Natural Entrepreneur: Improving Enterprise Productivity

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We face intense competition

The intensity of competition has been steadily growing over the last 25 years for many reasons. A soft economy, changing technology, business concentration, and globalization are all factors. The companies who win these competitive battles are inspired to continue to seek new opportunities for gains, causing a spiral of challenge. While difficult, this is also the strength of capitalism.

This spiral will continue as long as it can be fueled by the forces that have been at play, but especially the fuel of innovation and globalization. The answer is to embrace the challenge and seek ways to lead the change rather than simply reacting to it when ultimately forced. In other words take action to become the one who is raising the bar. The question, of course, is how?

The right question that CEOs should be asking, is How can I improve total enterprise productivity?

Enterprise Productivity is the total measure of the yield we are receiving from doing the right things as a business, and, doing those things well in the eyes of our customers, relative to our competition. Enterprise productivity is measured in revenue growth, market share gain and overall growth in profitability. Enterprise Productivity is the result of four kinds of productivity:

Strategic Productivity,
Operational Productivity,
Marketing Productivity, and
Organizational Productivity.

CEOs and Boards Of Directors need to drive efforts to improve strategic productivity

Strategic productivity is the concept of doing the right things to serve customers. It starts with the vision thing but gets real when it becomes ingrained in corporate culture. It is the outcome of a rigorous and participative strategic planning process that is based in a strong understanding of the customer and competitive environment. It is built upon an understanding of the economic drivers of your business and the basis for value creation within your industry. It is the 3 or 4 ideas that define the uniqueness of the business and is understood by all employees at all levels of the company.

Strategic Planning is not a binder on the shelf. It needs to be supported by action plans and budgets. It needs to be tied into measurement systems. Strategies need to cascade into departmental objectives and ultimately into job descriptions and performance reviews.

Strategic productivity occurs when every action, by every employee is consistent with the driving vision that makes the business meaningful to its customers.

The right Strategic questions to ask are:

Is our vision/mission well defined and meaningful to our customers?
Is our vision well understood by our employees and a part of our company culture?
Is every employee taking actions that are consistent with our vision?

Functional VPs, Managers and Directors need to improve operational productivity in all functional areas, and not just in manufacturing

Improving the manufacturing process results in improved operational productivity. “Lean manufacturing”, “Just-in-Time”, “Total Quality Management”, “Continuous Improvement” and “6 Sigma” are all powerful concepts that every business can benefit from adopting. In the simplest sense, these methodologies are all about improving a manufacturing process so that it results in predictable results without variation. But, in addition to manufacturing, companies need to extend these concepts into other process areas of the company.

Selling, for example, is a process. Many businesses do not treat it that way. An industry that does view it that way is direct marketing. Direct marketers carefully measure and analyze the performance of every marketing offer in every channel to every customer segment. They routinely apply continuous improvement techniques to create ever more productive campaigns. Similar concepts can be applied in businesses that market through traditional channels to gain productivity improvements.

Certainly, anyone who is marketing over the web, by bidding for pay-for-click keywords, ought to be measuring the results. Yet, the latest data shows that 75% of companies who pay for key words do so against a fixed budget amount and not by tracking the conversion rate of the clicks. This is not unlike a company treating direct production labor costs as a fixed cost instead of as a variable cost with no relationship to what was produced. Simply put, these sales managers are ignoring the productivity of their work and creating both economic waste and wasted opportunity.

You can look at any process within your business and apply lean thinking and quality tools to drive out costs in your overall operations. Anything in a business that is a process can be improved by the application of process improvement tools. Selling is a process; product development is a process; accounts payable is a process; hiring is a process; and the list goes on.

Start by making a list of the major processes within your company and create a flowchart showing how the work is now done. Then set about the work of figuring out how to remove all of the work that is not adding value. You will find many quick improvements that will not take much investment. Later, you can start to look at even bigger gains by asking if the, now, streamlined processes are the right processes in light of your strategic plans.

The right Process Improvement questions to ask are:

Have we defined and documented our processes throughout our company?
Have we eliminated the non-value-added work within these processes?
Do we have the right processes to fulfill our company vision?

Marketing productivity is about branding

Strategic vision gets translated into perceptions in the customer’s mind through branding. A strong brand increases the productivity of every customer interaction, or “customer touch,” by providing meaning and context. Meaning and context help to make the interaction more memorable and create a position for the brand in the mind of the prospect. A strong position becomes mutually exclusive with any competing brand. A business that has developed a reputation or a brand that is perceived by customers as the best at what it does, by definition, has only inferior competitors. A strong brand is a monopoly.

Achieving a strong brand is a long-term effort. It takes both time and a very consistent message. Further, it requires that all actions of the business live up to the brand. Branding is about making a promise to your customer and giving them the confidence and faith that they can rely on you for that promise.

People often confuse branding with saturation advertising that only huge consumer packaged goods companies can afford to engage in. Branding does not have to cost anything more than you spend today. It requires customer knowledge, knowledge of your competitive advantage and creative marketing to consistently communicate who you are. Business cards, facilities, lobby appearance, landscaping around you offices, invoices, web pages, affiliations, Christmas cards, press releases, trade association memberships, etc., all have communication value about your brand, whether you manage that communication or not. So why not use them to enhance your brand?

Differentiation is needed for strong brands. But differentiation comes in many forms. The product differences between a glass of Coke and a glass of Pepsi are small, however the brand differential is huge. Any business can develop a strong brand, even if it’s products are commodity-like. Without a brand you are destined to lose out to a lower cost supplier, no matter how productive your manufacturing process.

The right Branding questions to ask are:

Do we understand the different segments of our market and which segments we serve?
Do we understand what attributes are important to our served customers?
Have we defined our brand characteristics?
Are we being consistent in how we communicate those attributes to the world?

To be continued...

Increased enterprise productivity is about using specialized know-how across the entire enterprise to increase profitability. This includes Strategic, Operational and Marketing productivity. In part 2, we will discuss the final dimension, Organizational Productivity where you deliver results by engaging your employees.

John D. Ela is an experienced CEO and Consultant who provides strategic direction and leadership to propel businesses to the next level. His unique blend of strategic analysis and solid execution have increased corporate value in a range of industries including high tech, consumer packaged goods, industrial equipment, and direct marketing. The Enterprise Productivity Model approach to General Management has proven effective across such diverse business environments as, divisions of public companies, family owned enterprises, turnarounds and startups.

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