Jeff Standridge (Intro):
Are you ready to change the trajectory of your business and see massive improvements? Each week, we’ll share strategies and practices to generate sustainable results and long lasting success in your organization. Welcome to the Innovation Junkies Podcast.
Jeff Standridge:
Hey guys, welcome to another episode of the innovation junkies podcast. I’m Jeff Standridge.
Jeff Amerine:
Hey, this is Jeff Amerine. I’m glad to be back.
Jeff Standridge:
Yeah. It’s good stuff, man. Got some great stuff to talk about today and excited to just be back on here. It’s been a few weeks since we’ve been together.
Jeff Amerine:
Yeah, it has indeed. And to kind of kick this off a little bit, one of the top three things that typically causes new ventures to fail, it’s one of the top three is a lack of focus and it’s also true for large enterprises. So talk a little bit about what business owners and leaders can do to keep your business on track.
Jeff Standridge:
Yeah, we’re going to be talking about core business focus and there’s really five things. We’ll call it five key focus areas to keep your business on track. The first one is you’ve got to know the problems you solve. Unfortunately, and Jeff, you and I see this all too often. We have business leaders, whether they’re startup founders or they’re seasoned business leaders, who can get a little bit distracted by potential shiny objects and haven’t really done the work to step back and say, “Number one, are we solving a real problem in the market? And number two, is it a big enough problem that affects enough people? And will they pay more than what it costs to solve the problem so that we can actually generate an ongoing product service or ongoing business concern?”
Jeff Amerine:
Yeah. It’s so true. Understanding that and keeping focused on that sort of an issue and separating the noise away from what it is that you’re best and highest purpose. A lot of times, if you think about what a company is trying to do and the problems they solve, you have to be in an area where what you’re selling is a must have versus a nice to have. And sometimes it’s difficult not to chase that shiny object or look at the squirrel type of mindset when something else comes along that you think you might be able to do, requires real discipline.
Jeff Standridge:
That’s right. And one of our very early podcast guests in season one, it might have been number one, two or three, he said he creates a lot of intellectual property. And he says, he’s looking for a business problem that has a tailwind behind it. And he kind of defined that as, it’s a big problem, it affects a lot of people. Multiple people have tried to solve it and have failed. And that’s where he focuses his time in trying to figure out how to solve a problem like that.
So you’ve got to know the problems you solve and you’ve got to build a solution that solves those problems at a price point that would produce a profitable return. The other thing you have to know is you’ve got to know the clients you serve. So you’ve got to know who your ideal client profile is. That’s the term we use a lot. Who are the people that are experiencing the problem to the greatest degree? Who will benefit the greatest amount from a solution?
Jeff Amerine:
Yeah, it’s so true. And, oftentimes, when people think through that, whether they’re a startup, whether they’re a large enterprise, they think about customer segmentation and they tend to want to generalize that to industry segments or types of companies. And it needs to be more personal than that. It needs to be down to specific decision makers and influencers within that ideal client profile that are the ones that ultimately are going to have a lot to say about whether or not you get the business.
Jeff Standridge:
That’s right, that’s right. I hear people all the time say, “Well, anybody could use this.” And my response to them, “Well, if anybody’s your customer, you’re going to go broke before you reach enough buyers.” Because you can’t send a message that resonates with everyone. You’ve got to know who’s experiencing it to the greatest degree, as you said, who are those decision makers? And you got to develop your message to target those people.
So, know the problems you solve, know the clients you serve, know where you’re going. What’s the vision and direction and long term strategies and targets of your business? Where do you expect to be in three years or five years? And does this business problem that you’re now embarking to go try to solve? Does it take you closer to, or potentially further away from where you said you’re going?
Jeff Amerine:
Yeah, absolutely. You clearly want there to be alignment there. And that requires you to also think a lot about, where’s this market headed? Is there still going to be an opportunity there? Are the problems we are solving today, actually the problems that our clients are going to have based on our vision and our long term strategy. Some of that stuff, when things sneak up on companies or they get caught flat footed, it’s largely because they haven’t been thinking beyond the current quarter.
Jeff Standridge:
Yeah. Strategic plans have gotten a bad name in the last, gosh, decade. No, longer than a decade. For as long as I’ve been in the workforce, because they’re not strategic, they’re not plans. And they try to encompass everything that the organization does versus saying, “This is where we’re going. This is the rifle shot that we’re making as an organization. And here’s how we’re going to make that rifle shot hit the target.” And then if a distraction or a potential distraction or a new business problem presents itself, there are three or four ways you can answer that question. And I think we’ve talked about this briefly in another episode is, number one, we can look at where we’re going and this new potential opportunity. And we can say, “Does it fit with where we said we’re going?” And the answer might be, “Yes, it fits squarely in the middle.” The other answer might be, “No, and we’re going to stay away from it for right now.” The final answer could be, “No, it doesn’t match the strategy that we laid out the long term vision, the long term targets, but the circumstances have changed. The market has changed since we built that vision, so we may need to adapt our direction and strategy.” And that’s an okay answer as well, a good strategic growth plan or a good strategic plan doesn’t absolve the leadership of responsibility to make decisions. It just gives them a framework within which to make those decisions about new opportunities.
