life in the limelight. I wanted to be an actor. Under the influence of The Method, I remember agonising over the motivation for my small part in some obscure play. So I asked the director, whose name I’ve forgotten: “What motivates my movement in this scene? Just why do I cross the stage?

“To pick up your pay cheque,” he told me.

Although money certainly plays an important role in motivation, it isn’t the only factor.

Motivating staff

Let’s first look at the staff scene. Some companies recruit employees’ spouses to boost motivation. Adopting a management theory that a man will be a better worker if he has an understanding wife, one South African company (which shall remain nameless) not only invited the better halves to its sales convention, but emphasised their importance to the cause.

In his address to the delegates and their partners, the managing director dwelt on what he called “that great energiser, that great harbinger of motivation: encouragement”. To underscore his point, he singled out a cute and shapely blonde in the audience.

“Tell me,” he asked, “how do you encourage your husband?”

Flustered at becoming the focal point of attention without warning, blushed and stammered: “Oh, I couldn’t. Not in front of all these people.”

Although this method may sound okay in theory, it has a built-in potential for embarrassment. And disaster. There is a better way: a new resource that will help you motivate the members of your staff and keep them motivated.

The Whole Works.

This book recognises that you need a high level of staff motivation to keep your department running like clockwork … to give your organisation a real competitive edge. Essentially, it’s a hands-on guide to improving morale, motivation and productivity in your department. It’s filled with the information that you’ll need to find, train, motivate and keep good employees,

Whether you’re looking for simple, inexpensive ideas that you can use right away or comprehensive long-range plans, you’ll find them in The Whole Works, in which I bring together, update and augment all the essentials from my previous three best-sellers, I Was Your Customer, Look Out and Passion Makes Perfect. In its pages, you’ll learn:

Motivating customers

When you have your highly motivated staff in place, you need customers – fickle people who’ll love you and give you loyal support for as long as you give them what they want, when they want it and how they want it. The problem: they don’t often know what they want, when they want it or how the want. And, unless you make yourself fully conversant and stringently apply all the principles of world class customer service, it’ll be your fault. Then, suddenly, all those lovely folks who flocked to your door ready and eager to exchange hard cash for whatever you vend have moved to perceived greener pastures in the business next door.

Have you ever paused in your daily labour to wonder why these folks, who you reckon you busted a gut to please, don’t buy from you anymore? Surveys – and there have been plenty of them – all tell the same story:

Hang on a second. Let’s look at that last point again. To paraphrase it slightly, about seven out of 10 customers, who used to buy from you, left for no special reason.

Do you really believe that?

Don’t.

There was a reason or a series of reasons those seven out of 10 customers became your ex-customers. They left because:

And so on.

Customers don’t leave for “no special reason”. We leave because you give us a reason. We leave because we’re dissatisfied. More often than not, as a dissatisfied customer, I don’t say anything. I never complain.

I just never return.

Want to get me back? You’ll have to turn on the charm, and a lot more. You’ll have to bend over backwards to motivate my return. In The Whole Works, I’ll show you how to win back my affection. I’ll also show you how to retain the on-going loyalty of your present customers.

I’m not promising you an easy passage. You’ll have to work – and work hard – to build up a successful business by providing world class customer service. As Longfellow so eloquently put it:

“The heights by great men reached and kept
Were not attained by sudden flight
But they, while their companions slept,
Were tolling upward in the night.”

 I wish you all great good fortune in the journey ahead.

CHAPTER 1

 “Business must be run at a profit … else it will die. But when anyone tries to run a business solely for profit … then also the business must die, for it no longer has a reason for existence.”
– Henry Ford

deas – new or otherwise – are funny little things that won’t work unless you do. Some of the best modern business makeover ideas are adapted from well-proven formulae that worked so well in the past.

Like loyalty.

Loyalty is a quaint idea from the past. It’s now about as relevant as the stagecoach. That’s the ay it is

Or is it?

On average, a company in the United States loses half of its customers in five years, half its of employees in four years and half of its investors in less than a year. This is a trend you can’t sweep under the carpet. In fact, it shows every promise of becoming worse around the world. And South Africa isn’t an exception.

NEW RULES OF THE GAME

So let’s look at the new rules of the game you’re playing for high stakes – business survival, growth and profits:
 

Corporations that downside to stop profit and customer-base erosion haven’t turned things around. Instead, they find themselves forced to launch another round of downsizing a year later. They slash costs, re-engineer and restructure. And they continue to lose customers.

Ignore the latest management buzz words

True or false?

Let’s find out.

One of the world’s largest advertising agencies, Leo Burnett, grosses $600-million a year, although the professionals it employs are the industry’s highest paid and its prices the most competitive.

How does Leo Burnett do it?

Frederick Reicheld and his colleagues at Bain & Company studied the profits, strategies and tactics of different advertising agencies, including Leo Burnett, and found that some generated “mystifying” levels of free cash flow.. The key, as the Bain study found, is customer loyalty.

 A direct correlation

In advertising, the study showed, customer retention rates – the percentage of customers per year that continue doing business with the same company – and employee productivity were directly correlated. The higher the customer retention rate, the higher the level of productivity.

Leo Burnett leads the industry in both categories with a near-perfect 98% customer-retention rate and a productivity rate that maintains a level 20% above the industry average.

So what sort of profits does the agency report? It doesn’t because it’s a private company. But one can estimate that in advertising, a 20% advantage in productivity probably increases profit potential by 50 to 100%.

That’s what customer loyalty can do for you.

And don’t forget about the benefits of employee loyalty.

While most brokerage firms plunder each others’ employees systematically, A G Edwards has the highest employee retention rate in the business. It also has the highest profitability rates.

So loyalty isn’t dead. On the contrary, it’s alive and kicking. You’ll find it at the heart of every company that boasts a high level of productivity, solid profits and sustained growth.

To keep your company veering towards the bright side of business:

Take your eyes off the bottom line

If you want to ensure customer loyalty, you don’t have a lot of choices. In fact you don’t have any. The only route to follow is to make virtuous profits

Virtuous  profits?

Profits that result from creating customer value, not destroying it.

Even in the United States, the international shrine of capitalism, top business people subscribe to Peter Drucker’s theory that making huge profits isn’t a company’s most important responsibility. In The Practice of Management, first published more than 40 years ago, Drucker said: “Profit is not the explanation, cause or rationale of business behaviour and business decisions, but the test of their validity.”

Ninety percent of the 250 executives in Fortune 1000 companies who responded to a recent survey agreed with the statement: “A corporate leader’s responsibility is to ensure the greatest good for the greatest number of stakeholders, which include shareholders, employees, customers and local communities in which the company is based or does significant business.”

This represents a significant change of attitude in a country where business people have hitherto been obsessed with improving efficiency and cutting costs – often at the expense of employees and customer service.

Create customer value

The true goal of any business is to create customer value. It’s the core activity from which sales, profits and long-term success will flow. Philip Reed, former chairman of that long-time American business giant, General Electric, believes that people who give and get the most out of live have several qualities in common.. One of these qualities is “the rather special satisfaction, the deep-down joy they get out of a very simple thing – being helpful to other people.”

Do something a little extra

Just to be able, in the course of their everyday lives, you do something a little extra for a friend, a client, a patient, a customer, or perhaps a complete stranger is, they have found, a most rewarding experience.”

In more ways than one.

There’s method in their madness.

The insurers figure that customers with solid, well-constructed homes will suffer from fewer losses in the future. By taking their eyes off the bottom line and concentrating on customer value, these insurance companies lay the foundations for future success. 

Find and keep the right customers

Many companies inadvertently target people of the wrong type as customers – people who are inherently disloyal. In the marketing industry, choosing customers of this ilk is known as “adverse selection”.

How can you tell if a customer falls into the adverse selection category? Red lights should start flashing if you can easily persuade them to abandon their current suppliers and move into your business orbit. If you can induce them without much trouble, a competitor is unlikely to experience any difficulty in persuading them to abandon you.

Price-off coupons and price discount offers attract these people like syrup attracts flies. Sure, they’re an inexpensive way of reeling in new customers. But you won’t necessarily land them. A customer easily hooked by a minimal price discount will just as easily abandon you at the slightest hint of a discount offer from your competitor.

Your first step in building the loyalty-based cycle is finding the right customers. The next step is keeping those customers who will remain loyal and, therefore, become more profitable with each passing year.

One desperate store I came across in London tried to attract long-term customers by prominently displaying a large placard in its main window. The inscription read: “This is a non-profit organisation. Please help us change!”

Begging obviously isn’t the answer. Apart from a couple of dejected looking assistants, the store was deserted.

While on a trip to Los Angeles, I was taken to a popular restaurant that tried a bit of reverse psychology. A prominently displayed notice proclaimed: “Please don’t insult our waiters. Customers we can get.”

Last I heard, the restaurant boasted a band of happy waiters with no diners to serve. I subsequently folded.

So how do you attract the right type of business?

Step One…

Identify your customers

Not only the external customers, but also the internal ones, and segment them into niches.

Target customer categories that are most likely to be loyal. The trick: to find the criteria that tie into loyalty. You do this by asking yourself

To find the answers, do some in-depth research or commission a specialist to carry it out for you.

When you know the type of customers you want to attract, devise a marketing strategy – distribution channels, product lines, etc. – that is likely to lure those customers.

Consider the case of a life assurance company – let’s call it Ajax – which couldn’t understand why it was consistently losing customers while customers at its main competitor remained stuck to it like glue. In an attempt to halt the erosion of its customer base, Ajax conducted its own customer satisfaction surveys and increased the quality of its products. But the customer exodus continued.

Persistent probing

Then the persistent probing brought something to light: Certain customer segments were far more loyal to Ajax than others. For example, while urban policyholders tended to desert the company, those in rural areas continued to offer it their support.

Were rural customers inherently loyal, or were there other explanations? Perhaps the company had better agencies in some areas. Or was the competition fiercer in others?

The powers-that-be at Ajax decided to delve deeper. Confining the investigation to its own customers, they felt, left too much room for distortion, so they expanded research to include competitors’ customers. This industry-wide research helped them identify inherently loyal customers segments.

In its next move, Ajax targeted these customers. To do so, it placed agents in areas identified as high-loyalty geographic regions. It also changed its product line to appeal to loyal customer segments.

And it altered compensation practices to encourage agents to keep customers rather than concentrate on signing up new ones.

After exhaustive field trials, they found that these measures were more effective than enhancing the quality of the product.

Step two …

Focus on customers’ result

What do your customers want to achieve by doing business with you?

All people are different so, obviously, their specific needs will vary. Some will want to be fully protected in the face of adversity. Others may want to build a rock-solid home and yet others will want to keep perishable products cold..

When you’ve identified your customer bases, ask yourself this question: “What results do your customers want to achieve by doing business with us?”

Structure your marketing effort

Many companies simply categorise their customers into segments of profitability, or spend segments only.

Don’t.

Also categorise your customers in terms of loyalty. To do this, conduct and audit to determine:

Update your findings every six months.

To identifying potentially loyal customers and targeting them successfully, you’ll have t structure your marketing effort, big or small, to elicit enquiries from those people who are genuinely interested in purchasing what you have to sell. For example, if you sell Porsche sports cars, design your advertising, public relations and other promotional efforts to deliberately discourage nuisance calls from people who obviously can’t afford the luxurious, Teutonic motorised chariot.

If you’re vending popular household appliances and basic necessities, your marketing effort will obviously take a different tack in which price will probably play an important role.

Once you’ve enticed a person through the door and made a sale, you face the problem of getting him or her to return.

Again and again.

Repeat business

A lot of South African companies don’t seem to care a hell of a lot about repeat business. They’re too busy wrestling with their competitors for new one-time customers.

They’re wrong.

So …

Customer satisfaction fattens profits.

But how do you get your customers to come back for more? What’s the big secret? Australian consultant John Harle clears up the mystery: “If there’s a secret to successful customer relations, it’s simply to treat each customer the way he wants to be treated.”

Speaking as a customer, I want fast, efficient service. It’s important, but it’s not everything. I also want to be treated as a human being. I want to be treated with care and respect, not an inconvenience to your staff.

Learn about my requirements

The more you know about me, the more you’ll learn about my requirements and how to satisfy them. And the more I’ll return and spread the good word about your business to my friends and acquaintances.

Former and existing customers can be a gold mine, which a lot of local business people think is played out. Your access to the rich pickings of this mine is through a database of your current and past customers.

Develop a relationship

Look at it this way. When I walk into your business premises and place an order with you or make a purchase the first time, you’ve convinced me that your company is one that I should do business with. In addition to the immediate sale, I’m inviting you to establish an ongoing relationship – a relationship that will encourage me to buy from you repeatedly.

To develop this type of profitable relationship, develop a Customer Contact Programme. This is nothing more than a computerise database in which you store the names of all your customers and pertinent personal details as well as an inventory of their purchases.

This will become the most valuable asset of your business. Yet it’s amazing how many businesses let this prize possession slide into oblivion and become obsolete.

Update your customer database every six months. After all, people change companies … companies change people … staff numbers change as do addresses. All of these changes need to be tracked and meticulously recorded to increase the value of your database

Communicate with me

 Use the information in your Customer Contact Programme to communicate with me regularly. Publicise your new ideas. There’s no point whatsoever in creating a whole new spectrum of ideas every month if you don’t tell me and your other customers what you’re doing. How can we possibly appreciate your efforts, if you don’t keep us in the picture?

Send me a mailing at least four times year to keep abreast of the latest developments of direct interest to me in your business and changes to your product range.

Examples of the Customer Contact Programme at work include airline frequent flier programmes and hotel frequent guest programmes.

If your business isn’t that big, your constant quest for customer retention may take the form of a chatty but informative letter or, perhaps, a newsletter. But make it personal. And ensure that it addresses my self-interest, not yours as my supplier.

Customer loyalty isn’t dished out on a plate. You have to earn it by giving me added value by providing superior service. So …

Add Value

Summon all the members of your team. et into a huddle.   Organise a bosberaad if necessary. Examine ways in which you can add value to my experience of doing business with you.

Hold a team meeting once a month. And don’t be afraid of inviting me and your customers to meeting, where you can ask us: “What can we do for you that we’re not doing at the moment?”

Brainstorm at least 10 ideas at each meeting – that’s 10 ideas a month.

Give your brainstorming meetings a name. Call then Bright Ideas sessions. Encourage each of your employees to come up with a fantastic, remarkable idea to add value to your customers’ experience.

and reward them.

“What a wonderful idea ! Here’s R50. Do it. Try it. Make it happen.. And if it works … if we can run with it, you get R250.”

Generate enthusiasm. Beware of management put-downs like: “We’ve tried that idea before and it didn’t work.” Or the more subtle variation: “Mmmm! That idea does have some merit, but I think it’s a bit way out.”

Stand apart from the herd

Remember   this: the more ways you can add value to your product or service, the more you’re differentiating it in the face of competitive products and services that become more and more similar in terms of pricing. offers. looks, etc. Therefore. it’s important to somehow stand apart from the herd. Differentiation can mean the difference between runaway success and abject     failure.

But, as always, be specific.

” We offer better quality” and “We offer better service” are pointless statements. They’re nebulous. Because they cannot be measured, they cannot be achieved.

Write this down and stick it somewhere that you cannot fail to see it: What gets measured gets done.

Here are two examples of meaningful statements:

The benefits to your business of retaining my loyalty include:

Find and keep the right employees

All the ingredients that make up excellent customer service won’t mean a thing unless you get your employees’ support and commitment, according to Helen Schultz, a lecturer in Human Resource Management at the Port Elizabeth Technikon.

“Many international companies are now equating staff development with customer satisfaction,” she says.

Shultz, who was one of four delegates to represent South Africa at a world human resources congress in Hong Kong in 1996, points out that globalisation will force South African companies to compete against organisations which have adopted the philosophy that “serving customers is the sole  reason for being in business”.

Urging local companies to realign their thinking and practices if they want to survive, she adds: “Training and development of employees must be based on the needs of the employee, the company, and on the needs of the customer.

“Customer service is related directly to employee satisfaction. Staff loyalty and satisfaction are the foundation for customer service.”

Earn employee loyalty

Like customer loyalty, employee loyalty has to be earned. You don’t hire people who arrive at your workplace with built-in loyalty to your cause. This is a lesson that many companies don’t heed today. They dump workers when earnings dip, not to mention when earnings go up. They reason that every employee made redundant adds the content of his or her pay packet to the corporate bottom line. This is myopic. It lays the foundation of medium and long-term failure.

Let’s face it, when the going gets rough business-wise, key employees who have developed a bond of loyalty to the company will do their damnedest to see it through the storm. But if you, as the owner or manager, don’t give the members of your workforce your unstinting support, they’ll abandon ship just when you need them most. In particular. carefully scrutinise your sales people, sometimes described as “priests in the temple of business,” – especially those who get paid commission for luring new customers through your door. They’re also adverse-selection traps. These smooth-talking operators naturally concentrate on prospects who can most easily be persuaded to switch companies. These flighty customers, as I’ve already noticed, can just as easily be persuaded to switch companies again, by which time the sales person will have already pocketed to commission.

Like some insurance industry, these sales people often stop at nothing to get a prospect to sign on the dotted line. Like the insurance salesman who was getting nowhere in his efforts to sell a life policy to Van der Merwe, a Free State farmer.

“Look at it this way,” said the desperate salesman, resorting to the oldest trick in the book. “How will your wife carry on if you should die before she does?”

