This video (which can’t be embedded, sorry), does a great job of explaining opportunity cost. The ending isn’t an Academy Award winner or anything but it’s entertaining.
Click here to watch the opportunity cost video (opens in a new window)
Tag Archives: management
Just read: “The food court king” at CanadianBusiness
Every mall has a food court and, it seems to me, basically the same options: Usually a couple of Asian food places, an Italian place, a burger-and-fries place, and a sub place. The brands are usually pretty similar from one mall to another (at least in the malls I’ve shopped in).
Turns out, someone has been dubbed “the food court king” for his growth and broad brand lines represented at many food courts across Canada.
Stanley Ma is the founder of MTY, a food services company whose specialty is branding. They have 26 brands (some acquired and some developed in-house) and over 1,700 stores across Canada.
Read the article here: The food court king. Don’t miss the key lessons from this article:
- Good growth is thoughtful, strategic, and patient.
- Effective branding is an asset.
- Successful businesses find synergies among its products and brands.
Learn more about MTY and see what brands they own at MTYgroup.com.
HP places a big bet on its future competitiveness
HP recently hired former SAP CEO Leo Apotheker as their new CEO. Some people are calling it a foolish move. I think it’s smart. I think HP is making a big bet on a strategic move that could transform the company.
THE BACKGROUND
First, a little background, just to review some of the recent events at Hewlett-Packard:
- CEO Mark Hurd, who made HP into a lean, financially successful organization (with significant marketshare in hardware) in the past five years, was faced with a sexual harassment accusation.
- An investigation determined that the company’s sexual harassment policies were not violated but the company’s business and conduct policies were violated, due to some inappropriate payments from HP to an HP consultant with whom Hurd had a personal relationship.
- Hurd resigns.
- Hurd is hired by software giant Oracle.
- HP threatens that it will sue Hurd for a non-compete clause in his contract.
- HP backs off of their lawsuit.
- HP hires former SAP CEO Leo Apotheker as CEO.
That’s the backstory. Now let’s dig a little deeper:
STUPID AND SMART
Admittedly, Hurd did something stupid and his resignation is not a surprise. Oracle made a good move in hiring him because Hurd’s background as an efficient, cost-cutting machine will help turn Oracle (which tends to be somewhat inefficient because of its acquisition-heavy growth-plan) into a more profitable enterprise. [Note: It's already doing well… but Hurd will make it better].
HP was wise to back off of its threat to sue Hurd. That would only attract bad press and make HP seem to be a poor loser.
But what about its move to hire Apotheker? That has been met with some mixed opinions. (If you haven’t yet, check out this BusinessWeek article which points out that SAP suffered under the 2-year-long leadership of Apotheker).
In spite of some of Apotheker’s baggage, I think HP is making an aggressive — and fairly smart — move. Here’s why:
COMPETITIVE STRATEGY: SOFTWARE
Hewlett-Packard has long competed in the computer hardware space, easily straddling both retail and business sectors and enjoying a fairly significant marketshare (thanks to Hurd). Consumers probably think of HP as “the printer people”; medium and large businesses may have desktops supplied by HP.
The problem is, hardware is a commodity business and very price sensitive. Prices are aggressively decreased as low-cost competitors vie for limited dollars. Equipment is easily outsourced, driving costs and prices down. At the same time, businesses with pinched budgets look to extend a previous computer hardware investment by delaying equipment upgrades.
For companies with good marketshare, there is some benefit to being in this space (as HP has shown), but expenses are high and there is a lot of downward pressure on price, so profits are always a struggle.
The real money is in software. Software – especially enterprise software – can be expensive to development but, once built, it is very cheap to sell and install. (Similar to pharmaceuticals, where the first pill sold cost millions to develop but subsequent pills cost a mere fraction of a cent).
Not surprisingly, HP is looking to compete in the enterprise software space. HP offers some enterprise software solutions but their offerings pale in comparison to the offerings at Oracle and SAP.
SAP is the only company that offers any competition to Oracle. (Well, maybe IBM is up there, but I don’t think it’s as significant of a player). HP tends to be down one tier, competing with other smaller players for the scraps left over from Oracle and SAP.
Apotheker knows software, and as a former SAPer, he knows his main competitor Oracle. In fact, he likely knows more about Oracle than Hurd knows, he definitely knows more about SAP than Hurd knows, (thus he brings a superior competitive advantage) he likely knows more about enterprise software than Hurd knows, and he has experience in the enterprise software space – the very space that HP covets.
