S7 E45-48 Be sure your business will make money before you launch with Jeremy GRay

Jeremy Gray – Practical Solutions to Difficult Problems
IBGR. Network. The World of Business at Your Fingertips

Be sure your business will make money before you launch. Planning ahead leads to success.

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Episode 45 Employee feedback is not working. Here is what you should be doing.
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The once or twice a year performance review is a staple of many companies both large and small. Usually, it is handled poorly or avoided completely. Even those managers who are strong advocates of appraisals often are poor in execution. Sometimes it is treated as a tick the box exercise with little value to the employee. Then the review is filed away and not look at again until it is time for the next appraisal.

Why should this be? Because many organizations have forgotten why performance appraisals were introduced in the first place. The laudable original intent was to help employees get better, to grow to their potential. Unfortunately, reviews became linked to pay and bonuses and thus became a high stakes game. 

Telling people where they are going wrong is not the same are helping them to improve. In fact, the complete opposite. Employees given poor reviews disengage and often deny the problem.

Positive appraisals don’t help fix weaknesses that may be getting in the way of your employee achieving their best. 

So if feedback isn’t helping, what does? The authors recommend a four step strategy.

1. Shift from critic to ally
   1. No one wants to talk to a critic, but everyone want to talk with an ally
   2. Display caring, confidence and commitment towards them
   3. This allows them to drop shame and defensiveness – opens them up to hearing how to become better
      1. Empathize, if they are struggling show you understand how difficult it is for them
      2. Express confidence, show that you know they can handle the challenge
      3. Ask their permission to help.
2. Identify the future they want to create. 
   1. One that is bigger than their problem
   2. Allow them to describe the outcome they are hoping for
   3. Find a positive clear objective
3. Discover a hidden opportunity
   1. What might the outcome facilitate?
      1. The ability to learn a new leadership skill?
      2. The potential to fix an underlying problem
4. Create a level 10 plan
   1. Develop a plan of action which measured on a scale of 1-10 is 10. 
   2. That is the employee is confident that the plan can be executed
   3. It’s not critical that the plan succeeds, just the employee follows through, assesses the results and moves forward. 

Feedback well delivered can be a way that people can see their weaknesses and identify opportunities for growth. But only when it is part of a true culture of employee development.

This approach was highly successful at a large investment bank. Their unwanted attrition rate dropped to 3% and the performance review completion rate went from 50% to 95%

But maybe you should kill off performance appraisals totally, many big corporations already have. Why? What are they using instead?

1. It is well known that both managers and staff hate performance appraisals. They can be difficult conversations – the type that most people either avoid or handle badly.
2. Forced ranking and management interference can lead to unfair rankings
3. It is almost impossible to avoid bias. The halo effect surrounding folks identified as top performers. 
4. Reducing a person’s performance to a number on a scale from 1 to 5 is dehumanizing.
5. Taking a year to tell an employee that he/she is not performing is too long. 
6. It’s expensive and does not add much value. One Deloitte manager estimated the review process to 1.8 million hours across the company.

Given that is still a need to identify top and poor performers how can this be done without a formal appraisal process? 

1. Let’s start with rewarding top performers. Managers know who their best people are without an annual performance appraisal. They have no difficulty allocating merit based pay using qualitive data rather than quantitative data. 
2. Poor performers, as we learned earlier the current process does not improve performance. Feedback is too slow, not well delivered and not well accepted.
3. Companies are asking supervisors to report poor performance sooner. Juniper Systems formally asks managers to confirm that subordinates are performing up to standard. The find on average on 3% of employees are not making the grade. 
4. Adobe reports that dismissals are reduced as employees are monitored and coached more closely

Tags: How to start a business, achieve start up success, agility, responsiveness, hacks, business growth, market penetration, the successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

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Episode 47  Looking to boost margins and competitiveness? Here are three ways to sell value in B2B markets.

Three ways to sell value in B2B Markets published in MITSloan Management Review. Authors Joona Keranen, Harri Terho and Anita Saurama.

Do you want to boost your margins and competitiveness? Of course, you do. The authors claim that value-based selling (VBS) can deliver that boost but you need to move beyond the one size fits all approach commonly used today.