“Well,” answered the wilely farmer after a moment’s thought, “it’s none of my bloody business – as long as she behaves herself while I’m alive.”

Then there’s the story, reputedly true, about Jason who sold toothbrushes for a small basic plus commission in East London area for a major manufacturer. The going was tough. Sales for the region had dropped well below the projected level.

The sales manager summoned Jason to his office and told him he would be made redundant if sales didn’t show a dramatic improvement. A month later records showed that Jason’s sales had soared. The sales manager called him in again to congratulate him and explain how he’d engineered sensational turnaround.

Jason told his boss he’d shunned the pharmacies, department stores and supermarkets – his usual customers. “Instead,” he said, “I set up a small outside the entrance to the docks. On it I put some dry snack biscuits and little containers of a new dip. I then invited people going into and out of the station to try my dip. Man people did. When the asked me about the ingredients, I told them ‘garlic and chicken droppings’.

“The all went ‘Aaaargh!’ and spat it out.

“I then offered to sell each of them a toothbrush.”

While Jason may have shown initiative, most of his customers probably reverted to their old brands as soon as they got home.

Attracting the right customers, who buy from you on a regular basis over a long time period generates a cash-flow surplus. Reinvest it in continuing to deliver and prove the kind of value that will keep your customers loyal by acquiring and keeping loyal employees.

The skills, knowledge and experience acquired by long-time employees make them more efficient and productive. This ultimately saves you money but, more importantly, offers the customer better value. Higher productivity, lower training and recruitment costs plus greater customer retention all contribute to make employee loyalty beneficial to you, an employer, and your customers. So …

Reward long-term customer delight

If you want to keep customers and your star employees, reward members of your staff who have kept customers in your fold. Single out any employee who has kept a customer happy for three or more years for a special accolade and reward. And don’t be stingy with it either.

I don’t for one moment suggest that you must necessarily keep all the employees who clog your company’s payroll. They key is to separate the wheat from the chaff, and keep only the wheat. Keeping unproductive or under-performing employees on board drains value, not to mention costly resources.

Deadwood in terms of loyalty is a negative. Now is a good time to take a closer look at one of the key benefits of customer loyalty.

Customer retention.

Recent studies show that companies with high levels of employee loyalty consistently boast the highest levels of customer loyalty. In a survey of the car service business, for example, neighbourhood garages had the best employee retention, followed by regional chains, national chains and car dealers. Customer retention followed the same pattern.

The survey, conducted by Reichfeld, found that people went to local garages precisely because they knew that the same mechanic would work on their cars. These customers believed that the mechanics employed by chain outlets and car dealers had better training and access to more sophisticated equipment. But for them, dealing with the same mechanic – one whom they knew was familiar with their car – was more important than dealing with an employee who might be better trained and equipped.

As with customers, the benefits of employee loyalty increase with each passing year. So think long and hard before you embark on a downsizing, rightsizing or re-engineering programme that could send your business down the tubes.

Encourage entrepreneurship

One way of getting your best-performing employees to stay with you is by encouraging entrepreneurship. Give your staff some room. Allow them to imagine that they own the business. Get them to ask themselves two questions:

An entrepreneurial performance index was launched in 1996 by the University of Cape Town’s Graduate School of Business. It’s designed to monitor a company’s entrepreneurial performance in terms of its willingness to encourage creativity, flexibility and risk support.

The index guides management in the development of strategies to promote entrepreneurship within their corporations. Professor Mike Morris, the driving force behind the venture, points out that empirical evidence shows that entrepreneurship is closely related to improved levels of company performance.

According to Morris, competitive advantage in the marketplace involves adaptability, flexibility, speed, aggressiveness and innovation – all key factors  in change wrought by entrepreneurship.

Another way that can pay handsome dividends in term of customer and employee loyalty is education. Consider on-the-job training for everyone on your payroll a “must”. In addition, insist that all your employees do at least one course a year. Any course the choose. From flower arranging, scuba diving and computer programming to public speaking. And the company must foot the bill, providing they pass.

Learning from defections

Value-creation instruments

When profits dip in business, something is wrong. Before you can correct the fault, you have to find it. You can do this with the aid of value-creation measurements. Your company’s level of customer retention points to one of the most powerful you have to identify the cause of your business’ failure – and that’s customer defection. To take effective remedial action, get to the root cause.

This is not as simple as it sounds.

When asked, most customers who have switched allegiance, will give the answers that come easiest to them. Bank customers, for example, may say low rates of interest prompted them to move their accounts. However, the underlying reason may have been poor customer service, which started them thinking about switching. And that’s when they noticed the lower interest rates.

When interviewing defecting customers to find out why they’re abandoning you, remember the five “why” rule. Ask why they’re leaving five times in a row will get you to the root cause of your failure to satisfy them.

But finding out the true reasons for customer defection will be an exercise in futility if the right employees don’t learn the lessons. And most of them don’t learn because defections don’t influence employees’ success. If you don’t directly relate compensation structures and career path policies to customer loyalty levels, employees won’t act on the results of failure analysis.

Develop a ‘Black Box’ Mentality

Don’t take customer defection or employee resignation lying down. Get to the root causes. Make it your business to understand exactly why.

Obviously, reasons like emigration or relocating to another city can’t be helped. neither can pregnancy.

But if one of your employees has a responsibility clash with a colleague, that isn’t good enough reason to leave. And if you’re that person’s boss, it’s your fault. So intervene and sort it out. Now

 “A good manager is someone who never puts off until tomorrow what he can get someone else to do today.”
– A personal executive assistant who prefers to remain anonymous

e’ve all experienced a manager like Desmond. Totally indifferent to the needs and aspirations of those who work for him, Desmond considers them people fit only for use and abuse. He rues the day when slavery was abolished, except in the restricted form of marriage. Burdened by a superior attitude couple to poor interpersonal skills, he doesn’t have the ability to develop a positive relationship with any one – not even the likes of Gandhi.

Briefly, Desmond is a manager from hell.

Low employee morale

The corporations of the world are filled with guys like him. Which is why a lot of companies suffer from low employee morale and lousy levels of productivity. This, in turn, leads to poor quality products and services, not to mention higher costs.

Don’t be dumb

I don’t know who Lois Wyse is, but she seems to have made a big impact on American business people with this quote, which neatly sums up what I want to say: “It’s dumb to be proud of production records rather than products. It’s dumb to be proud of a plant rather than the working conditions of your employees. It’s dumb to flaunt your wealth and then try to tell your employees that times are tough. It’s dumb to ask employees to make sacrifices you are not willing to make in kind.”

So how do you put Wyse’s sentiments into practice? Implement my four guidelines to power drive employee motivation.
 

Become a performance coach

If you’re successful as a manager, you motivate and inspire your employees. And they don’t do it by casting them in their own image.

Says well-known American football coach Bear Bryant: “Over the years I’ve learnt a lot about coaching staffs and one piece of advice I would pass on to young coaches – or a corporation executive or even a bank president – is this: Don’t make them in your image. Don’t even try.

Strive for balance

My assistants don’t look alike, think alike, or have the same personalities. And I sure don’t want them all thinking the way I do. You don’t strive for sameness. You strive for balance.”

How to you, as a manager, achieve this balance?

By refusing to beat employees “into shape”. By elevating yourself from a manager to a performance coach who assumes responsibility for:

But it won’t be easy.

As one cynic – said: “A coach is a guy who is always willing to lay down your life for his job.”

So, to convince the sceptics, you have make an effort and take the time to build up your credibility as a performance coach. You have to go out of your way to slowly build a close and open relationships with each member of your team. And while you’re building these relationships, you have to learn the techniques needed to become an effective trainer, career advisor, confronter and mentor.

“This performance coaching business is a great idea,” you say. “But I just don’t have the time.”

A couple of questions

Before you write the concept off that easily, ask yourself a couple of questions.

If you answer “yes” to the second question, you don’t have any choice. You have to nurture and develop your company’s workforce. It’s not enough to throw training at you employees and hope for the best. Yet, in many ways, this is what human resources departments do.

Training in a vacuum

However, many companies have found to their cost, that unless training is results-orientated, it’s an expensive exercise in futility.

‘Knowledge management’

Business gurus have another training concept. They call it “knowledge management”. Ostensibly results-related, it has given birth to a whole new industry. It employs team of high priced consultants who attempt to account for the value of intellectual corporate assets like patents, databases and qualifications of employees in neat little columns so characteristic of auditors’ balance sheets. It also involves the design of intricate management strategies that allegedly improve the creative productivity of workers.

Wasted time and effort

Professor Hirotaka Takeuchi, of Tokyo’s Hitotsubashi University, recons that the concept merely leads to wasted time and effort.

Takeuchi, who co-created the best-selling book The Knowledge Creating Company with Ikujiro Nonaka, says that the ability to generate new ideas is more important that the management of the knowledge it already has. He outlines a three-point plan to ensure that the wealth of expertise your company already possesses permeates throughout your organisation:

Takeuchi warns that it’s important to recognise the difference between “explicit knowledge” and “tacit knowledge”. He defines explicit knowledge as the type of knowledge contained in manuals or imparted during training programmes. Tacit knowledge, he says, is the knowledge gained trough experience.

Tacit knowledge is difficult to articulate or put into numbers. You can’t put it into a computer. It is the kind of knowledge a master craftsman has at his fingertips and you can only learn and absorb it by working alongside him. He warns against the Western business world’s insistence of making everything explicit by setting rigid performance targets and financial returns.

Takeuchi points out that the current epidemic of downsizing, leading to the dismissal of older, experienced workers, means the loss of a vast fund of tacit knowledge — the sources of innovation and future growth.

Resource development strategy

One South African company that has matched training to on-the-job objectives is SA Eagle Insurance. According to Barry Reynolds, assistant general manager resource development, initial research lead to the design of a comprehensive resource development strategy to meet Eagle’s specific needs. In the insurance company’s case, the objective was to improve people skills and levels of service so that they would have a positive impact on business results.

Communications skills are obviously vital in selling a non-tangible product like insurance. So this was what Eagle concentrated on. To get the programme rolling in the right direction, the company called in a well-established consultancy, Interman, which offered Eagle its Business Communications Skills (BCS) programme. This included a comprehensive five-week train-the-trainer component and an ongoing quality assurance involvement to ensure the maintenance of high standards.

In 1995, Eagle conducted a study at four branches, where all existing staff were evaluated and invited to join the BCS programme to improve their business communication and language skills. Management made participation in the programme obligatory for all new staff.

After its successful introduction at the four branches, programme coverage is being progressively extended to include other branches.

Reynolds reports that Eagle employees now realise that communications skills are vital to both their career advancement and personal development. He stresses that crucial to the success of the programme is the meticulous documentation of the company’s objectives in running the programme and the ongoing communication of these objects to employees.

Set clear objectives

So what does all this boil down to? Simply this: if you want employee training to have a positive impact were it counts – customer service, productivity, bottom line – don’t blindly rush in and introduce training programmes for the sake of introducing training programmes. Set clear objectives that you can directly relate to company needs; constantly communicate those objectives to employees and, if necessary, find experts with proven track records to custom-design and help implement the programmes.

Before you even do that, think about just how far you want employee empowerment to go in terms of customer service. How far can an employee go to satisfy a customer before you fire him or her?

Sit down and write out a list of actions that could lead to dismissal.

But be specific.

Phrases like “within reason” or “limited time period” mean nothing. If you employed me, I’d want to know exactly where I stand. I’d want to know exactly how far I could go for a customer. I don’t want to be told: “You can travel a reasonable distance to deliver something important to a client” I want to know that I can travel 300 kilometers by car, I want to know that I can book an air ticket to any destination in the country if I deem it necessary without getting my supervisor’s permission, I want to know that I can take a client for lunch five time a year …

Write me a list of “allowed to’s” within three days of reading this. Then we’ll discuss it before you give me the final draft.

Connect training to the job

If you’re a manager in South Africa, you’re a very busy person.. In this country, the ratio of managers to employees is a lot lower than it is in most other countries. As a consequence, those that keep our wheels of commerce and industry turning don’t usually know whether they’re coming or going. Mention the introduction of a new training programme, which you want them to oversee, and they get a glazed look in their eyes, gaze skywards and murmur: “Okay, Scotty, you can beam me up now.”

When confronted with orders from boardrooms to implement staff training and coaching programmes, most managers  obey  the so-called First Law of Procrastination: There’s no time like the present to postpone what you don’t want to do.

 I know many managers who see employee coaching and training as another task that they must add to their already overflowing agendas. They view employee development as an activity irrelevant to the jobs they must accomplish. It’s an investment of their precious time with no return. As the production manager in an Alrode, Germiston, plant defined it: “Employee development is all outgo with no income.”

A new philosophy

Pperformance coaching is different.. It represents a new philosophy in developing people.

What’s so different about it?

It’s based on your hands-on experience and on-the-job knowledge. It doesn’t rely on dry textbooks or the theoretical training so beloved by human resources professionals. Unlike these professionals, you’re focused on your company’s business objectives. Therefore you make the ideal performance coach because you’ll ensure that employees receive on-target training relevant to those objectives.

Another important point in favour of you being appointed performance coach: you’re accountable for the performance of the employees you train. In other words, it’s your head on the chopping block if the people you train screw up. Thus, for you, it’s results that count, not the training activity. So you ensure that you don’t become involved in training for training sake.

What does this mean in practical terms?

You keep hands-on, on-the-job training in the workplace as much as possible. This ensures that all new learning can and will be applied to the job. It also means breaking up training into small learning units that last only a few hours. This prevents you drowning your employees under a tidal wave of information that they forget as soon as they step out of the learning area

Make employee training relevant to your business objectives.

This means more than confining employees to a water-tight boxes in which they work in a vacuum, totally isolated from their team mantes. An all-round knowledge of the entire operation leads to better performance by specialists.

Create a training roster

Break through function barriers by creating a training roster so that members of your team work out each function necessary to produce he required result. For example, If I’m a sales rep, get your receptionist to train me for an hour on the finer points of switchboard operation. And let your receptionist accompany me and your other sales reps on a t least one call a week.

And don’t stop there.

Get the folks in credit control to teach me their functions in the overall scheme of things. Insist that I attend a 30-minute “class” each week until I know how to do what they do.

Carrying this a stage further, get each department in your business to draw up a schedule detailing exactly the steps involved in their functions and how to do them. Also itemise who will teach what and when. Then ensure that all the members of the other departments go through the programme, from beginning to end.

Develop personal relationships

Don’t use outside experts or the people in your in-house training department to teach us. Rather use the people in different departments themselves to give us hands-on training. This will develop their sense of self-worth, increase their own knowledge — the best way to learning is by teaching — and develop personal relationships that span artificial barriers between the company’s departments.

In fact, structure all in-house training programmes to…

Develop potential

Only you can build the relationships with your employees that motivate and inspire them to better themselves.

Inspiring employees to reach for greater heights needn’t always involve money. However, the promise of filthy lucre can be an important aid to motivation.

The great composer Rachmaninoff disliked the title of ‘genius’ when it was applied to him. He always considered himself to be perfectly normal – an ordinary member of the human race. Therefore, he became particularly irritated when, after a concert, a stage-struck member of the audience asked him: “Whatever inspired you to compose such a wonderfully marvellous piece as your C-Sharp Minor Prelude?”

The composer bowed deeply and, with a perfectly straight face, replied: “Because, madam, I needed the dough.”

Award employees shares

In South Africa, the City Lodge hotel group motivates employees by awarding them shares in the company. Executive chairman Hans Enderle says the creation of an employee share trust, launched to celebrate the groups 10th anniversary in 1996, made the move possible. Each employee received 30 shares as part of a plan to put one million shares — about 4% of the ordinary shares issued — in staff hands.

Another South African company that believes in motivating staff by giving them a tangible interest in the business is a civil engineering group, Afriscan. Established in 1988, it specialises in earth and road works and the provision of township services for government and quasi-government organisations as well as hiring out civil engineering equipment. In 1996, turnover hit R55-million, reports managing director Rick Jackson. He predicts that this will top R100-million soon after the turn of the century.

“Without doubt,” he observes, “the success of Afriscan can be attributed to the high level of employee motivation…”

And to what does he attribute this motivation?

An employee benefit trust structured to give the staff a 15% stake in the fortunes of the company.

As I said earlier, money isn’t the only motivational device. If I join your company and you entrust me with responsibility, I’m certain to strive harder. So why not give me a workflow chart when I become a member of your team. Then ask me to redesign it within three months, after I’ve had a chance to find my way around. Because I see everything with a fresh eye, I may be able to find a better, quicker, cheaper way of doing things without sacrificing quality.

There’s something else you can do to develop my potential.

After I’ve been with you for three months, ask me to list 10 things I need the company to do if I’m to achieve the results you expect from me more efficiently. And if you, my boss, need to be criticised, allow me to point the finger at you. In fact, while we’re about it, get me to write down five constructive ideas of how you  can achieve better results too.

 If your programme of employee training leads to the acquisition of new on-the-job skills and measurable improvements in performance … if your methods of coaching employees creates workers who are confident and ambitious, then you’ve done it right. And, what’s more, you and your company have more than recouped your investment of time, energy and money.

Build self-esteem

Building self-esteem: that’s the main purpose of the performance coaching process. And it does it for you as well as your employees. As your relationships with members of your workforce develop, all sides gain the confidence and security to listen to their colleagues and accept the challenges.