I believe Apotheker’s biggest challenge will be turning a hardware company into a software company. Apotheker’s primary experience in leadership has been in growing a software company. He’s been with SAP since the late 1980′s and although his work as a CEO wasn’t met with enthusiasm, he did have some success in the previous years where he founded country-specific versions of SAP and was president of regional teams.
WHAT APOTHEKER SHOULD DO
- HP has an interesting advantage over Oracle (and SAP). They have hardware in a lot of companies. I believe they could easily achieve a foothold in the same way that Microsoft does – by adding basic HP software on their equipment, then creating enterprise solution add-ons that customers can purchase which run seamlessly with the pre-existing HP software.
- Find a space where Oracle and SAP are lacking and innovate there. (SAP has been slow to move into cloud-based computing and social media adoption. I think Oracle is a little better but maybe HP has an opportunity here).
- HP should also start playing catch-up, Oracle-style: by acquiring or developing significant joint partnerships with smaller innovative software players looking for funding and growth.
Disclosure: I have written content for SAP (while it was run by Leo Apotheker) through a SAP content partner, and I am currently in a consulting contract with HP as a technical writer. These are my opinions only! I have tried to remain as neutral as possible and have not received compensation for this blog post, nor have I been asked or authorized to write it.
Knowledge centers: Why your growing business needs one and how to build it
Growing businesses face a variety of challenges, from scaling distribution to hiring and training competent staff.
A knowledge center can help to minimize the pain that comes with growth.
A knowledge center is an offline or online area in your business where you capture and store all of your best practices, procedures, processes, and more. It is a single repository of information to enable effective operations.
It’s a place where your staff can go to find the latest and most relevant information and resources to help them do their job. Instead of running here for one thing and over there for another, you can keep it all together in a single knowledge center.
Your knowledge center might start quite humbly, with just a document or two, but as your business grows, your knowledge center can grow with it.
Hiring a technical writer to help you create and/or improve and/or moderate your knowledge center may seem like an investment in a non-core asset. However, with the right structure and attention, your knowledge center can deliver the following benefits:
- Less time wasted as staff go searching for an answer.
- Faster redeployment time when you change a process and need to change the instructions, guidelines, and policies that accompany that process.
- Lower training costs — knowledge centers support training and sometimes even replace it. Moreover, HR can rely on knowledge centers as a starting point for training that they perform.
- Improved managing: Management moves out of “how-to-do-it” training mindset into a “how-to-do-it-better” mentoring mindset.
- Processes become streamlined for an improved customer experience and potentially lower costs throughout the organization.
Here are some tips to build and maintain a useful knowledge center:
- Don’t start from scratch. You probably already have user manuals and job descriptions you can add
- Keep it simple: Create a blog but make it private (require a sign-in).
- Train your staff to refer to the knowledge center first, before they go up the chain of command.
- Record every question you are asked and add it to the knowledge center.
- Assign on person to be in charge of your knowledge center. Task them with the responsibility maintaining and regularly updating the information.
- Get your staff to record the procedures they perform and add them to the knowledge center.
- As your company grows, start dividing your knowledge centers up and give each department their own knowledge center to maintain.
- Over time, review the content and remove or modify obsolete information.
Business puberty
Life as a child is carefree. You play and run and eat candy… and everything seems right with the world. Then mom and/or dad have “the talk” and suddenly the world seems like a different place. It’s weirder and more complex. You notice things you didn’t notice before. You know things you wish you didn’t know. You can never fully go back to those carefree days.
If you’re running a start-up or relatively new small business, consider this post “the talk”. Your years of playing and running and eating candy are over.
YOU’RE GOING TO EXPERIENCE CHANGES
The transition from child-business to grown-up-business is somewhat awkward and not always a distinct event. Your customers change, your products and service evolve, and your efficiencies improve.
One of the things you can expect to change is your financials. As a new business, you might have kept fairly haphazard books. But now that you’re growing up, your financials need to be cleaner and clearer. (And, I would even go so far as to say that you’ll grow faster and more effectively if you take the first step of putting your financials in order… instead of waiting for your business to grow first before doing something about your financials).