In today’s business environment where customers are seeking to reduce costs, competitors are digitally enhancing or servitizing their products, VBS has become critical in B2B markets. Traditional VBS leads to confusion about the actual value salespeople are supposed to sell.

Research shows  vendors should adopt either a product-centric, customer process centric or performance-centric approach to VBS. Today we will look at characteristics, requirements challenges of each and help you choose the one that is right for you.

Value based selling is based on focusing on the customer, showing the value of the product or service being offered, the benefits the customer receives in return for the price to be paid. This is a powerful argument because B2B customers buy to reduce their costs or boost their revenues.

Traditional VBS faces challenges as the vendor has to a) Understand the customer’s business model to identify the drivers of profitability for the customer, b) Vendors must deliver a value proposition that is compelling compared with the customers best alternative, c) this must be clearly communicated and d) vendors need to prove the value has been delivered. Just deciding to use VBS is not enough to effectively implement the methodology.

A more granular approach is needed to choose a strategy that focuses on the product, customer process or performance.

The product centric approach is the often the easiest way for companies to start VBS. This builds on your greatest and best understood asset – your product. But the sales pitch is modified away from features to benefits. Using their knowledge of the customers need and expertise in their own product vendors can see ways to  improve their offerings that unlock cost reduction or revenue generating opportunities for their customers. By being able to show that the benefits from the product outweigh the costs the vendor is able to move into premium pricing territory. A product that enables a retail store to open faster, or a product the demonstrably has a longer life and lower service requirement are examples.

Switching costs must be considered, the new product should not require major changes in the customer’s processes. It requires that the customer can consider the total cost of ownership. This maybe a challenge if the procurement team are focused on price. Getting other stake holders with a broader prospective involved is often needed.

Customer Process Centric VBS. Focuses on facilitating improvements in your customer’s business that are valuable and produce measurable financial benefits. Seeks to educate customers on how to apply your solutions more effectively to their value creation processes. This is a joint effort as vendors need input from the customers about their business and value drivers. To be able to deliver customer process centric VBS requires that you have strong process expertise and a consultative sales force that know how to apply that expertise to the customer’s business. As this model relies on joint application of expertise there is good potential for sustained competitive advantage. As well as continually improving the service the seller should find a way to keep some of the expertise in house. Sharing everything may lead to the customer deciding to go it alone.
Examples of this approach are Caterpillar’s fleet analysis and management programs, or Kemppi’s diagnostic tools for welding processes, their tag line, We are committed to boosting the quality and productivity of welding.

Performance centric approach. This is where the seller guarantees the realized value. Pricing is tied to results, such as improved productivity, availability or lower total cost of ownership. Customer’s may find this attractive as it ties payments to outcomes, reduces risk and aligns buyers’ and sellers’ goals. Maybe the best-known example of this is Rolls Royce’s power by the hour agreement for jet engines. This has turned around and bitten RR during the covid crisis. With planes flying less RR income has dropped significantly. This could not have been foreseen. Prior to the crisis most people were predicting solid growth in air travel. But the situation highlights the risk sharing approach of performance centric VBS.

Is VBS right for you? If so which model? 
Step 1 Identify your strengths.
Can you deliver quantifiable value by selling better products, efficiencies or guaranteed outcomes? Can you add valuable services to your product offering. Kemira moved from selling chemicals to selling chemical management solutions.

Step 2 Seek value creation opportunities in your markets.
What drives value for your customers? Rolls Royce’s power by the hour freed up capital for airlines. Rather than paying up front of jet engines, they paid only when the engines were being used. Hilti identified that cost of owning and maintaining had a significant on their customer’s productivity. Hilti’s response and program to optimize the overall cost of tool ownership.

Step 3 Understand what changes will be needed to implement VBS
Folks do not like change so it is likely there will be some internal resistance if you decide to implement VBS. Product Centric VBS targets a wider and usually more senior audience at your customers. Sales people need to adapt their sales pitch from unquantified benefits to demonstrating how value can be delivered. Customer Process Centric requires both a consultative selling approach and a deeper understanding of the customers business. This can be a difficult transition for your sales-team. Performance centric VBS while offering the greatest opportunity to improve profitability is a fundamental shift in the selling process. Because you are guaranteeing the outcome, many parts of your business need to work together effectively. This may require organizational changes. Work previously done by the customer may now become your responsibility.