Henry Ford had a lot to say about security. This is one of his more memorable quotes and it fits our context perfectly: “If money is your hope for independence, you’ll never have it. The only real security that a man can have in this world is a reserve of knowledge, experience and ability.”

When correctly channelled by a performance coach, knowledge, experience and ability develop self-esteem. But experience and psychological research shows that it’s difficult, if not impossible, to build self-esteem from within. It’s development is best encouraged from outside.

One of your most important tasks as a manager and performance coach is to get your employees to realise that they have the power inside to achieve great things and get the results that they want.

There’s an old proverb – it dates back to the early steam age – which is as true today as it was on the day it was first coined.

“Lukewarm water won’t take a locomotive anywhere, nor will lukewarm purpose lift a person to any noticeable height of achievement.”

  Empowerment could fail to motivate

Empowerment assumes that you, as a manager, have total control in all business situations, which you can choose to share with your employees. In an empowerment scenario, employees are at the mercy of your willingness to hand over power. As a result, empowerment initially fails to motivate your employees to the same extent as a relationship based on self-esteem.

A one-way process

Look at the concept this way: empowerment is a one-way process – a gift from you to your employees. Creating self-esteem is a two-way process in which both you and your workers give and receive. The success of the process depends on your efforts and the efforts of those who work for you.

You give the process a hearty shove towards success by following this four-step plan:

To sum up, as a performance coach, give your employees opportunities to enhance their self-esteem and improve their performance. Then it’s up to them to run with the opportunities you have created for them.

“No organisation ever financed anything that it did not get control of. You cannot separate responsibility and power. If an organisation hands out a dollar, with it goes the implied responsibility of how it shall be spent and some influence on the life of the recipient.”
– Dr Alfred Haake.

young man working in an overseas subsidiary office brought down one of the oldest, most venerable investment banks in the world. Nicholas Leeson, a futures trader in Barings Plc’s Singapore office, ran up losses of $1.3-billion on Asian markets. The debt forced the bank, which had traded for 233 years, into bankruptcy.

It shouldn’t have and couldn’t have happened.

But it did.

How?

Barings found out too late that maintaining the right balance of different philosophies and cultures is the key to organisational management. In the bank’s Singapore office, trust and instinct ruled uncontested. But management controls were totally absent.

The result was disastrous: a spectacular example of why no manager can afford to ignore the philosophies of management.

A different de facto meaning

“Philosophy” is a word bandied around like confetti at a wedding when associated with the words “management” or “business”. It implies wise solutions to every problem after calm appraisal of the current situation. However, at the coal face it takes on a different de facto meaning.

Organisations of all types, even business organisations, are typically bureaucratic. The key feature of a bureaucracy is top-down management control. And despite all the talk of flattening hierarchical corporate structures, organisations are in one sense under pressure to become even more bureaucratic.

A business, like any other organisation, tries to grow and become bigger, because the bigger it gets the less dependent it is and, in theory, the more flexible it becomes. For example, in a sprawling conglomerate, a loss sustained in one area can be offset by profits in another.

Consider the huge South African monolith, Anglo American. Its gold division, Anglo American Gold (Amgold), performed badly during the first six months of 1996/1997 financial year. Net earnings dropped from R264-million to R229-million. Against the background of the plummeting rand value – it plummeted by more than 30% during the period under review – qualified observers said Amgold’s profit should have soared by as much as 70%.

But it didn’t.

However, a vigorous performance by the coal division, Amcoal, saved Anglo’s bacon when it raised its per share earnings from 1 283,6 cents 1 680,4 cents. The performance by Anglo American Industrial (Amic) also helped wipe the egg off Anglo’s corporate face.

The business environment has never been more volatile. Change is rapid and constant. To survive, flexibility is a must. But building bureaucratic structures isn’t always the answer.

Indeed, it seldom is.

The copies-in-triplicate syndrome

Bureaucracies that suffer from the make-copies-in-triplicate syndrome, such as those so beloved by governments, are invariably staffed by more over-paid chiefs than Indians. Here’s an example: A report, focusing on a government department in the UK, noted that 24 supervisors oversaw the work of 25 clerks. When this was brought to the attention of a certain Civil Service head, he was horrified. “Imagine such a situation!” he said. “Which supervisor was absent?”

Then there’s the story I heard in Pretoria, South Africa’s bureaucratic jungle. Although I can’t swear to its veracity, it appears that an assistant department head was instructed to reduce the amount of storage space occupied by redundant files.. So he told his secretary to get rid of them. “But,” he warned her, “see that you make a photocopy of every piece of paper before you destroy it.”

Work to a formula

Working without deviating from a rigid formula is the hallmark of every bureaucratic structure. In the context of business today, for example, information technology dictates that all departments use the same forms and language. Government regulations and accepted methods of bargaining with trade unions also result in internal consistency across the organisation.

The larger your business grows, the more controls, rules and procedures you’ll be tempted to implement. Controls, rules and procedures demand consistency. And consistency implies standardised method, fixed reporting methods and so forth.

“Consistency,” as Oscar Wilde observed, “is the last refuge of the unimaginative.”

The more you expand your business and the more consistency you insist on, the more bureaucratic your business becomes and the more tightly defined its internal boundaries.

So what about the people?

Today, the people who work for you want more from their jobs than just a wage packet or pay cheque. They want you to recognise them as thinking assets, not mere machines.

If you’re a keen student of the latest developments in the science of human resources, you’ll know about the value of fulfilling your employees’ desires in terms of increased motivation and productivity. That’s why, if you’re wise, you’ve jettisoned management command-and-control philosophies in favour of employee empowerment and participation programmes. You’ve replaced the management versus labour hierarchies of bureaucracy with independence and problem-solving teamwork.

In summary, the forces of modern business are pulling you in two opposite directions: to be at once more and less bureaucratic. As a business owner or senior executive, you’re involved in a tug-of-war between the laissez-faire style of management and the bureaucratic approach.

You have to live with boundaries, but …

Let’s face it, despite what management gurus preach about the benefits of flat, business structures without borders, there will never be an organisation that is completely without boundaries. Because people employed by a business or any other organisation have different levels of authority and influence, there will always be hierarchical, or vertical boundaries, to distinguish them from the rest. And because people specialise in different tasks, there will always be boundaries between functions – horizontal  boundaries.

Other boundaries you’ll encounter are external  – boundaries that separate the work you do from the work done by your suppliers, customers and other outside companies, geographic  – boundaries that separate work done in different places, different time zones and, sometimes, by different cultures.

You can’t eliminate these boundaries. But you can make them permeable so that they allow information, ideas, resources and energy to flow freely throughout your company.

Relegate the thick, unyielding walls of the past to the rubbish heaps of corporate history.

 If you don’t encourage fluidity in your company, it could lose its competitive edge. The reason? Factors for success in business have shifted from:

. The vertical, horizontal, external and geographic boundaries of traditional organisations constrain the new success factors of speed, flexibility, integration and innovation.

So uunshackle your company from these confines.

Follow my three guidelines:

Loosen vertical boundaries

Think of the structure of your company. If you’re like most of us, first and foremost you think vertically … you think pyramidal. The chief executive officer (CEO) occupies a place of honour at the top. Below we find the middle managers, with the workers and administration even lower down in the corporate pecking order.

Now read a definition of teamwork by American businessman and political leader Russell Baker: “A team is a mutual protection society formed to guarantee that no one person can be held to blame for a botched committee job that one person could have performed satisfactorily.”

Ignore the self-appointed management gurus and Mr Baker.

Human social interaction

Hierarchies are basic to human social interaction from family to religion to school to work to government. Therefore they will and must continue to exist. Without hierarchies, human groupings of any kind would fall into inefficient anarchy.

So what can you do about your company’s inefficient and outmoded hierarchical structure?

Make it healthy.

This means you have to enhance your organisation’s speed, flexibility, task integration and ability to innovate. You won’t do this by clinging to the factors that ensured success in the past. If, in your quest for continued corporate prosperity, you adhere to old-fashioned recipes of size, role, clarity, specialisation and control, you’ll experience:

 Not entirely convinced? Check out what happened to Xerox back in 1973. In that year the company’s Research Centre in Palo Alto developed the world’s first personal computer. That was three years before Apple put its first product on the market.

However, Xerox research boffins were unable to sell their idea up the chain of command. Those at the pinnacle of the corporate pyramid myopically recognised only developments related to photocopier technology. In essence, vertical boundaries stopped Xerox from reaping the rewards of being first in a field that was to take the world by storm.

Redefine roles

To make the boundaries in your organisation more porous, set each of your employees the task of redefining his or her role in producing a result.

I often ask people what they do. The replies are pretty standard. “I’m a doctor,” she proclaims, wearing the obligatory bade of office: a stethoscope and white housecoat. “I’m a chartered accountant, ” he says with all the enthusiasm of a dried tomato.

What piffle!

That’s not what they do. That what they qualified as at university..

Doctors try to make sick people better – that’s what they do.

An accountant counts numbers, and sales reps makes sales. That’ s what they do.

Forget about titles. Work on results. Replace the titles on everyone’s business cards with a description of what each individual does in customers’ terms. Change from descriptive titles to prescriptive statements.

And don’t stop there.

Make everyone in your organisation responsible for producing a measurable result, whether he’s the officer cleaner who has undertaken to keep the premises clean or the managing director who’s responsible for producing long term profits.

The way to go: get each person to define their result. Then ask them to write down exactly what functions they should perform to produce that result.

If you follow this route, chances are that you’ll need to …

Rewire the system

Many organisations in the public and private sectors attempt to pry loose hierarchies with powerful-looking, impressive-sounding change programmes. And they’re often disappointed when results come nowhere near matching expectations.

Back in the early AD’s, Roman satirist Petronius noted: “We trained hard. But every time we were beginning to form up into teams, we would be reorganised. I was to learn later in life that we tend to meet any new situation by reorganising – and a wonderful method it can be for creating an illusion of progress while producing inefficiency and demoralisation.”

The more things appear to change, the more they seem to stay the same. The crux of the problem: implementing change without first creating a systematic framework for the change.

Here are four guidelines that will help your design the framework you need:

There is a fifth factor you shouldn’t overlook in your rewiring operation: the corporate rule book. Even if you don’t have a formal tome of do’s and don’ts like some of the huge conglomerates, I’m willing to bet that have a web of rules and procedures that govern your modus operandi: dress codes, time sheets, authorisation checks – things like that.

Write them down. All of them that regulate actions in your company right now. Ask your staff to help you. It doesn’t matter how absurd they are. Just write them down. Then get hold of a big bag, fat red marker pen and put lines trough any rules or procedures that are not directly linked to producing the required results.

You still haven’t finished rewiring.

Your next move: get every member of the staff to write down – step by step – the functions they must perform to get their results. This servers two purposes:

Okay, so you’ve decided to rewire your corporate system. What do you do now?

Take action on four dimensions

The four dimensions outlined below are vital if you want to kick-start your business into new-found prosperity.

Transmit information

In traditionally rigid hierarchies, management hoards information, releasing it only on a need-to-know basis. To overcome the problem, encourage the free flow of data. Sharing information throughout the company will enhance the business’s response speed and encourage innovation.

It’s usually pretty easy to share good news. But don’t keep the bad news to yourself., either. If members of your workforce know the difficulties you’re facing, they’ll react more sympathetically to your proposals, even though they may be tinged with bitterness.

Communicate often

And when you communicate, which should be often, develop the ability to use simple catch phrases that focus the message without hiding the complexity of the task or tasks behind it.

Develop Competence

A company structured along inflexible, hierarchical lines splits skills along different levels. In the characteristic pyramid formation, leadership skills are concentrated at the top while technical skills sink to the bottom. Healthy hierarchies are different. They allow competencies to develop wherever they’re needed, without regard to rank, position or status.

To slice through the bureaucratic red tape generated by pyramidal hierarchies, determine the technical and cultural competencies required by employees at every level of the business. Then fill the competence gaps through training or by hiring qualified people. For example, you can enhance the speed of response to customer requests simply by training salespeople to do their own credit checks. The process doesn’t require the cerebral capacity of a rocket scientist.

Build up speed

In the nanosecond 90’s, speed is of essence. Look at each employee’s self-stated result and determine how long the functions take to produce it. Then insist that the length of time be halved within four weeks.

It can be done.

Sure, you may have to update and upgrade your  existing systems. Decide on which systems produce the results you desire and keep them. Dump the other systems or replace them with ones that keep your results up to speed.

Develop across-function competence

Bestow authority

Urge competent members of your workforce to constantly challenge established decision-making assumptions. In which book is it inscribed that factory workers can’t stop assembly lines to meet customers’ specific needs? And what legislation forbids retail workers from making special arrangements without management approval to keep customers happy?

Even if the die-hards in your boardroom proclaim it a heresy, insist that more decisions are made by the lower echelons – at the rock face, so to speak. But be prepared. It’s going to rock the boat and lead to far-reaching changes, particularly in middle management. Direct supervision will become less important than guidance and motivation.

How much does each employee cost ?

Make each person in your organisation an entrepreneur by asking them: “If you were freelancing, how would you do your job differently?”

Calculate exactly how much each person costs the company in terms of wages and salaries, office or factory rental, medical aid, pension, stationery, telephones, etc. Then ask them to calculate the profit on their jobs. A minimum of three times cost is an acceptable norm. For example, if a secretary cost you R10 000 a month in total – including 13th cheque, office space, salary, etc – she should be providing you with the value worth R30 000 a month. In other words, if you sub-contracted the services she provides, your bill would be 30 grand a month.

Adapt your reward system

Employees are often rewarded more for their position on the hierarchical ladder than for their performance. If this is the system you have adopted, you’re in essence rewarding people for their past achievements – achievements that got them promoted to their current positions.

To get the best out of the people you employ, revamp your company’s reward system.

Reward performance and skill, not position.

One way of accomplishing this is performance-based pay. The better they do, the more they get.

You can also spread rewards across vertical boundaries through such things as employee stock option plans. With these in their pockets members of your workforce will feel they have a greater stake in how the company performs.

I spoke to a worker at a factory in Wadeville. He’d taken the opportunity of taking up a stock option offered to him by his employers in recognition of a job well done. “Now,” he said, “I have to worry about the lousy work I’m turning out.”

And to keep motivation on the constant boil don’t just reward individuals. Offer rewards across functions by giving teams who do well a share of the spoils.

“The art of progress is to preserve order amid change and to preserve change amid order.”
–  Alfred North Whitehead

“Progress is a nice word. But change is its motivator and change has its enemies.”
 –  Robert Kennedy

“There is nothing permanent except change.”
–  Heractlitus

ot too long ago you could have found John Bull, who epitomises England, propping up the bar in the Dog and Duck, pint of bitter in hand. Now he and the lovely Mrs Bull, who never have been seen dead in a public bar, pop around to the wine bar , Chez Something-or-the -other,  for a kir and a plate of what they fancy.

Down the hatch

This social revolution has left its stamp on Britain’s big breweries. Now they’re all hunting for more profitable activities than pulling pints. Two recent deals show the way that the brewers are headed. It’s also hit the consumption of tea, Britain’s traditional all-purpose cure for everything that ails main, woman and child.

Quintessentially English as the two lukewarm, brownish liquids  –  beer and tea  –  may sound, the British now drink less of both national drinks. On the beer front, production has fallen 1% a year from its peak of 42,1-million barrels in 1979. And the volume consumed in pubs dwindled to 74% compared with 91% in 1976.

Indeed, profits that accrue to British breweries have fallen as flat as John Major’s beloved bitter. When the Brits buy their beer in shops rather than pubs, margins decline to squeeze profits. Even pubs, for centuries the centre of the English social scene, find sales less profitable than they were as a result of a ruling by the Monopolies and Mergers Commission. It forced larger brewers to sell about a third of the pubs they owned.

`Tied’ pubs

Breweries owned 58% of British pubs in 1986. By 1994 they owned only 33% of the watering holes. “Tied” pubs  –  pubs that serve only beer made by the brewer who owns them  –  allowed brewers to keep artificially high. Back in the 1980s this story did the rounds of popular pubs in London’s Balham area: A gorilla walked into a quiet, side street pub and slapped a £10 note on the bar counter. “Give me a pint of bitter,” he demanded.

The barman drew the bitter and thought to himself: “He’s just an overgrown monkey so he must be a bit dim. “So he gave the gorilla £4 in change. Then, donning his friendly barman’s face, he said :”We don’t usually get many gorillas in here.“

“I bet you don’t ,”replied the gorilla,” if you charge £6 for a pint.”

However, the growth of independent pub groups has shifted bargaining power into the hands of pubs, which now force rival brewers to compete for their custom.

Extensive retail interests

Other brewers have responded to the flat market by diversifying. Large brewers in Britain have long had extensive retailing interests through their ownership of pubs. They’ve extended from this into retailing and leisure businesses such as hotels and restaurants.

Even Scottish & Newcastle, which concentrates on beer more than any other British brewer, makes only a third of its profit from the stuff. The rest of their revenue comes from running pubs and holiday resorts such as Centre Parcs and Pontins.

Perhaps the most obvious way for brewers to diversify is to persuade people to eat more in their pubs. Britons spend twice as much on meals away from home today as they did 30 years ago. Pubs are, therefore, trying to look more like restaurants. Each of the large brewers has a chain of pubs-restaurants aimed at families. And they’re rapidly extending this side of their operations: Harvester for Bass, Chef & Brewer for Scottish & Newcastle and Brewer’s Fare for Whitbread.