HERE ARE THE BASICS
Want to grow? Start with the basics:
- Implement a good bookkeeping system. I like and use IAC-EZ (disclosure: A friend of mine owns it). I’ve also checked out some other bookkeeping systems that I like, including Clarity Accounting (which recently changed its name to Kashoo).
- Separate out your bank account, credit cards, etc. Even if you’re a sole proprietor (which technically means that your personal and business financials are one and the same, to be filed on a single tax return) you’ll find it to be so much easier to manage your business when your business financials are separated out.
- Get compliant with tax laws!!! Pay your taxes. Keep good records. Expect to be audited and celebrate every year that you aren’t audited. But be ready.
- Get an accountant… a good business accountant; not the guy who also does your grandma’s taxes out of his basement.
NOW TAKE IT TO THE NEXT LEVEL
Once you have the above financial “infrastructure” in place, make sure you practice good financial habits. I define “good financial habits” as accurate, consistently-entered numbers entered in the right places and used to build your business.
“… accurate” will help you to trust your numbers. Grown up businesses rely on their financials to guide their decisions.
“… consistently entered” numbers will mean less time spent entering numbers and more time using those numbers for business growth. There’s also a lower margin of error when you enter your data consistently.
“… entered in the right places”. Get to know the difference between balance sheets, income statements, and cash flow statements. I confess: I resisted for a long time and as soon as I took the time to learn the stuff, it was like a magic key that unlocked a world of business growth.
“… used to build your business.” This part is key. Financials are not just something you keep so that tax time is made easier. Rather, your financials are a tool you can use all year long to accelerate your business performance.
- Your financials are the benchmark you’ll use to conduct ongoing measurement of your business’ health. When your expenses are lower than last year, and your income is higher, that’s a good thing! (Okay, you know that part… but it can get far more complex than that).
- Your financials are the indicators you’ll use to know where exactly to take action. (On that note, here is an excellent article by Ken Kaufman called “20 Indicators Your Financials are Wrong” which I believe is a must-read for every business… and ESPECIALLY for businesses that are making the transition from child to adult). Financials are the easiest way to quickly identify what your next strategic steps should be and what exactly you need to do to be better in that area.
THE VALUE OF FINANCIALS
While clients served or inventory turnover are nice numbers to have, the only numbers that truly matter are found in your financials. Those numbers will determine whether you can open up shop tomorrow and whether you’ll retire early or die trying.
The problem is, financials seem like hard work to navigate. (They’re not, they just seem that way). So new business owners who want to grow their businesses but don’t want the challenge of dealing with numbers will spend a lot of money on many of the latest tools and programs that are offered… when all they really need to do is give some attention to their business’ numbers.
Managing financials is what grown-up businesses do. If you want your business to enter adulthood, are you implementing good financial practices today?
I’m glad we had this little talk.
Rethinking the consultant’s business strategy
I recently heard someone mention that a consultant’s job is to get fired. Although that sounds drastic, what they meant was that a consultant is hired to provide a service that, once delivered, should render the consultant redundant.
For example, a company with an efficiency problem might hire an efficiency consultant who will get the company to the point where they are so efficient that they don’t need the consultant any more.
TYPICAL CONSULTING BUSINESS STRATEGY
This type of strategy is situational and based on a problem/solution mentality. A business identifies a problem and hires a consultant to guide the business to a resolution. While it is very practical, it doesn’t always make sense. It’s reactionary and it relies on the business to first recognize the problem and then accurately diagnose what kind of “repair” is necessary. Problems that aren’t noticed or aren’t properly diagnosed can lead to missed opportunities and a poorly run business.
AN ALTERNATE VIEW
An alternate view is for consultants to become proactive value adders. They can do this by creating products and services that meet key needs for businesses, which may not be in problem areas but which should be in hot button areas. It requires a different kind of mentality, a different kind of marketing, and a different kind of delivery to be successful.
To be successful, consultants need to approach businesses with a clear proposal that demonstrates how well they know the business and that reveals the opportunity for the business to be more successful with the consultant’s help.
Consultants won’t want to do this because it requires proactive selling and measurables (neither of which are things that many consultants enjoy doing) and businesses won’t want this because they tend towards a gap-plugging mentality instead of a success-optimizing mentality.
Favorite video: Align training, HR, and strategy (part 9 of 9)
In final installment, Learn.com explores the critical link between training, HR, and strategy.
My name is Aaron Hoos and I'm a business, finance, and real estate writer.
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