Jeff Amerine:
And I’ve heard you say a number of times, a strategic plan is often more about what you won’t do than what you will. And said another way, Guy Kawasaki, big thinker, chief evangelist with Apple and Macintosh in the early days said, and he was talking about customers, but it’s really true about solution set and vision, “Don’t be afraid to polarize. You can’t do everything.” And it gets back to that idea of focus, not everybody is going to be your customer. Not every problem is going to be the problem you solve. Same thing for your strategy. Throw some things overboard that are not going to add that value that you want in the long term.
Jeff Standridge:
So know the problems you solve, know the clients you serve, know where you’re going as an organization, your vision, your long term targets, your strategy. And then know where you make your money. Talk about that one a little bit.
Jeff Amerine:
Yeah, it’s so true. In a good classic example, we’re sitting in a strategic review for a company. They were continuing a line of business where it was pretty clear they were shipping money out the door with every sale. And there wasn’t a good rationalization. There wasn’t a fundamental understanding for the longest time of the unit economics. And finally, it gets to the point where you either have to increase price or you drop that line, if you can’t do it.
But letting that kind of stuff go on a lot of times is almost poisonous or cancerous to an otherwise successful business because they think they need to do something. It’s a zero margin thing. And if it’s really not adding business development in other areas, in other words, there’s not a cross subsidy, they should stop doing it. And it was fundamentally continued because they didn’t understand their unit economics.
Jeff Standridge:
It’s hard to fire a non-performing client. It’s even harder to… I’m sorry. I said that backwards. It’s hard to fire a non-performing employee. It’s even harder to fire a non-performing client. And sometimes you have to do that. Or a client segment because it’s costing you money. Maybe it’s contributing strategically to the organization in other ways. And if that’s the case, then you’ve got to be able to quantify and qualify that. If you can’t quantify and qualify it, then there are big questions about whether that’s a strategic part of your business.
Jeff Amerine:
Exactly. And you’ve got to have a clarity of visibility so that you know where you stand so you can make informed judgments based on what’s generating margin. What’s growing the top line, what’s supporting the bottom line. Those are kind of essential things that can’t be driven by guesswork or intuition.
Jeff Standridge:
Have an understanding of what your break-even is. I was involved in a retail business a few years ago with some partners. And whenever they closed out the books at the end of the day, the point of sale system sent me a detail of all the transactions, a summary and a detail. So I already knew, I’d calculated what the daily break-even was. And literally by opening a quick PDF, I could look and say, “Did we hit our profit break-even, and did we hit our cash break-even?”
And it was phenomenal. You talk about transforming a business. If you know what your daily break-even is, that can be phenomenal. So know where you spend your… Know where you earn your money, where you make your money. And then the final one is know where you spend your money. How many times do we run into businesses that have no idea what their income statement looks like below the top line?
Jeff Amerine:
Yeah. And it’s so critical. And a lot of times, particularly in the early stage of a new project, new product, it’s understandable that you’re going to have forecast errors on the top line, on the revenue side, because it’s new ground and you learn those over time. It’s really never excusable to not have a good understanding of the expense side and why those expenses are necessary and what they’re going to be. And I have to tell you this last one of knowing where you spend your money, in inflationary times like we have now is more critical than anything else.
It’s going to force people to be ahead of it and figure out what are these inflationary trends going to be like on the input side? Where can we make changes? Where do we drop lines? Where do we add price increases? Just to try to stay ahead. I’ve never seen, in my 35 year career, a more challenging environment on the input side, the expense side, and figuring out how to manage it. So understanding where you stand is critically important.
Jeff Standridge:
Revenue and sales covers over a lot of sins. And when that revenue and sales starts to falter in an inflationary environment and economic depression, recession, whatever you want to call it, in a downturn of some form, when those sales start to suffer, those sins become exposed. And if you don’t have a good idea of which expenses are strategic and are contributing to your business and which are not, you’re going to be in trouble.
Jeff Amerine:
And one final thought on this. If you do these last two items, knowing where you make your money, knowing where you spend your money, well, going into a downturn, your inclination sometimes is going to be to draw back, do less, be more conservative. Sometimes these downturns are precisely the right time to put capital investment in, to take advantage of competitor’s weakness, and to really put your foot on the accelerator.
Jeff Standridge:
Excellent.
Jeff Amerine:
But you can’t do that if you don’t have clarity of where you make your money and where you spend your money.
Jeff Standridge:
Great summary, great way to cap it off. This has been another episode of the Innovation Junkies Podcast. Talk to you soon.
Jeff Amerine:
See you next time.
Jeff Amerine (Outro):
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