What all this boils down to is that to survive and thrive you have to …

Change

For many business people in South Africa the future, which means change with a capital “C”, will come too soon. According to local manufacturing consultant Mteto Nyati, there are no visible signs that middle managers and other employees are preparing for the inevitable. “It appears they believe they have a diplomatic immunity to change,” he says.

The greatest barrier to change is complacency.

So kill it before it kills you.

Sabotage self-satisfied cultures

In this competitive age, people like you, who lead companies, need to know how to blow up self-satisfied corporate cultures … how to sabotage “we do it this way because it’s the it’s always been done”.

Create a sense of urgency … do something ... before a real disaster strikes.

Over the last 20 years or so we’ve witnessed a period of significant and often traumatic change. Huge corporations like AT&T split themselves apart. On the local scene, many conglomerates followed suit by hiving off divisions and subsidiaries in an ongoing unbundling exercise. Massive layoffs dominate the headlines. Nerd-like upstarts launched high-tech companies which, after only a few years in existence, began redefining competition in their field.

Bite the dust

The business environment is changing. And it’s changing fast. Bearing this in mind, identify five macro-economic changes that will take place over the next five years. Then ask yourself:

If you don’t know, find out. And find out fast.

Appalling carnage

To date major transformations have helped some organisations. Companies like GE, Allied-Signal and Motorola have adapted significantly to changing conditions. But in too many situations improvements have been disappointing. Carnage has been appalling, with wasted resources and burned-out, scared or frustrated employees.

Referring specifically to the fast-changing retail food sector, Sir Ian MacLaurin, chairman of the huge Tesco Supermarket Group in the United Kingdom, said there were two vital elements that had to be borne in mind by managers:

Strong brand image

MacLaurin said that retailers needed a consistent long-term strategy to build a strong brand image  –  an image that reflected everything that contributed towards customers’ perceptions of the company: the quality and value of own-label products, the company’s standards of service, its ability to deliver value for money, the range of in-store facilities it offered to customers, the range and quality of the products it sold and the corporate attitude towards the environment.

Fine-tuning

According to MacLaurin, short-term tactical flexibility meant the ability to respond rapidly to changing customer tastes and values by fine-tuning product ranges, prices and policies. He cited as examples of customer values that demand quick tactical responses included concerns about nutrition, growing awareness of environmental issues, economic pressures and the a constant clamour for new and interesting products.

Even if you follow MacLaurin’s guidelines, change will inevitably generate some degree of downside. Pain is always present whenever a business is forced to adjust to shifting conditions. But you can avoid a significant amount of the waste and anguish that change brought with it over the last 10 years.

How you enact change makes the difference.

Squash complacency

Yes. off course it’s important to have a clear vision, a consistent long-term business strategy, as MacLaurin suggests. And it is important to get everyone in your organisation to support it. But my research has found that most efforts to implement change never make it that far.

Why?

Because managers fail to squash complacency.

When they decide to change an organisation, those in charge often plunge ahead without establishing a high enough sense of urgency among the people they lead. This error is fatal. Corporate transformations always fall apart when levels of complacency are high.

According to Edgar Bronfman, president of Seagram in the United States, change is everywhere so it’s pointless wasting time discussing it.. He says the essence of good management today is to accept the inevitably of change and make it work for you.

Change should be at the heart of strategic planning. He urges managers in all types of business to routinely and constantly ask themselves where change is taking them and where they want to go.

But even if you accept the inevitability of change and plan your strategy around it, how you implement your plan will determine its success.

Phalanx of problems

Even the most talented manager can come a cropper. Look what can happen to Adrian  –  I’ve changed his name to protect the guilty. When he was appointed head of the speciality chemicals division of a large corporation, he inherited a formidable phalanx problems.

But he also saw opportunities lurking on the horizon.

As a seasoned and self-confident executive, he worked day and night to launch a dozen new initiatives to build sales and margins in an increasingly competitive global marketplace.

Not insurmountable

Two years after his promotion Adrian watched initiative after initiative sink in a sea of complacency. Regardless of his inducement or threats, the first phase of his new product strategy took so much time to implement that counter moves by the competition offset any important benefit.

He felt as if he was banging his ahead against a brick wall. He couldn’t secure sufficient corporate funding for his big re-engineering project. Re-organisation was talked to death by skilled filibusters on his staff. In frustration, Adrian gave up on his own people. He acquired a smaller firm that had already successfully implemented many of his ideas.

Reason for failure

Smart people like Adrian fail for many different but interrelated reasons. They:

More resistance to change

Even worse, they confuse urgency with anxiety. By driving up the latter they push people ever deeper into their foxholes and create even more resistance to change.

If complacency levels were low in most companies today, this problem would be of limited importance. But just the opposite is true. Too much past success, a lack of visible crises, low standards of performance, insufficient feedback from the outside world and more all add up to: “Yes, we have our problems, but they aren’t that terrible and I’m doing my job just fine. “There’s another popular shoulder-shrug: “Sure, we have big problems, and they’re all over there.“

The famous and prolific Spanish surrealist painter, Dali Salvador, once admitted: “There are some days when I think that I’m going to die from an overdose of satisfaction.”

Face facts

You have to face facts: without any sense of urgency, people won’t put in that extra effort that is often essential. They won’t make needed sacrifices. Instead, they’ll resist initiatives from above and cling to the status quo.

Status quo has been freely translated from the Latin by a local executive to mean: “The mess we’re in.”

Why do nominally sensible and aware people behave this way?

For lots of reasons.

Show 25-year-old BMA students a complacent company that’s in trouble and they’ll probably talk as if a group of people with an average IQ of 40 were running the firm. Their implicit diagnosis: if the place is in trouble yet urgency is low, management must be a bunch of dupes. Their recommendation: fire them immediately and hire us.

Low sense of urgency

But this alleged link between ineptitude and complacency doesn’t fit well with my experiences. I’ve seen a low sense of urgency among highly intelligent, well-intentioned people who had good reasons to be worried. I can still vividly remember sitting in a meeting of a dozen senior managers in a severely under-performing corporation and listening to an intellectual debate that might have been well-received at Harvard.

And why not?

Many of the people seated around the table that day had degrees from the world’s best universities. Unfortunately, the rather abstract discussion of “strategy” avoided confronting any of the corporation’s key problems. Predictably, no decisions of any consequence were made by the end of the meeting.

You can’t make important decisions without talking about real issues.

This reminds me of a story that did the rounds of Wits campus a few years ago.

A former student, currently living Down Under, returned to South Africa for a short holiday. He took the opportunity to look up his old economics professor, who showed him the latest examination paper.

The former student glanced through the paper and raised his eyebrows in surprise. “Prof, these questions are identical to those you asked when I was a student here 10 years ago.”
“That’s right, “said the professor .”I ask the same questions every year.”
“But surely you know that students hand the papers down from one year to the next?”
“Sure I know that, “said the professor .”But in economic we change the answers.”

No room for complacency

The moral of the story is that while the basic problems involved in running a successful operation may be similar from year to year, changing circumstances have a profound effect on the solutions. There’s no room for complacency bred by what you think you know through experience.

At least six reasons help explain this sort of complacency:

According  to Frederick Crawford, who specialised in turning apparently doomed American businesses into profit-making concerns, companies aren’t bricks and mortar or money and finance.”

They’re people,” he says adamantly.

He points out that to be a success a manager must have the ability to coax above-average efforts from people.

One Move

Crawford recalls that early in his career he was given the responsibility of resuscitating a plant in imminent danger of going down the tubes. Because there was little or no capital available, he couldn’t hire additional staff or invest in new equipment. He had to do the best he could with what he had. He only made one move.

He put the workers to work.

Just how did he accomplish this miracle?

Crawford asked the plant’s workforce to contribute ideas for planning.

A personal interest

Because the workers now had a personal interest in not only what the were doing, but also the results of what they were doing, the company experienced a dramatic increase in productivity.

As Crawford observes: “When you have your employees’ confidence and understanding, you don’t need much management. “Winning the hearts and minds of workers  –  especially if your company has its back to the wall  –  may temporarily overcome inertia. But for longer-lasting results …

Turn up the heat in your company

Remove sources of complacency.

Eliminate such symbols of excess as a big corporate air force.  Set higher standards, both formally in the planning process and informally in day-to-day interaction. Change internal measurement systems that focus on the wrong indexes. Vastly increase the amount of external exposure that each of your employees get  –  ensure that they meet customers and suppliers face-to-face as often as possible. Discourage “yes” men. Reward both honest talk in meetings and people who are willing to confront problems. And put a stop to baseless “happy talk” at its source: in the boardroom and executive suites.

There’s nothing new about any of these actions. All competent managers take some form of action to overcome at least some of these problems. But they often don’t go nearly far enough. For example, they invite a panel of customers to attend the annual management meeting. But the can’t seem to find a way to bring customers’ complaints to the attention of all employees on weekly, or better still, daily basis.

Louis XIV splendor

Although a company may hold its annual management meeting at a less-than-than-posh place, chances are good that when it’s over executives will return to offices of Louis XIV splendour. While the executive committee probably initiate one or two relatively frank discussions about problems, the company newspaper devotes all of its space to nothing but “happy talk”.

Crawford claims that good management depends on a few “fundamentals”. He cites investment in candid communications as one of these. Effective communications, he says, will win the understanding of employees.

Create a strong sense of urgency

This normally demands the bold or even risky actions that we normally associate with leadership.

Bold  means cleaning up the balance sheet and creating a huge loss for the quarter. Or selling the corporate headquarters and moving into premises that look more like a battle command centre. It may also mean telling all your associated businesses, divisions and departments that they have 24 hours to become first (if they’re second) or second (if they’re third or less) in their markets.

Divesture or closure

And the penalty for failure: divestiture or closure. Or by making 50% of the pay for the top 10 officers performance related and based on tough quality targets for the whole organisation.

Like some, you may argue that change is impossible until the company’s problems become severe enough to generate significant losses.

I disagree.

 I’ve seen people successfully initiate restructuring programmes or stepped-up quality efforts during periods when their companies were making record profits. They did so by relentlessly bombarding their employees with information about problems (profits are up but market share is down), potential problems (a new competitor shows signs of becoming more aggressive), or potential opportunities (through technological advances or new markets).

Vastly ambitious goals

Set outrageous goals

A great Japanese entrepreneur, Konosuke Matsushita, stopped his management from becoming complacent despite record earnings by setting outrageous five-year goals. Just when executives started becoming smug over their many achievements, he’d say something like: “We should set a target of doubling our revenues within four years.”

Because of his credibility, his employees couldn’t ignore these pronouncements. They also knew that he never pulled his goals out of thin air, but put careful though into just how far he could stretch his objectives. The targets that he set were feasible. And his ideas were dependable.

The net result?

Matsushita’s five-year goals became little bombs that periodically demolished pockets of complacency.

Create artificial crises

Real leaders often create artificial crises rather than wait for something to happen. For instance, one executive, instead if arguing with plans drawn up by his manager, decided to accept revenue and cost projections that he knew were unrealistic. The resulting 30% plunge in expected income caught everyone’s attention. In similar manner, another executive accepted what she believed were unrealistic promises about a major new product introduction. She allowed the project to blow up  –  not an action recommended for the faint of heart.

Okay, you accept that you have to instil a sense of urgency to successfully implement needed change. But how do you know when that sense of urgency is adequate?

There’s one sign: when a majority of employees and virtually all of top management believe that considerable change is absolutely essential.

But a few words of warning.

Reinforce their rationalizations

Managers sometimes convince themselves that they’ve done their job … that they’ve created a sense of urgency when, in fact, more work is necessary. I’ve seen exceptionally capable individuals fall into this trap. They chat to fellow executives who only reinforce their rationalisations. “Everyone understands that the current situation has to be changed, “they say.” There’s not much room for complacency around here. Right?”

Then they move ahead on a shaky base.

This is where outsiders can be helpful. Ask customers, suppliers or shareholders what they think. Is the level of urgency high enough? Don’t confine your questions to a few friends on the outside. Talk to others who know your firm. Speak to people who appear to be at odds with your organisation. Remember, you’re not looking for plaudits. And, most important, pluck up the courage to listen. Particularly to the brick bats.

A credible judgment

If you do what I suggest, you may find that some people aren’t well enough informed to offer a credible judgement. Others may have an axe to grind. But, if you talk to enough people, you should be able to sort the wheat from the chaff. The point is to counteract insider myopia with valid external data.

In today’s fast moving world, insider myopia can be lethal.

 “Invention is the mother of necessity”. 
–  Thorstein Veblen

“Sometimes one has to say difficult things, but one has to say them as simply as possible.” 
– G P Hardy

he ultimate battleground for control of any market is the mind. Successful marketing implants in the mind of the consumer a clear, specific identity for a certain product or service. For example, when you thing of Steers, what immediately comes to bind? The answer: a juicy well-prepared steak. Likewise, when you think of I&J, fresh frozen fish immediately springs to mind. And Kodak to most of us means photography.

Xerox is linked to photocopiers to such an extent that the brand name has become a verb as in: “Will you xerox that for me, please”.

There is an answer to the problem. It’s a lot easier to say or write than it is to do.

If the market changes your company must change.

Reposition yourself

In other words, you must position yourself in a new way, with a new product or idea.

Repositioning was never easy. And the dawn of the information age has does nothing to make it easier. Today’s consumers suffer from information overload. More information is being thrown at them now than at any other point in history. Whether you’re attempting to position your business or reposition it, the battleground remains in the consumer’s mind.

It always has been.

But now it’s more crowded than ever.

The age of information saturation

People can only absorb a certain amount of data. By constantly bombarding them with it, we’re rapidly reaching the stage of overkill. Just how bad has the info babble situation become? Here are some facts to consider:

There’s simply too much information for the consumer to ingest.

Let’s take another look at the New York Times. One obese Sunday edition of the newspaper contained more than 1 600 pages, tipped the scales at more than 26 kilograms and contained more than 10-million words. Nobody, of course, will ever attempt to read everything in the New York Times Sunday edition. Instead, readers leaf through its pages to pick and choose what interests them. As Lord Northcliffe, a former Fleet Street press baron once said: “Journalism is a profession whose business it is to explain to others what it personally does not understand.

Consumers also pick and choose what they want of need from the flood of information that is flung at them and tune the rest out.

The latest method of transmitting even greater volumes of information yet faster and cheaper: e-mail.

Forget it!

One of the pioneers in the use of email was Digital Equipment Corporation (DEC). Stan Olsen, brother of ex-chief executive officer Ken and one of the founders of DEC, says that gets so much email that it’s useless.

“A lot of people send me messages,” Olsen told Jack Trout. “At the end of the day, when I print out my messages, I get a 30-foot roll of paper. There’s no way I’ll read that. The way to get to me is on the phone.”

The simple, the bold and the brief

If you don’t want your audience to listen with rapt inattention, one of the first rules to bear in mind when trying to get your message across is: keep it simple. Complexity, which comes with built-in yawn appeal, leads to confusion, then to rejection. People will simply turn off your message.

One example of an over-complex message: the ill-fated healthcare reform efforts of United States President Bill Clinton. Although a majority of Americans agreed that some healthcare reform was necessary, opponents easily convinced people to reject Clinton’s 1 342-page Health Security Act.

Had Clinton kept the message simple, he might have successfully have implemented. For a lesson I simplicity and boldness, we stay in the American political arena.

Some years ago, when Sheriff Ralph S Marshall, of Allen Country in Ohio, fought re-election campaigns, he made no speeches, unlike his verbose opponents. Instead, he took his wife to public meetings, placed her 10- paces away and used his Colt .45 revolver to blast cigarettes out of her mouth. He was invariably re-elected.

Then there’s the question of brevity.

Gordon Hewart, a former Chief Justice of England, best known for his observation that justice should not only be done but be seen to be done, is credited with making the shortest after-dinner speech. Called on to reply to a toast to His Majesty’s Judges, he said: ” When I accepted the invitation to respond to this toast, I was not certain at what stage of the evening I should be required to speak. So I prepared two speeches: a short one and a longer one.”

Hewart looked at the clock before continuing.

“As the night is young,” he went on, “I propose to deliver them both. I will give you first the shorter speech  – ‘Thank you.’ Now I will deliver the longer speech  – ‘Thank you very much.’ ” And then he sat down.

So keep you messages simple. Keep them bold. And keep them brief.

Complex products

Because the human mind is suspicious of confusion and rejects it, consumers will more readily respond to simple products. Marketers and product development people, on the other hand, enjoy creating wondrous new products that are over-burdened with difficult-to-use features. Here’s a current sampling:

Will any of these multi-function products make it?

I don’t think so.

They’re too confusing and to complex for mere mortals. Many of us, perhaps most of us, haven’t yet learnt how to drive our VCRs properly.

Confusing concepts

Consumers, being simple souls for the most part, reject complicated products as well as complex concepts that don’t make simple sense. For example, Mennen introduced a Vitamin E deodorant. While vitamins and deodorants are certainly popular, if you put the two together you get confusion  – and rejection.

The two-in-one product’s demise was swift.

Break the circle of consumer confusion

Keep it simple

The best way to enter the human mind is not just to simplify, but to over-simplify. Some of the most powerful advertising and promotional programmes are those that focus on a single word. Think of Crest and cavities, Volvo and safety, Prego (spaghetti sauce) and thick.

When you try to communicate your message, don’t tell the whole story. Rather focus on only one attribute and drive it into the mind. If you can achieve this, you’ve successfully positioned your company or your product or service.

Liquifruit is fruit juice. Kellogg’s is breakfast cereal. Xerox is copiers. Kodak is photography. Microsoft is computer software. Unfortunately, companies are straying from the focus that is the key to positioning.. Today, more and more businesses are losing their once solid market positions for one of two reasons.

When a company strays from its core market, the results are often negative.

Why?

Because consumers aren’t convinced that about the company’s expertise in new business areas that are unrelated to its traditional products. Sales of the new product don’t take off. Perhaps even more important: the new products weaken the company’s image in the consumers’ minds  – they no longer readily equate the company to a successful product or business area. For example, Xerox’s foray into computers was a disaster because customers equated Xerox with copiers, not computers.

Muddled brands

Expansion into new, unrelated products is one way to blur the image of your business in consumers’ minds. There is another way: creating products that try to be all things to all people. Chevrolet, once America’s favourite family car, provided good, solid value. Even in South Africa it was associated with drive-ins, blue skies, sun and braaivleis. Today, the name projects a muddled image. Chevrolet is a big, small, cheap, expensive sports car, sedan and truck.

To break out of the widening circle of confusion …

Get back to basics

Pounded by setbacks, companies have learnt the best way to anchor an image in consumers’ minds: get back to basics by returning to the business areas in which they originally made their names. Harking back to Xerox, it pulled out of the computer field and is now repositioning itself as “The Document Company”. It has returned to the central idea that defines Xerox in the minds of consumers: photocopying. But what happens when the market and not the company changes? How should a company react if technology renders what you manufacture obsolete, or if consumer preferences prompt a switch to another product?

The answer is obvious.

If the market changes beneath your feet, your business must change as well.

If your product continues to be viable in the marketplace, sticking to basics is important. But if the market changes, sticking to an old product is the fastest way to bury your future. Whatever way the marketplace wind blows, it is vital you company maintains a clear, focused identity in the consumer’s mind.

What this all boils down to is that the challenge of successful repositioning is to get consumers to follow your company into its new position.

Say it with words

More than 2 500 years ago, Confucius said: “One picture is worth a thousand words.”

He was wrong. And he proved it himself. The continuing power and influence of Confucius two-and-a-half millenniums after his death is based words, not pictures.

Little, if anything, is exclusively visual as John Trout discovered after analysing hundreds of corporate positioning programmes. Words, in fact, are worth a thousand pictures. This is particularly true in marketing. You don’t need pictures to get your message across. On the other hand, pictures without words don’t work.

Want to prove it? Pick up a magazine. Ignore the next; just look at the pictures. Or watch TV with the sound turned off. How much information did you get from the ads?

The ad power of words

The fact that words are better at transmitting information goes against the common wisdom that prevails in today’s world of advertising, in which the visual rather than the verbal is emphasised. This doesn’t mean that you should ignore or abandon visual elements in your advertising. They have important roles to play. Use words as the driver, with pictures to reinforce their inherent strength.

Say your sales message straight out. Don’t try using pictures to show it, no matter how exciting or pretty your visuals may be. And don’t try to imply what you want your sales message to say through cute or confusing words that carry no information.

Print or electronic media commercials for pain relievers, for example, seldom try to be cute. And their visuals aren’t very stimulating. After all, few people get turned on by watching someone suffering from the effects of acid indigestion, But these commercials work because they get a clear, unambiguous message across: “This medicine will relieve your pain.”

If you do use pictures, choose them carefully to add variety to your ad and reinforce the sales message. But be sure to use terse captions that quickly explain the significance of the visuals. Unexplained pictures are simply distractions. In your TV commercials, for example, insist that the visual elements, including movement, don’t overwhelm the spoken sales message. If you don’t take this precaution, viewers will stop listening and little communication will take place.

Sight vs. sound

A television commercial without words is less effective than one with words. Says Robert Bly, a much sought-after freelance advertising copywriter in New York: “Dramatic stories, fast-paced action, surreal fantasy landscapes, animation, computer graphics, the ‘new wave’ look and other technique are used to give commercials distinct graphic appeal  – often, in my opinion, at the expense of the sales pitch. These commercials do stand out, but they don’t sell because they tend to ignore the product and its appeal to the consumer.”

Bly, author of the authoritative The Copywriter’s Handbook (Dodd, Mead & Company), believes that simple commercials that present the product and its benefits simply and in a straightforward manner “are what convince consumers to write cheques and open wallets”.

He says the serious prospects actively seek valid information. They want to be well-informed before they spend their hard-earned money.

As in the United States, many South African advertisers attempt to emulate the glitz and glamour of Hollywood, hoping that the razzmatazz will entice people  – many of them unlikely to buy the advertised products  – to watch their commercials. They seem to forget that the objective is not to get people to watch, it’s to get to buy. And words are the best way to get the sales message across.

There are two methods of incorporating words in a television commercial. You can have them spoken by a narrator or actors. Or you can have them superimposed over the visuals on the screen.

Does it make a difference?

Certainly.

The spoken word uses the ear; the printed word uses the eye. And contrary to popular misconception, the human mind prefers the ear to the eye.

In one experiment, researchers used a tape recorder to present a list of words to people auditorily and slides to present the word list visually. People correctly recalled more of the words that they heard than the words that they saw.

Retention of sound

Why does the mind prefer sound to sight? Researchers believe that it has to do with retention.

The mind retains something it sees for about one second unless it has a compelling reason to file it away for future reference  – like perhaps a horse pulling a bus or some other extra-ordinary image. . However, when it hears something it retains it for up to five seconds.

Check this next time you’re out driving. If you look out of the window and another car drives past, your mind will retain the image for one second before the image fades away. But if you’re near a window and hear a car drive by, that sound will stay with your for four or five seconds before it fades away.

A rose is a rose is a rose  – or is it?

Shakespeare was wrong about roses when he wrote: “A rose by any other name would smell as sweet.”

That ain’t necessarily so, to quote the lyrics of a yesteryear hit song. Because of the importance of sound in our thought processes, the sound of a name can alter how we think of things. A classic experiment proves this point.

Researchers first identified two women whom a group of people had rated as being equal in beauty. Next, the researchers went to a second group and added the dimension of sound. They gave the two women names. They called one “Jennifer and the other “Gertrude”.

What happened when the second group was asked to vote on which of the women was prettier?

Jennifer won hands down for no other reason than her name sounded better. At this point I apologise to all Gertrudes. That reminds be of a little story about two cowboys who met at a rodeo. “My name’s Tex,” said the one, introducing himself. “You from Texas, buddy?” asked the other. “Nope. I hail from Louisiana. But what rough-rider wants to be called Louise?”

Names that sound beautiful

Choosing the right name is vitally important to your marketing and repositioning efforts. As Samuel Butler pointed out: “The Ancient Mariner would not have taken so well if it had been called Old Sailor.”

Names should be memorable and communicate the message. DieHard batteries are a good example. But just as important, they should be pleasing to the ear. For example, Caress sounds as silky soft as the bath soap itself. But Hog Island in the Caribbean was going nowhere as a resort until it changed its name to Paradise Island.

Clarify what you’re selling

Many companies often have difficulty in describing their products, especially if they form a new category and are in the high-tech field.

Before you can correctly position your product in the marketplace, you have clearly know what your product is and into which category it falls. To take the first step in the right direction, state clearly in writing exactly what your product is.

Do it now.

The reason for this that we sort and store information by category. If you present consumers with information that they can’t quickly pigeonhole in a specific category, you confuse them. And if they’re confused, your message has only a slim chance of making an impression on their minds.

What’s a PDA?

Apple Computer invented a PDA  – a personal digital assistant. And they called it the Newton Message Pad. The problem: most people don’t know what a personal digital assistant is. And the abbreviation PDA only adds to the confusion.

Let’s face it, no company can force the name of a product category on to consumers. So it didn’t matter how many times that Apple talked about personal digital assistants in their advertising, the name never caught on, forcing Apple back to the drawing board for a major rethink.

How would you position the Newton?

Simple terms

In selling, you have to explain what you have in terms so simple that the prospect or user understands them and can repeat them. The problem faced by Apple is that the Newton Message Pad performs three functions. It’s a computer, a communicator and an electronic organiser. When Apple described the products in terms of all three functions, it led to confusion and, consequently, disinterest.

For the sake of simplicity, you have to choose only one of the three functions to market. In this case, the best function to position the Newton is the organiser.

Why?

The computer function has a disadvantage. It’s pen-based rather than keyboard-based. Users, especially the younger ones, are used to keyboard operation.

The communication function is limited. The fax, for example, needs additional infrastructure before it can become truly operational.

But the organiser is very competitive. And it builds on a category that already exists. In 1994, more than 10-million organisers were sold compared to 120 000 personal digital assistants.

Summing up, Apple should position the Newton as “the ultimate organiser”. Consumers will then know exactly what they’re getting.

This is how Jack Trout and his colleague Al Ries see the situation: “Today, positioning is used in a broader sense to mean what the advertising does for the product in the prospect’s mind. In other words, a successful advertiser today uses advertising to position his product, not to communicate its advantages or features. The men cite the following as advertising used to position a product:

And Bly suggests that if your product fills a special niche, you position it against a well-known brand as a quick and effective way of establish the product’s identity in the consumer’s mind.

And so to public relations

Most public relations efforts are name-in-the-media programmes. Success is measured by weight: how many clippings they generate. The weight-based assessment, however, doesn’t take into account content. It doesn’t measure whether or not the PR job is consolidating the chosen positioning of the company or product.

So forget name-in-the-media PR in terms of positioning.

However, there’s a good chance that positioning will come to play a greater role in public relations than its already important role in advertising. The reason: positioning is, as Bly suggested, an “against” strategy. Your position your company or brand against another company or brand.

“Against” strategies, as opposed to strategies based on what you stand for, make goods news copy. And that what PR professionals seek.

Public relations and marketing

If you change the focus of your PR efforts from getting your name in the paper to positioning your product, you will assume much more control over what appears in print. Remember that too much publicity, the premature publication of stories and misdirected television placements  – all generated by clippings-at-all-costs PR efforts  – can lead to public relations problems for your company.

To position a new product, initiate a positive launch PR campaign before you break with the advertising campaign. However, this is rarely done. Instead, advertising campaigns and public relations programmes are launched simultaneously, usually by different companies competing for the client’s advertising rands.

In the industry, they call this the “quick bang” approach. It usually involves a public relations, advertising and sales promotion extravaganza to launch the product. Unfortunately this type of “big bang” approach to positioning is ephemeral and evaporates after the initial excitement.

Successful positioning needs consistency. Don’t throw a new product at consumers and then quickly move on to your next offering. Instead, slowly build up a long-term interest in your products.

If Lotus, the computer software provider, did it, so can you. The Lotus programme was successful because a carefully planned PR programme led to a slow build up of press exposure of Groupware in which Lotus Notes were often mentioned.

“The adherents of the status quo never had it so bad. There has always been a conflict between those who feel their values are eternal and those who feel they are relative.”
 – R Kostelanetz

“The world is in a constant state of flux.”
 – Heracleitus, the Greek philosopher.

ight gigantic American companies dominated the steel industry in 1960. Their total market value: $55-billion. Today, it’s down to $13-billion, and falling.

Where did the value go?

It migrated.

It sought greener pastures in other companies and other sectors of industry that found better ways of responding to customer needs and priorities. It migrated, for example, to Nucor, a min-mill that uses low-cost technology and cheap raw materials and can, therefore, offer steel at much lower prices.

The value also moved to aluminium and plastics producers who offered manufacturing customers better suited to their drinks cans or car parts. It also migrated to Japanese Mills, where superior manufacturing process designs allowed for the production of quality steel at lower prices.

How could new and often small competitor steadily plunder the customer base so painstakingly built up by the big steel producers?

By better business design that focuses on customer priorities.

It was Samuel Gompers, an American labour leader in the early 1900s, who said: “The worst crime against working people is a company which fails to operate at a profit.

Best business designs

In the business world, higher revenues, profits and market share, leading to higher market value, migrate to companies with the best business designs. To ensure that these values migrate your way:

Value migration is an inevitable cycle. And it’s coming soon to your industry, so…

Be prepared

To help you sharpen your defenses and initiate appropriate action:

RESPOND TO CUSTOMER PRIORITIES

In the past, technology gave you the competitive advantage. If you invented a successful product, customers sought you our. DEC, for example, invented the VAX computer. The company’s market value grew by billions of dollars. One product, Tagamet, tuned SmithKline into a multi-billion dollar pharmaceutical giant. And Xerox introduced the photocopier and watched its market value soar by $11-billion.

In the industrialised First World, innovations followed one another in rapid succession. They changed the way we thought of our companies, our markets, our competitors. And they changed the way we thought of ourselves.

Business journalist Mark Roman, general editor of Success in 1987 wrote: “Every time a manager rolls out of bed and gulps down his morning coffee, he’d better be prepared to face a world that is dramatically different from the one he fell asleep in.”

Brains in the boardroom

Until the Technological Revolution and its successor, the Information Revolution, doing business was a process that remained relatively constant. The brains in the boardroom strived to devise strategies and systems that fitted the world in which they operated. Many, trained in the “old school” of business management, can’t or won’t adapt to their methods to deal with the new, infinitely more complex business environment.”

Managing in this environment,” says international business consultant and author Richard Foster, “requires a new orientation.”

Rather than tightening central control, he suggests that companies fragment themselves into self-sustaining divisions, each responsible for innovating within its own niche. This usually means predicting trends and catering for them with technical innovations.

One company that does that with outstanding success is the mighty Sony Corporation in Japan.

The powers-that-be in Sony watched the fast growing trend in fitness. A growing army of international health fanatics jogged or cycled along roads and by-ways in their hundreds of thousands. They needed a device that would take their minds of the pain of the slog.

What better than a go-anywhere, miniature audiotape player? The thought led to the birth of the now legendary Walkman.

“Nobody liked the idea,” he recalled. “But I had a hunch that the portable stereo player would be successful and popular despite scepticism within my own company.”

Morita was so certain of his hunch that he offered to resign his chairmanship if Sony failed to sell 100 000 Walkman units during the first year of production..

He didn’t have to. By 1987, Sony had sold more than 20-million Walkmans in more than 70 different models.

Morita and Sony co-founder Masaru Ibuka often discussed the concept of developing their company as an innovator that would design and manufacture high-tech products.

“Merely building radios,” he said, “was not our idea of the way to fulfil these ideals.” Sony set out to make its products better, smaller and more efficient by adapting and using the latest advances in technology, especially electronic technology.

Rapid imitation

But, in many sectors of industry, the rate of breakthrough technological innovation is slowing. And even breakthrough innovation doesn’t give you much of an advantage anymore because of rapid imitation from competitors. For example, Sony no longer has an exclusive hold on the market for in-the-pocket, go-anywhere stereo systems.

Invent and develop a radically new product and you’ll have all your competitors offering something similar in no time at all. And it may be even cheaper.

Also bear in mind that innovation isn’t easy. Before you can innovate, you must understand what type of business you’re in. Superficial knowledge isn’t good enough. Your comprehension must be total. This knowledge must include:

 Robert Taylor, founder of Minnetonka Inc, which launched the wildly successful On Tap Beer Shampoo and marketed Calvin Klein’s Obsession, offered these suggestions:

An old maxim, still echoed by some people in business, says there’s always room in the consumer-dominated marketplace for improved versions of existing products.

Like the mousetrap.

Zero sales

Indeed, an inventor designed and built a better mousetrap. Field tests, so to speak, proved that it’s performance was far superior to the conventional mousetrap. Moreover, it was infinitely reusable and could be retailed at only twice the price of the use-it-once and throw-it-away variety. After you caught your second rodent, catching further mice didn’t cost a cent.

But no-one bought it. Sales were zero.

The inventor had overlooked an important detail. He found that no-one wanted to remove a squashed mouse from the trap. People would rather through the whole contraption and the corpses of its victims away.

“Build a better mousetrap and the world will beat a path to your door,” proclaims the hoary adage.

Forget it. It’s probably one of the most useless pieces of old wives’ wisdom. To get ahead and stay ahead, you’ve got to thing revolution not evolution.

In a product development and customer service, aim to make things 100% different. Ten or 20% better just isn’t good enough.

If you improve what ever you offer in small, incremental steps, the world won’t race to get to your doorstep. It’ll yawn. To overcome the consumers’ ho-hum mindset, jolt them into action by revolutionising what you do. Make the changes radical.

Completely redefine your product category.

Look at Nando’s. It didn’t try to upstage Kentucky Fried Chicken by offering fried chickens under another brand name. Nando’s developed its own unique recipes to produce chickens that are unquestionably different.

When you offer a truly unique product, it will automatically differentiate itself from the competition to find its own niche in the market.

There’s also another way.

Deliberately alter the consumer’s perception of your product without, in fact, changing the product itself.

Some years ago Swatch Watch successfully did just that. When it decided to enter the market for low-cost timepieces it faced formidable opposition from Timex, which had all but completely sewn up the low end of the market. So Swatch designed watches with trendy new-wave faces and straps. Instead of inexpensive and reliable Timex-style timekeepers, they became affordable fashion statements.

Overcome institutional memory

If you find that you’re losing value to your competitors, don’t lay the blame on the current economic climate or anything else. Blame yourself. Chances are that you’re responsible.

Thomas Watson, who founded the computer giant IBM, reputedly often spoke to his regimented, suited executive troops in simple, homely terms;

“We must never feel satisfied,” he told them. “There is no such thing as standing still.”

And when he was in a rah-rah mood, he rallied his managerial lieutenants with such rousing proclamations as: “Hire the best people. Give them top notch training. Treat them well. And expect loyalty.”

Business historians claim that IBM was built on the best of American middle-class values during the 1950s and 1960s. Young men with executive potential were recruited from selected universities. They were hard-working and clean living. But independent thought, according to some critics, was discouraged.

 Insular company

“The ideal IBMer,” said a former executive, “was ambitious, impressionable and easily moulded. And the company was insular. When you were in IMB, that’s where life began and ended. You were expected to keep within the confines of your allotted department and strictly toe the rigid company line.”

IBM’s rigidity led it into deep water. Set in its ways and unable to quickly react to marketplace changes, it saw its formerly dominant grasp on the market slipping. For example, it could have protected its position by selling computers through the mail as Dell did. And the big steel producers, whose dominance of the market at one stage looked unbreakable, could have safeguarded their markets by starting a separate mini-mill network as Nucor did.

But they failed to take value-protecting steps.

Why?

Because industry leaders tend to suffer from “institutional memory”.

This affliction prevents them from thinking outside the bounds of their past experiences and successes. The ability to buy computers by mail-order and scrap metal mini-mills had never existed before. Therefore industry leaders believed that they were irrelevant.

They overcame institutional memory

However, some large companies found ways to defeat institutional memory. For strong, forward-looking leaders like Jack Welch, of General Electric, and Andy Grove, of Intel, the phrase “we’ve always done it this way” is meaningless.

James Bryant Conant, the celebrated American scientist, said:”Behold the turtle. He only makes progress when he sticks his neck out.”

Intel’s Grove stuck his neck out – all the way. He wasn’t afraid to abandon memory chips, the product on which he’d built his company, in favour of processor chips to create one of the most powerful companies in the computer industry. The phrase “Intel inside” has come to be synonymous with leading edge personal computer technology.

Other big-name companies also developed structures or processes that continuously combat institutional memory. 3M constantly searches for interesting products that will carry it into the future. And Shell’s scenario planning always looks ahead – far ahead. In South Africa, the Anglo-Dutch petroleum giant, ever cognisant of customer needs, pioneered the off-highway Ultra City “fill up and refresh” complexes.

Following their lead, you can wage your own war against the retarding effect of institutional memory by:

It’s easy to tell you that you must create a new design for your business. But creating it is a different story. To give you a kick-start, here are four practical suggestions that really work:

To get your business on track to a successful future …

Redesign it from top to bottom

Cutting to the quick, follow my four suggestions for a fast business makeover.

Lacerate Hierarchy

Replace traditional corporate hierarchy with more indirect methods of leadership. This leads to greater freedom, better allocation of resources and a strong force for focusing on the common good. Giving your employees more scope to lead creates an organisation that is ready to meet any challenges that tomorrow will throw at it.

This means totally restructuring your company’s management structure until it is no longer structured. The old-fashioned, authoritarian manager has become a dinosaur. Even Peter Drucker says that he’s no longer comfortable with the word “manager” because it implies subordinates.

“You have to learn to manage in situations where you don’t have command authority, where you are neither controlled nor controlling”, he points out.

He add that management textbooks still discuss the managing of subordinates.

“But, ” he observes, “you no longer evaluate an executive in terms of how many people report to him or her. That standard doesn’t mean as much as the complexity of the job, the information it uses and generates, and the different kinds of relationships needed to do the work.”

Cubicle dwellers

In the traditionally structured company, each employee operates in a cubicle. Peter Day, the presenter of the BBC Radio 4’s programme, In Business, refereeing to comic strip character Dilbert, a nerdish middle management admin worker, says: “The cubicle marks the boundary of his power and influence within this huge and nameless company.”

Dilbert describes himself as “the king of my cubicle”. His loyal subjects are “Mr. Computer, Mr Stapler and the Binder family”.

The archetypal middle manager, Dilbert is a reminder of why companies need to re-engineer. Too many people are boxed up in little cubicles in which they perform their given functions for year after year without any idea of how they or their functions slot into the overall scheme of things. Indeed , their only function appears to be how to go about frustrating attempts to improve customer service by intercepting and delaying messages destined for the decision-makers.

Some years ago, the late Professor C Northcote Parkinson published his now famous law: “Work expands to fill the time available for its completion” One of the many equally famous corollaries states: “In any administrative organisation, the administrative staff will increase each year by a known percentage, irrespective of the work – if any – to be done.”

Then there was the Peter Principle, first made public by a Canadian doctor, Lawrence Peter: “Managers are promoted to just above their level of competence.”

Now Scott Adams, the cartoonist creator of Dilbert and former cubicle inhabitant, “has put forward a new principle: “People get promoted to management because they’re incompetent at doing the job they’re originally supposed to do.”

Promote incompetent employees

The middle manager-turned-cartoonist notes that traditionally structured corporate bureaucracies single out the most incompetent employees for promotion to management without even passing through the ‘temporary competent stage’.

He says that this actually makes sense. In a perverse way.

“In the old days, the manager had to be the smartest one because the manager had to know how to be manager, plus understand all the jobs of the people below.

“You want your smartest person to be the computer programmer, the person doing the heart surgery, the person piloting the jet. And you want your least intelligent person to be the person asking for status reports and doing team-building exercises and doing the hiring and firing.

“I mean, you know, these are fairly moronic jobs. So it kind of makes sense.”

The trouble is that in the real world the guys in these “fairly moronic jobs” can stifle progress and kill customer delight stone dead. Today’s management gurus reckon that they’re the layers of lard that clog corporate arteries. Current thinking urges business to siphon off this fat to make the distance between the point of customer contact and to corporate brass as direct and short as possible. The decisions made by this in-between layer should be made by those at the coal face …those who deal directly with the customers.

Downsizing

Americans have coined a word for bleeding off the blubber. Downsizing. It’s a synonym for job-chopping. The objective: to create a lean, flat, cost-efficient corporate structure.

So, if you’re going to survive in the new economic climate in which you will face cut-throat competition from highly efficient global competitors, you’re going to have to trash the red tape and deadwood.

According to Laurance Kuper, managing director of Competitive Strategy, corporate inertia is likely to stunt any attempts to face the harsh reality of global competitions.

He says that local business people have the choice of either drastically revitalising their companies and repositioning them to achieve greater efficiency or “shoring up comfort zones to no-profit positions right at the tail end of global competitiveness”.

Most South African companies, he observes, have chosen the latter course.

You don’t have to follow the herd. You can make it happen for your company and customers by demolishing those tacky little boxes … those suffocating little cubicles, and giving your organisation a flat, streamlined look.

But you don’t have a lot of time.

The advance units of the foreign business invasion troops are already on our soil. Re-engineer your company for greater efficiency and total customer delight this year. Next year could be too late.

DEVELOP A FREE MARKET

Begin by unleashing the spirit of enterprise in your organisation. As recent changes in South Africa’s political mainstream thinking show, the free market seems an indispensable institution for improving productivity and prosperity. As Adam Smith wrote, the free market’s “invisible hand” guides entrepreneurs, while pursuing their own selfish ends, into serving the needs of their customers and, thus, the common good.

By introducing a free market principle in your organisation, you can directly motivate and inspire your followers to find the most efficient, effective ways to serve the group.

‘Intraprise’

There’s a name for this sort of organisation: intraprise — short for intracorporate enterprise. And the way it functions is easy to understand. You don’t force employees to the monopolistic staff services. Let them choose among service providers — and them become the providers if they want to. That’s what the US Forest Service did with great results.

The Forest Service controls 127 national forests divided into two regions. The foresters employed by the service had access to only one of the centres, depending on the region in which they operated. Since each centre was a monopoly in its region, service standards were far from acceptable. The foresters — the service centres’ internal customers — often complained about the poor quality of the service they received from the centres, which adopted a take-it-or-leave-it attitude.

Two options

Forest Service executives initially considered two options. They could define and lay down acceptable standards of service for the technical centres or they could attempt to improve matters by bringing in new management teams.

They did neither. They did something better.

They let the foresters — their internal customers — choose which technical centre they wanted to call in irrespective of which thhhhhey operated in. This transformed the centres into cost-effective, customer-focused organisations.

What does this mean for your company? Simply stated, your business becomes a collection of entrepreneurs who sell their services to your core business. Like virtual organisations, your business will have a small hierarchy responsible to top leaders for accomplishing missions.

With one important difference.

Free internal market

Virtual organisations buy components and services that create value for customers from outside suppliers. In a free intraprise system, buyers can choose from groups outside the company or suppliers who are part of the free internal market.

There’s no doubt that intrapreneurship encourages innovation. Basically it’s a concept that fosters entrepreneurial behaviour within an organisation. But John Naisbitt, who penned Megratrends and Reinventing the Corporation, warns that while boardroom barons pay lip service the idea, many get cold feet when it comes to committing themselves to intrapreneurship. The path to success, they point out, is littered with “innovative failures”.

Naisbitt cites Levi Strauss as one example. Although generally known as a company with a progressive management philosophy, it was forced to scrap its Fashion Portfolio offshoot, which targeted the more fickle and high end of the fashion market. The post-mortem revealed Fashion Portfolio’s focus contradicted Levi Strauss’ overall marketing strategy.

Executives in the United States agree that intrapreneurship leads to innovation. In fact, a study of 500 top company executives by Arhur Young and Company found that most respondents believed that innovation should be a corporate priority. However 50% of them said that the high innovation mortality rate precluded the implementation of any form of intrapreneurship in the corporations for which they worked. More than 66% of the respondents also said that their companies lacked coherent plans for the implementation of innovations.

The situation on the corporate landscape hasn’t changed much, particularly in South Africa.

A study by Arthur Young and Company some years back of more than 500 executives in the United States found that while 75% of the respondents believed innovation was a corporate priority, 50% said their companies cited innovative failure as a cause to shun intrapreneurship. More than 66% of the respondents added that their companies lacked coherent plans for the implementation of innovations. The situation on the corporate landscape hasn’t changed much, particularly in South Africa.

Corporate pinnacle

For innovation to happen through intrapreneurship, the people at the corporate pinnacle must empower those down the line to take independent action internally. This requires dedication, patience and vision. You’ll probably have to stick with employee-mooted projects for at least five years before, if ever, they turn to a profit. That’s takes the kind of guts that doesn’t often bloom in conventional, pyramid structures.

But the results can be worthwhile. At Ford, it led to the development of the popular Mustang and at IBM, the personal computer.

At Northwestern Bell, which encourages independent thinking, active intrapreneurs must perform their normal jobs until their brainchildren take off. Venture capital is provided by the company, but they don’t part with the cash easily. Intrapreneurs have to thoroughly research their pet projects and draw in-depth venture plans, projects sales growth and, if necessary, call in technical experts to support their proposals before Northwestern Bell will agree to underwrite the financial side.

How do you recognize a potentially successful intrapreneur on your payroll? He or she will be a person who revels in taking measured risks. They’re prepared to start small and gradually unfold their ideas. This means that you can keep the initial funding lean to minimize your losses if the project flops.

Its a good idea to form a separate company for any new intrapreneurial venture. Its less intimidating for those working on the internally generated, innovative project. And if it fizzles out, your core company saves face.

LEAD ON PRINCIPLES

Leaders of the future will be the people who create cultures or value systems based on principles. Or so says Stephen R Covey, author of The Seven Habits of Highly Effective People.

Creating such cultures will be tremendously exciting for the people who create them. But only if they have the vision, courage and humility to learn and grow.

Winterhur Insurances managing direct and CEO peter Spalti lists what he considers to be the six most important leadership qualities. As a leader worth following, you must have the ability to:

Spälti also cites integrity as vital leadership quality. An effective leader values dependability and honesty both in himself and others. He says integrity is a prerequisite for your acceptance and respect as a leader. It allows you to criticize your employees without jeopardizing their sense of justice, understanding and goodwill.

Those with a passion of learning — through listening, seeing, emerging trends, evaluating successes and mistakes and absorbing the lessons that conscience and principles teach — will have enduring influence. These leaders wont resist change. They‘ll embrace it.


Four character traits

John Garner, former Secretary of the United States Department of Health, Education and Welfare, has pinpointed our characters traits, which he believes differentiate leaders from traditional managers.

True leaders, he says:

If you want to become a new leader, Jan Carlzon suggests that you learn to listen, communicate and educate. He describes the new leader as an emotionally expressive and inspiring person who can create the right atmosphere rather than make all the decision himself”.
 

Don’t preach – do

When Peter Drucker was a high school pupil in the mid-1920s, his history teacher told the class to read a number of books on military campaigns during World War I. When called on to discuss the books in class, one pupil said: “Every one of these books says that the Great War was a war of total military incompetence. Why?”

The teacher, who had been wounded in the war, shot back without hesitation: “Because not enough generals were killed. They stayed way behind the lines and let others do the fighting and dying.”

To quote from The Bible: “If the blind lead the blind, both shall fall into the ditch. (Matthew 15:14)

Cultivate leadership behaviour

If you want to be an effective leader:

Two qualifications

British Premier John Major cites two qualifications which he believes are vital to good leadership.

“First,” he says, “good leaders have the courage of their principles and clear, long-term objectives and goals. Second, good leaders never forget the people who work for them.

“The difference between passive obedience and active loyalty can make the difference between success and failure. From manager to messenger they’re all individuals with their own hopes, their own self-esteem and their own interests. A good leader remembers that and behaves accordingly.”

Spälti uses the word “leadership” to define the abilities an individual possesses so that he or she can convince other members of a team to act in concert to achieve set goals.

“Leaders,” he says, “distinguish themselves from managers in that they do not understand ‘leading’ in terms of simply supervising the execution of a task of the ‘managing’ of an affair by means of a set of doubtlessly useful management techniques. “To leaders, ‘management’ means guiding people, motivating them and spurring them on to new achievements.”

Consultant and speaker Gifford Pinchot believes that more leaders, rather than managers, will be needed as the percentage of knowledge workers in organisations increase. He lists as important things that need to be done: innovating, seeing things in new ways and responding to customers by changing the way things are done.

MAKE MISTAKES

Businesses of stumble and even collapse because timid leaders send signals that discourage risk-taking. IBM founder Thomas Watson had the right approach to risk. While discussing IBM’s competitive challenges, he once said: “We don’t have enough people out their making mistakes.”

Bishop W C Magee put it this way: “The man who does not make mistakes does not usually make anything.”

While many bosses will harshly discipline employees who make mistakes or, perhaps, even axe them, there’s one chief executive who actually rewards people who err. He’s Steve Ettridge, the chief executive officer of a Temps & Company, a temporary employment agency in Washington. A bookkeeper apparently transposed an employee’s Social Security number with his hourly wage. The employee could believe his eyes when he received a $5,5-million pay cheque.

Most heads of companies would have at least docked the bookkeeper’s pay.

Not Ettridge.

A bonus

In fact, he gave her a $250 bonus. Indeed, he reportedly gives everyone who makes a major foul-up a cash bonanza.

“Mistakes,” he maintains, “are only failures if you can’t learn from them. And you can’t learn from the if you don’t talk about them.”

Now Ettridge and the bookkeeper double check the payroll before making out cheques. He says his philosophy of rewarding errors stems from the early days of Temps, when he could only afford to hire people who had just left college.

“They worked hard,” he recalls, “but they made a lot of mistakes.”

He says he usually discovered their errors too late to correct them. So he urged his employees to admit their mistakes so that the could be timeously corrected. To encourage them to own up, he called a staff meeting and put $250 on the table. He told them it was up for grabs by anyone who owned up to a major faux pas.

It’s worth noting that turnover at temps rocketed from around $100 000 a year to more than $25-million in the six years since he introduced reward-for-mistakes concept.

Although famed Olympic decathlon athlete enjoys winning — who doesn’t? — he claims that what thrills him most is the way he reacts when he’s beaten. “To my mind,” he says, “the great champions are the ones who react to defeat in a positive way.

“I’d much rather climb into the head of someone who’s lost, and see what made that person come back to be a victor, than to climb into the head of a winner.

“You can probably learn more from failures. That somebody wins all the time does not necessarily mean they are successful.”

“Most of us never recognise opportunity until it goes to work in our competitor’s business”
 –  Anonymous

“The opposite of the ‘me-too’ strategy is the ‘nice strategy’,”
 –  Edward de Bono in Tactics

he year: 1984. A high-level team set out on a special mission. It’s goal: to destroy a competitor. The team determined to use any tactics that would disrupt the existing marketplace order and create advantage of its company products

Guy Kawasaki, a member of the team called together by an upstart company, Apple Computer, specialised in software evangelism. He had to convince developers to create software for the Macintosh  –  vital for Apple’s survival, let alone the downfall of hated competitor, IBM.

Fuelled by zeal, Kawasaki and friends happily worked 90 hours a week. After all, they were on a crusade to save the world from domination by IBM’s “blue-suited meanies”.

To disrupt the market, they created a user-friendly interface, something the world had never before seen or even thought possible. Next, they introduced excited computer users to innovative software, like easy-to-use desktop publishing programmes. Then they incited customers to “evangelise”  –  sell  –  for them.

A great time

Alhough Apple didn’t topple IBM, Kawasaki and his crew succeeded in driving “the Big Blue” up the wall and, in the process, won a big chunk of the computer market. The team also had a great time.

What lessons did Kawasaki learn from his marketplace disruptive endeavours that you can apply to your business?

To create advantages that diminish the power of industry leaders, or just everyday competitors, takes clear, shrewd thinking as well as guts, hard work and a willingness to buck convention. It means knowing yourself and your competitors so well that you can give them what the want and need  –  even before they think of it. Idiosyncratic American financial consultant Jim Rogers says it’s extremely simple to play it safe by following the crowd. But he warns that following the trend is the fastest way to bankruptcy.

“Nobody,” asserts Rogers, “gets rich following the trend.“

“It’s respectable and everybody sitting around the pub says: ‘I’m doing this.’ and you say: ‘I’m doing this, too.’ And the third guy says: ‘I’m doing it, too.’ But that’s no way to get it right. It’s a fast way to bankruptcy, no matter what the field is.”

To break away from the herd, you have tempt fate; break the rules. You have to be curious, creative, enthusiastic and tireless. Your willingness to challenge “the way it’s always been done” will help propel you way past all of the other runners in the race.

Nobel Prize

The two researchers spent three years looking for a way to make superconductors that would carry electricity at very high speeds without resistance.

Although neither Meuller nor Bednorz had worked in the area before, Mueller had  –  almost casually  –  been collecting data about superconductivity for several years. After studying the trends that set the path for research, he convinced himself and his colleague that scientists looking for the secret were sniffing up the wrong trail.

Pursuing a hunch, he found that, under certain conditions, he could coax oxides into conducting electricity at really fast speeds  –  speeds that had never before been achieved.

The head of his department at IBM didn’t believe him. And following laid down corporate policy, forbade Meuller and Bednorz to continue with their experiments. He pointed out that everyone knew that oxides were used in insulation to stop the flow of electrons. There was, therefore no way that they could super conduct them.

Determined to continue with the experiments, two electronic sleuths went underground. They spent three years secretly searching for the right oxide, cloaking undercover research with a screen of half-truths.

Then came the breakthrough that was to revolutionise the electronics industry.

A new oxide

Paging through an obscure technical journal, Bednorz noted a reference to a new oxide. He quickly rigged up an experiment.

The new oxide worked.

He and Mueller repeated the experiment again and again. It worked every time.

Because they’d defied IBM top brass, the two men decided not to announce their discovery with a fanfare of trumpets. Instead, they described “a possible discovery” in a short article published by a little known journal devoted to the study of physics. Eagle-eyed scientists at the University of Tokyo noticed the article, reconstructed Mueller’s and Bednorz’s experiment.

It worked.

The superconductors increased the speed of computers by as much as 40%. And IBM was the first in the queue to put to work the results of their two errant researchers clandestine experiments.

That should inspire you to …

Set the pace.

Philosopher James Boren beautifully summed up the downside of attempting to lead by slavishly following trends: “It’s hard to look up to a leader who keeps his ear to the ground.”

Here’s a fact of business life we have to face: it’s the big guys who usually set the trends. If you keep your ear to the ground and look up, the big guys look even bigger. But always remember this piece of age-old wisdom: the bigger they are, the harder they fall. So …

Pick a “mighty opposite”

IBM founder Thomas Watson saw it this way: “Make no little enemies  –  people with who you differ for some pretty insignificant reason. Instead, I would urge you to cultivate ‘mighty opposites’  –  people with whom you disagree on big issues, with whom you will fight to the end over fundamental convictions. And that fight, I can assure you, will be good for you and your opponent.”

Guy Kawasaki and others at Apple chose IBM as their mighty opposite because they perceived the “Big Blue” as centralised, autocratic and, at times, user-unfriendly. On the other hand, they saw Apple as decentralised, democratic and user-friendly.

A good enemy forces you to improve your company. In Apple’s case, it even helped to company succeed.

Look around you now. Which biggies are making your life hell? Choose the biggest and smartest, and prepare to do battle. Says guerrilla marketer Jay Levinson: “If you’re lucky, your competitors are good and smart, and working hard  –  they’re not pushovers.”

But before you ask your trumpeter to sound the “Charge!”, make a …

Reality check

To ensure that you’re gaining the right insights using this method:

The results will surprise you.

To come out fighting and win, follow my four-point strategy:

Do the right things

The best way to drive your competitors bananas  –  make your customers happy. You do that by focusing sharply and squarely on them. While what your competitors do is obviously important, if you concentrate on them instead of the people who support your business, you’ll get into a tit-for-tat battle that may have little to do with pleasing customers.

One of the largest retailing organisations in Britain, Kingfisher, takes its ability to focus on customers very seriously. The chairman, Sir Geoffrey Mulcahy, said: “We listen to our customers. We keep abreast of what they want, and we anticipate what they need.

“We believe that this what makes us better-than-average retailers.”

Successful Malta-based food and beverage company Farsons has embodied its attitude towards customers in its mission statement. The relevant paragraph reads: “To maintain customer satisfaction as the top priority. To always listen to our customers in order to ensure the quality of products and service they need.”

The link

Recent studies in the United States a definite link between a company’s financial performance and its ability to satisfy customers.

American Express, for instance, found that the cost of luring new customers was about 15 times higher than generating more business from existing, satisfied customers.

Chrysler found that 72% of its customers who were satisfied with the product and the service they received bought a second car. And IBM correlated a 2% increase in customer satisfaction with a $50-million increase in revenue.

But how do you ensure that you satisfy your customers? How do you know exactly what customers want?

Ask the right questions

Guy Kawasaki discovered a restaurant in Portland, Oregon. The owner made a habit of asking the right questions about customers’ needs. Called Old Wives’ Tales, the restaurant features a huge playroom for kids. It contains three boats, a tunnel and a lot more goodies to keep children happy and out of harms way.

When you sit down at a table, the restaurant serves orange slices to your offspring in the playground to them quiet and content.

Why would restaurateur Holly Hart give over to a playground valuable space that could accommodate at least 20 more revenue producing seats? Because she noticed that parents couldn’t relax at dinner when they had their kids in tow. They tended to gulp and run at full service restaurants. Yet they weren’t always satisfied at eateries that had playgrounds for kids: fast-food joints.

So Hart asked her customers: “How can I redefine the dining experience to make it more pleasant for families.”

They told her. She acted. And business has boomed ever since.

Even when you ask the right questions to uncover the problems, you must …

Provide imaginative solutions

Eventide Lutheran Home in Moorhead, Minnesota, asked the right questions about what people wanted in a nursing home. Knowing that most nursing homes breed loneliness, isolation and boredom, Eventide gave its home a friendly small-town feel. It installed a post office with antique mail boxes, a bank, a library, a beauty parlour, a barber shop and even a soda shop. Nursing home residents elect a mayor and a “town” council, the members of which bring their concerns to management.

In addition to asking the right questions, go out of your way to …

Tell your customers more

An Australian business analyst, Barry Urquhart, reckons that today’s customers want to know more about what they’re buying. And Urquhart, managing director of Marketing Focus in Perth, Western Australia, says that it’s up to you to tell them if you want to keep them as customers.

As in South Africa, consumers “Down Under” no longer respond to the same extent as they did to advertising, marketing or visual promotions at point-of-purchase.

He describes the new breed of customer as “discerning” and “street smart”  –  a person who wants more information about less.

Customers want full explanations of product attributes, the real benefits to them and the relative advantages of one product over another.

Urquhart says that today’s consumers are better informed than ever about categories of product. But they don’t always have detailed knowledge about specific brands or models. Most have to be told on the benefits of individual brands.

He points out that to “provide more information about less” may well be the difference between gaining and retaining or losing customers.

Concentrate on a decisive point

Back in 1876, Napoleon, commanding a force of 35 000 men, faced the 600 000-strong combined armies of Austria and Sardinia.

Napoleon didn’t pit his outnumbered forces directly against either the Austrians or the Sardinians. Instead, he thrust his army at the point where the two enemy armies joined. After securing this weak area, he turned on the Sardinians. They surrendered. The Austrians, without their allies, waved the white flag three days later.

Napoleon’s strategy of dividing and conquering also works in business. It helps you deploy your resources most efficiently, it minimises the effort of retaliation, and small victories give you and your troops confidence.

Before you set out to conquer the world in one fell swoop, study your competitors. Seek a chink in their armour.

Find a niche

If you know your advantages and the capabilities of your competitors, you can detect and exploit market-busting niches. To carve out a viable niche for your business:

“The niche guys finish first,” according to Jack Trout and Al Ries, marketing consultants to many companies listed in the Fortune 500. Narrow focus, they maintain, is the name of the new marketing game. They argue that you can only become stronger if you reduce the scope of your business operations.

Trout and Ries claim that many companies  –  even big multinationals  –  aren’t sharply focused. They cite IBM as a “legendary example”.

In the early days of computerisation, “Big Blue” focused exclusively on mainframe computers. It quickly dominated the market with an estimated 70% slice of the cake.

And today?

The two American marketing fundis allege that IBM has no focus whatsoever. It sells computers of all types. It has lost out to companies that focus on specific types of computers such as personal computers, laptops and notebooks. IBM’s name and logo has all but disappeared from computer retail outlets.

Fill an existing need

If you’re looking for a niche market, Joseph Mancuso, who founded New York’s Centre for Entrepreneurial Management, suggests that you stand more chance of success if you set out to fill an existing need rather than create something new.

Think small, he advises. Find an area of the market that has been ignored and you can often carve out a profitable niche for yourself without spending an arm and a leg on marketing.

To find a profitable niche, identify a section of a fast-growing market that has been neglected. For instance, there are thousands of corner cafes in towns and cities throughout South Africa. Until recently, they had a vice-like grip on neighbourhood convenience markets. But none of them stay open around the clock. This created a hitherto neglected demand for convenience stores that never close. The launch of always-open shops attached to service stations neatly meet that demand. In the process, they’re threatening to muscle corner cafes out of business.

Clearly define your niche

In this age of specialisation, it is becoming increasingly difficult to be all things to all people. Department stores that sold everything “from a pin to an elephant” have had their day. Many household names, like Garlicks, have already disappeared. Others, like OK Bazaars, have become fossils that are living on borrowed time. So clearly define you niche and then service the hell out of it.

 It happened in this country to CNA. The company virtually had the whole bookselling, periodical and stationery ball park to themselves for years. But as they grew bigger, service standards slipped, giving others, like Fax & Fiction and Exclusive Books. Timing is all-important in niche marketing, says Mancuso. It therefore pays to be aware of the four phases of the life cycle of your product. During the start-up phase your chance of finding a viable niche market are limited because the market hasn’t yet developed. During the growth phase, the market “blossoms” with niches. When the product life cycle reaches the mature stage, niches diminish. But the often return with force when the life cycle begins to decline.

Indeed, Mancuso, stresses, niche marketing opportunities occur whenever significant changes occur in the structure of the market.

Don’t become complacent

Even when you’re safely and profitably ensconced in niche, don’t become complacent. Nothing lasts forever. Not even a successful niche. Consumers attitudes and needs change, forcing changes in the marketplace. So constantly keep your eyes open for new opportunities, while closely watching the performance of your product. As soon as sales begin to dwindle, prepare to make a quantum leap to a new niche.

Provide a complete product

Like most people, when you buy something, you want to take it out of the package and use it right away. Which bring me to a vital element of customer satisfaction. If you want to satisfy your customer, provide everything they need to get started. For example, paint form Standard Brands sells a customer-pleasing kit that includes a roller tray, roller handles with an extension for painting those difficult-to-reach places, drop cloth, roller covers and a paint brush.

Do as Standard Brands did. Look for features that your competitors don’t provide. That’s where you’ll find your niche.

Provide alternatives, or value

Another way to find a decisive point of attack: provide an alternative to the market leader. Think about Coca-Cola and Pepsi-Cola. Pepsi provides a carefully crafted alternative to Coke. If you’re stodgy, drink Coke. If you’re hip, drink Pepsi.

A few years ago, the commandment for all successful marketing strategies was “positioning”. In basic terms, this meant looking for open hole in the marketplace and becoming the first to fill it in the consumer’s mind with your product or service.

As Jack Trout notes: “If you weren’t first, you were in serious trouble.”

For example, General Electric attempted to crash the market for mainframe computers. But IBM was already their. The two corporations hit each other head-on. IBM won.

However, Al Ries says that there’s often room with mature brands for two competing products. It’s possible to be the second brand and prosper if you refocus your strategy to position yourself opposite the leader.

He points out that because Coke was first, Pepsi created the “Pepsi generation” concept. This appealed primarily to the younger, “with it” consumers.

Ries stresses that it’s a whole lot better to be “first in mind” rather than first in the marketplace.

In a war, as I’ve pointed out, generals who know what they’re doing, don’t attack the enemy across a broad front. They concentrate their firepower on a narrow front to penetrate the weakest point in the line. You can do this the old-fashioned way by increasing the value of your product or service.

Don’t try to increase value to customers by slashing your prices to undercut competitors. Price wars are nasty and if you face financially-muscled competition, you could price yourself out of business. Rather increase the length of your warranty, improve after-sales service and customer support, guarantee delivery times or provide free or inexpensive upgrades.

Turn your customers in evangelists

Back in 1984, everyone expected Apple Computers’ eventual demise. Although even the experts thought that Apple’s Mac was nifty as far as computers were concerned, the believed it was doomed.

Why?

Because it couldn’t run the industry’s standard operating system: MS-DOS.

The naysayers couldn’t foresee that Apple would muster a band of “raging, inexorable, thunder lizard evangelists”, who would provide emotional and technical support. With missionary zeal, they spread the word to millions around the globe.

Such early adopters  –  evangelists all  –  made the Mac a success. The moral is obvious: get your customers to spread the good word about your product or service.

How do you go about doing that?

Create a cause

Evangelists need a cause. The want something they can believe in. And they want others to believe in it, too. That “it” can be a product the Apple Macintosh, a company like Anglo American or Liberty Life. It can also be a set of beliefs like environmentalism.

Do you have a great product or service that could become a cause. If your product has what it takes, it:

To spread the word, you have to …

Find the right people

Your aim has to be accurate otherwise you’re going to miss the target  –  the people who believe you’re offering them the best thing since the development of sliced bread.

When Apple first began marketing the Mac, it zoned in on senior executives who, the Apple people believed, would order their brainchild in large numbers.

They were wrong.

Inhabitants of executive suites were too far removed from computer usage. They took to the electronic wonders like water takes to a duck’s back. Besides which, they were committed to maintaining the status quo in corporate governance.

Apple then lowered its sights and targeted grassroots users: secretaries, temps, artists, students and interns among others. These were the folks that ultimately made the Mac a success.

Existing users

To find the people who will commit to using your product or service, start with existing users. It’s easier to raise them to higher levels of commitment than it is to convince new customers of the virtues of using only your product or service.

And don’t be afraid to ask the people who support your business for help. Folks love to assist companies that create great things … they want to be associated with winners. So let them help you whenever they can. Some will to demonstrate your product. Some may want to write about it. Others will attempt to persuade friends and acquaintances to switch alliances. Don’t get in their way: let a thousand flowers bloom.

Do whatever you can to get your product into the hands of users. Freely distribute samples, if it’s that sort of product. Or offer “test drives”. When W L Gore introduced Glide Dental Floss, the company sent samples to every dental office in the United States.

Sales consultant and training expert Kevin Davis says that if you want to keep a customer for life, you have see things from his or her perspective. He notes that while most sales people see the close of a sale as the end of a process, customers see it as the beginning.

While you’re selling your product or service to a customer, he’ll form expectations of the value to him of what you’re selling. If your product fails to meet expectations, the customer will be dissatisfied. This means he won’t come back for more. Worse, he’ll spread the word to his friends and acquaintances all right. The wrong word. The most important cause of customer dissatisfaction is the complacency of your sales staff. Don’t assume that everything is going great because a customer doesn’t call in to complain. Like me, most customers don’t complain. They just don’t come back. Overcoming the problem of complacency isn’t difficult. All it needs is constant communication.

Phone your customers from time to time to find out how they’re doing and if you can help. If problems do crop up, don’t procrastinate. Put the right immediately.

A different angle

 If you show that you care, your portfolio of come-again customers will grow.

Hewlett Packard (HP) adopted the same concept but looked at it from a different angle. The company has become adept at driving its competitors crazy. Unlike many of its competitors in the high-tech field, HP doesn’t fall in love with the technology that it creates. It tries to look at it through the eyes of the customer.

When faced with a declining demand for microwave products, HP replaced its Microwave Division with the Video Communications Division. And it found a market for its potential product range in a matter of months, said division chief Jim Olson. It’s now making test equipment for TV studios, a video server and a plain-paper video printer, he reports.

When ignorance is bliss

How did the division fin a ready market so quickly? By acknowledging its ignorance and using what it didn’t know to its advantage.

“We took our current R&D and marketing engineers and … sent them to attend trade shows and meet customers,” said Olson. “We told people we didn’t know anything about the industry, but that we thought we had a lot to offer. We listened. It was better than talking to other microwave engineers.” Olson also refused to hire a bunch of video experts for the new video-orientated division.

“One of the ways to drive your competitors crazy,” he observed, “is to succeed at seeing the forest from the trees. We could do that because we have never been in this forest before.

“Ignorance for HP was incredibly empowering. There’s no way anyone could do what we did without taking a fresh viewpoint of how to talk to customers, how to listen to them, and how take what they tell and go back and execute.”

Sure, customers are important. In fact, they’re vital if your business is to grow and prosper. But the people who service them are just as important. So …

Don’t forget your employees

All of your employees should be evangelists for your cause. After all, their salaries depend on the success of your business. When push comes to shove, all the people who work for you are sales people. Even the “backroom girls and boys”.

A company that takes this philosophy to heart is the airline Kiwi International. It trains all its employees to think of themselves as sales people. They even visit local travel agents to evangelise Kiwi. And they don’t expect to be paid for their extra efforts.

Employees are at the heart of the engine that drives improved customer service, according to the top brass at BankWest, a bank in Western Australia. The bank has implemented a programme designed to encourage a service-first culture to improve customer satisfaction and customer loyalty.

Customer’s perspective

The programme stresses the importance of the customer’s perspective. Branch managers, now called “relationship managers”, allocate about 80% of their working days to customer service and business development. They allocate the remaining 20% to admin. In the “not so good old days”, the split was 50/50.

Another unique aspect of the programme is a form of contingency planning. The bank encourages employees to imagine being confronted by an unexpected range of customer demands. They then had to determine how they would react so that the ultimate outcome was customer satisfaction.

This approach, according to management, was designed to equip staff , specially those in regional offices, to solve customers’ problems on the spot without referring them to people higher up the chain of command.

BankWest’s new approach to staff empowerment and customer delight specifically discourages the degrading rote-learning of slick and clichéd customer services phrases so beloved by many American organisations.

In addition to immersing employees in its service-first culture, the programme has also involved structural changes to banking hall and office layouts. Wherever possible, staff members have direct eye contact with the people they serve. Implementing its “no backs to customers” rule, the bank has redesigned and repositioned counters, chairs, desks and even filing cabinets to ensure that direct employee/customer eye contact is not lost.

Another inflexible rule

The bank has also introduced another inflexible rule: Customers always take priority over all administrative tasks. And the institution’s customer service specialists are expected to frequently leave their desks and “walk the talk” by mingling and chatting to customers.

Each bank employee receives a weekly and monthly assessment on his or her progress towards an agreed performance level. Because each person is now accountable for his or her actions, personal recognition is given to top performers. Poor performers must agree to embark personal development programmes.

The programme punts a simple philosophy: “Product knowledge and skills can be learnt. While certain skills are necessary to succeed, it’s the applicant’s attitude that ultimately leads to excellent service.”

So, to achieve a level of service that will delight your customers and turn them into call-again fans:

 Do things right

Staying focused on customers  –  that’s doing the right thing. Getting people to buy again and again is one aspect of another important business task: doing things right.

What we’re talking about here is customer loyalty. One way to establish it is to systematise the process. Dick’s Supermarkets, a chain in Wisconsin and Illinois, has made it a science.

Dick’s employees regularly comb newspaper, new utility account information, chamber of commerce announcements and other sources. They’re looking for the names of new residents, newly married couples and families with newly-born infants. Each family that makes Dick’s list receives a barrage of enticements. Newly arrived families, for example, get a welcome letter from their nearest Dick’s store. It contains coupons that can be exchanged for two free items each week over a three-week period.

And it doesn’t stop there.

A few weeks later the families get another letter with more coupons. A year later still another letter and coupons.

The rationalisation behind the programme: “If we can bring people in six times, we feel we can convert them into regular customers,” says Dick’s president.

Dick’s targets prime prospects in its areas of operation. I suggest that you do the same.

So …

Target cubby-holes

 A niche is based on the characteristics of a product. A cubby-hole is based on specific customers in a market. For example, Polaroid targets a spacious cubby-hole: real estate brokers. It gets to them through a programme it calls the Polaroid Real Estate Photography Workshop. Those invited to attend receive instruction on using instant photography to shoot pictures that house-hunters can take home and study at their leisure.

For $10, real estate brokers receive instruction, a camera and film, a booklet, discounts and special deals. Besides providing a skill that brokers can use immediately, Polaroid makes them feel wanted and offers hands-on experience with Polaroid products. It’s a great way to create loyal customers.

To paraphrase Aimee Buchanan, loyalty depends on admiration. If you don’t admire a company or its products, it’s difficult to be loyal.

Building customer loyalty takes time, effort and patience. If you don’t want to lose it once you’ve earned it …

Build cocoons

Smart companies use a technique called “frequency marketing” to keep customers on board. The New York Times successfully has developed a programme for residential subscribers to exploit the technique. The newspaper offers members restaurant and theatre discounts. These create incentives to keep subscribing.

There are, of course, other ways to keep your customers happy. You can, for instance, go out of your way to…

Eliminate headaches

Begin by thinking of problems that aggravate your customers. Then solve them. Sometimes it’s as easy as that.

As a motorist who relies heavily on my car to earn an honest crust or two, one of my pet peeves is: How do I get around when I take my car into the dealer for a service? No dealer workshop in South Africa has, to my knowledge, come up with a practical solution.

Perhaps local workshop managers should invest in a trip to Minneapolis. A car repair outfit there, Servtech, has found the answer to an age-old problem that has bugged customer/dealer relations. No, it doesn’t taxi you around while you car is on the hoist. Instead, it picks up your car in the evening, services it overnight and delivers the car to your driveway by 6.30 am.

Now, that what I call service to delight the customer.

You’ll also be inscribed in my good books if, through you, I …

Save money

Seduce your customers to contact you by saving them money. Progressive and innovative companies provide toll-free numbers, offer free shipping and more.

If you indulge in some really hard thinking, you’re almost certain to find even more creative ways of saving money for the people who keep you in business. Telecommunications company Ameritech, for example, offers a new call-waiting plan, As a subscriber, you hear two different kinds of beeps. One heralds a local incoming call. The other signals an incoming long-distance call.

The plan may not be earth-shattering, but it saves you money. Let’s face it, it a lot easier on your pocket to take the long-distance call immediately rather than accepting the local call and dialling the far-off party back.

Often it’s the small improvements that make the difference … that keep your customers yours.

“Remember that a partnership is a two-way street. You’re depending on the partner to supply the expertise you lack.” 
– Cynthia Griffin,
American Business Journalist

ot all that long ago businesses competed in stable national markets. Competitors were familiar. Customers were captive.

Not any more.

If you want to compete today, you need to be flexible. And you need to be global. You need the ability to respond quickly to new, innovative competitors who constantly bust in to woo your customers. To survive, let alone prosper, you have continuously seek new products, new customers and new markets. At the same time, you have to keep costs and prices down.

In a nutshell: you have to move fast; you have to be everywhere.

That’s why strategic alliances are important. They’re partnerships between two or more strong companies that have something worthwhile to exchange. The alliances are often global and can involve anything from research and development (R&D) and manufacturing to distribution.

Joint venture

One of South Africa’s largest industrial conglomerates, Anglo American Industrial Corporation (AMIC), which saw turnover top R20-billion and total net earnings top R1-billion in 1995, got into bed with the Korean electronics giant Daewoo. They set up a joint venture operation in Gauteng. The initial intention: to manufacture colour tubes for TV sets.

Heavily involved in commodities, AMIC went into the alliance to diminish its exposure to the vagaries of the volatile market.

Although chairman Leslie Boyd said that the alliance was not an indication that AMIC wanted to get out of commodities, its investment in joint ventures, like the one with Daewoo, would ensure that the group’s bottom line wasn’t critically affected by commodity price swings.

Build business together

He told the Financial Mail’s Special Survey of Top Companies in 1996: “We are specially keen on joint venture projects with major players who can bring process operations, new techniques and technologies to S A so that we can build business together  – some of which may have export potential.

“It’s another of our strategies for going forward.”

Although the original intention of making TV colour tubes stalled, the joint venture got off the ground in May 1995, when AMIC/Daewoo took control of the quoted electronics company Supalek, a small consumer electronics firm that supplied Kenwood hi-fi and low-end audio brands. With 60,4% of the equity, the joint venture reconstituted Supalek as Daewoo Electronics South Africa. Within eight months its turnover rocketed by more than 110% to R142-million.

Meteoric growth

The addition of Daewoo TVs, VCRs, domestic appliances and the Pace satellite TV franchise led to the meteoric growth in turnover.

“Mike Bosworth, managing director of Daewoo Electronics, describes the joint venture as “a powerful strategic alliance” with both parties willing “to bring more and more to the joint venture”.

At the heart of each companies alliance agreement are the strategic goals of each participant or member.

Let’s look at another example.

In the late 1980s, Japanese computer giant Toshiba entered into two alliances that involved developing and sharing microchip technology. Although, on the surface, both partnerships appeared to have the same technical objectives, they had different strategic implications.

The first alliance called on Toshiba, IBM and Siemens to collaborate on chip-design research. Researchers from each company were to work independently in their respective laboratories and then compare notes. On completion of the research project, each company would go its own way.

Since chip design is clearly a strategic activity, this was a strategic but limited alliance. A contract agreement was sufficient to cover all the issues.

Strategic implications

The second alliance  – between Toshiba and Motorola  – was also aimed at developing chip technology. However, the strategic implications were much greater than those in the first alliance. It called for the partners to exchange their core expertise. In effect, Motorola gained access to Toshiba’s “family heirloom”  – its process technology skills. In return, Motorola granted Toshiba access to its “crown jewels”  – the company’s product development skills.

Yet, despite the alliance, both companies continued to compete head-on in several geographic areas.

The success of the alliance depended on tight control of the information exchanged between the partners. Toshiba and Motorola opted for a joint venture governed by a detailed contract that stipulated what technologies and information could be exchanged.

That was an alliance.

In 1986, the two giant companies expanded their co-operation. They agreed to:

Their pact of co-operation didn’t end there. Toshiba also agreed to actively support Motorola’s efforts to access the Japanese market.

That was a strategic  alliance. And, like in many strategic alliances, the two partners were also competitors.

How can you build partnerships with competitors? To find the answer, I investigated …

The Nike story

When Nike founder Phil Knight first ventured into the market for athletic footwear, the only competitor was a German company, Adidas. Knight decided to attack Adidas with low-priced, high-quality Japanese imports. After all, he reckoned, if it worked for cameras, why couldn’t it work for shoes?

So the Nike boss entered into a sourcing agreement with the Japanese shoe manufacturer, Onitsuka. Nike provided the designs. Onitsuka manufactured the footwear.

Knight configured the business so that he retained the key value activity  – design  – in-house. The agreement also leveraged the partner’s resources: its manufacturing infrastructure and know-how.

But Knight had overlooked a key factor. He had done nothing to protect the future.

Onitsuka saw the success of Nike shoes and decided that it wanted the market for itself. Knight turned down an offer from Onitsuka to buy him out. Onitsuka retaliated by withdrawing its manufacturing facilities.

A valuable lesson

 Knight had no fall-back position. But he learnt a valuable lesson.

He now insists on contracting multiple manufacturing sources.

So what real benefits can you derive by entering into strategic alliances? The 1996 issue of Trendsetter Barometer, produced by Coopers & Lybrand, surveyed 437 companies that were identified as the fastest growing businesses in the United States between 1990 and 1995. It found that companies that collaborated with outside partners launched 23% more new products that those that relied entirely on inside resources.

So-called external teaming, used by 51% of the high growth companies, usually took the form of strategic alliances with suppliers or sub-contractors (41%), marketing or selling partners (24%) and joint venture operations (3%).

According to George Auxier, of Cooper & Lybrand’s Entrepreneurial Advisory Services, these companies reduced their risks by engineering new products to external rather than internal standards. They also derived benefit from the collective resources, expertise and experience of their partners.

However, before you rush into wedlock with what appears to be a suitable partner:

Rethink your business

Evaluate each of your company’s activities from design and manufacturing to distribution a sales. Look carefully at where you add value. Look equally carefully at where you don’t add value.

Your investment in R&D, for example, has led to innovating improvements in your products. Clearly, R&D is one of your company’s value activities.

On the other hand, when you manufacture a product, you’re not adding any value  – say through innovative logistic systems. You could manufacture more cheaply through an outsourcing agreement without any loss of value.

Reconfigure your business

When you’ve evaluated all your company’s activities, decide which you should keep in-house and which you can give to partners. Partnerships can be internal (subsidiaries) or external (alliances).

After taking stock of your situation, you may find that it will pay you, in terms of cost and quality, to outsource the manufacture of your products to an external alliance. You can the plough back the resources your save into a new distribution network or into the development of new technology or products.

According to recent research, about 85% of the companies in the United Kingdom farm out some part of their operations to independent contractors. The concept, first publicly punted by failed American Presidential contender Ross Perot in 1962 when he set up Electronic Data Systems (EDS), really took up in the United States as the 1980s drew to a close. It was a concept that companies in America and across the Atlantic, in Europe, desperately grasped in a bid to contain fast-rising costs.

Unhealthy pallor

After closely analysing the situation, in which bottom line figures began to display an increasingly unhealthy pallor, company bosses decided to concentrate on core competencies and outsource everything else. This led to improvements in the quality of products because outside specialists were responsible for producing different components. In addition, service improved and reduced stock levels freed capital previously tied up unproductively.

James Fitzgerald, chief executive of EDS in South Africa, is bullish about the future of outsourcing in this country, particularly in the area of information technology (IT). He reckons that outsourcing will account for a good share of the future world-wide spend on IT, which he expects to grow by 13% a year until 2002.

South Africa’s return to the international business community has given impetus to the spread of calling in outside contractors. As an example of the growing trend, Fitzgerald cites the Standard Bank.

Phone Standard to authorise a MasterCard and you speak to an EDS employee. This is part of the service included in a R1-billion contract that the bank signed with EDS to restructure and manage its card division.

Big Blue has also entered the local IT outsourcing arena. In 1993, a year before it bought back its former South African business, IBM established International Outsourcing Services. Also muscling in on the act: Momentum Life, which recently gave birth MC2 Solutions. It’s structured to electronically collect and disburse money and provide admin services.

Fiery American management consultant Tom Peters passionately believes in the benefits of outsourcing. “Contract out everything except your soul,” he urges with a regulatory bordering on tedium. But South African business only subscribes to the concept only with reluctance. Carl Roberts, of IBM Global Network, diplomatically says that locals are still in need of education. However, long cocooned from the real world by an over-protective government, South African business is wet behind the ears when it comes to realising the benefits of outsourcing and implementing it.

Converts

But there are exceptions. Converts include the South African Breweries (SAB), Gengold, Ingwe Coal and Premier, which have contracted out some IT work to IBM. Standard Bank, as mentioned, outsources much of its MasterCard operation to EDS, which has also scooped a R500-million outsource contract from JCI and a R200-million deal with Automakers.

So, if you want to weather the invasion by foreign companies or become internationally competitive, identify your core competencies and hive off the rest. It’s the way to go.

Leverage resources

Reconfiguring your business may not be the total answer. In some cases, reconfiguration fails to bring sufficient resources to add meaningful value. Alliances that allow you leverage resources from your partners may offer the solution.

If R&D is an important value activity in your company, for example, you can combine the resources of your partner’s company with your own through co-development. As one manager explains: “It’s just like leveraging your company through borrowing. Except here you leverage through other firms’ resources.”

But be warned: outsourcing doesn’t come without pain because it’s inevitably accompanied by re-engineering or restructuring. And that means heavy duty job losses. Consider the case of Johannesburg-based Anglo American Property Services (Ampros). At the time of writing it was in the throes of a major restructuring process. Job losses were expected to be heavy-duty. About 900 of the company’s 2 000-strong workforce faced the axe.

The reason, according to a management source: Ampros wanted to concentrate on its core business  – property asset management. It, therefore, intended outsourcing “periphery operations” such as cleaning and security services.

The company’s operations chief, Piero Farina, claimed that Ampros had embarked on the re-engineering programme to keep it abreast of developments in rival property management companies which outsourced non-core services.

He also noted that the restructuring would have a positive impact on the shape of Ampros’ bottom line. That, after all, it what it’s ultimately all about.

What happens the businesses that don’t form alliances or refuse to outsource peripheral activities. In view of the demand for excellent customer service and murderous competition in the market place, they either battle just to survive or go down the tubes.

Painful sting

Apple Computer, once a front-runner in global IT field, has felt the painful sting of refusing to change. It stuck rigidly to its “exclusive proprietary” strategy in the face of plummeting earnings. It consistently refused to allow other suppliers to sell its hard and software. It was a policy introduced by co-founder Steve Job and enthusiastically propagated by his successor John Sculley, who quit his job as president of Pepsi-Cola in 1984 to join Apple.

Marketing-orientated Sculley grew the upstart computer company from a $800-million a year fledgling to an $8-billion a year giant. Then Apple saw earnings drop by 80% in 1993 and Sculley quickly bowed out. It’s problem: the company arrogantly discouraged “cross-platform compatibility”.

With the exception of Apple, giants in the IT industry co-operate as much as they compete. Setting standards for consumers to interchange compatible hard and software has meant massive profits for such players as IBM, Intel and Microsoft. While they and others reaped the benefits of co-operation, Apple saw it its 10% market share in 1991 sag to about 7% in 1996.

Just how to leverage resources effectively is a key consideration in any alliance strategy. Nike did it. A graduate graphic design student created its internationally famous “swoosh” logo for a mere $35.

To sum up, reconfiguring your business  – redistributing your company’s activities between the parent business, subsidiaries and alliances  – will help you concentrate your resources in areas where you can add value.

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