Step 4. Identify customers who are willing to pay for value.
Customers who understand Total Cost of Ownership and can take a long term view are a good place to start. Consider the organizational dynamics, is your customer’s procurement team well integrated and well respected? Has the customer demonstrated a desire to try new ideas.

Common Pitfalls during implementation.
Keep in mind this approach is new to your sales team, it is even less familiar to your customer. Rushing in with a full program could be costly in sales resources and overwhelm your customer. Find small improvements that can be implemented easily and build from there. 
Do not ignore smaller customers, customers on tight budgets are often most receptive to VBS.

VBS selling is the best way to get your fair share of the value you create. If you cannot demonstrate the financial benefit you can deliver, you are reduced to competing on price. VBS is not easy and many major companies while claiming to use VBS default to cost plus. But if you are wondering if VBS may be right for your company then I suggest:

• Obtain the full article – the link is in my show notes, you can get a free copy by giving up your e-mail address.
• Look at the four steps identified and decide who in your company can provide ideas on each topic and gather them together to get their thoughts and opinions
• Be ready for naysayers – listen to their objections and determine if they have merit. In many cases folks will be pushing back out of fear rather than reason. 
• If VBS makes sense for your company develop an implementation plan. Small steps.

Link: https://sloanreview.mit.edu/article/three-ways-to-sell-value-in-b2b-markets/
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Tags: How to start a business, achieve start up success,  Value based, Pricing solutions profit improvement, engagement business growth, penetration, the successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

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Episode 47 Delivery Helper has grown to a $22B business, its success has lessons for all entrepreneurs. 

While we may not all be aspiring to be a multi-billion business the fundamental drivers of growth are the same whether we are aiming for $100,000 turnover life style business, or as in the case of Delivery Hero a $300 billion corporation. You start from nothing and scale up.  
In this episode I will share the observations of Delivery Hero’s CEO Niklas Ostberg when he talked with McKinsey & Company. Published as Scaling from start up to blue chip company lessons from Delivery Hero.

As Mr. Ostberg explains rapid scaling requires delegating authority, promoting accountability, and executing business efforts quickly. 
Today, ten years after its launch, Delivery Hero is a $22 billion corporation handling 8 million orders a day, with 43,000 employees. Ten year from now Mr. Ostberg believes it could be $300 Billion Plus. To do this Delivery Hero will need to retain the start up qualities that got it to where it is today. Mr. Ostberg explains how the organization continues to experiment and expand. 

Believe in your business
When critics asked “Will this company ever be profitable?” it provided the motivation to prove them wrong. Success feels better when no one believes in you.

When things are going badly  
Maybe your competitors are strong in a marketplace, maybe your spend rate is higher than expected, or the product is not evolving. In tough times it is important to stay calm.

Rather than ask what is going wrong? Ask what specifically can I do?
Eat an elephant one mouthful at a time

When you have a monster problem and do not know where to start; make a list and solve the problem one step at a time. As you make progress confidence will build.

Balancing competing goals – stock market expectations, high growth and covid

Mr. Ostberg admits that when things were not going well, he used to keep this to himself, not tell anyone the true status.

Be open with your team ‘Here is the good and the bad, here are my weaknesses and here is our current status. People were supportive. Stand by and fight alongside. Being open kills stress as you share the challenge with others

Niklas is still highly involved in hiring. Looking for fit – passion, capability and to execute. Important to have people who can be open and honest when things are not going well.  Provides resilience and time to breathe

Learn to let go.
Niklas used to do everything himself, even when he had hired people to do the work. But eventually that level of involvement was not possible.

Dedicating 1% of time to every topic is much less effective than spending 100% of your time on one thing

As leader focus on vision, values, strategy and structure takes more time as the company grows. Do the things that you and only you can do.

Continue to look at numbers – to frame questions – Why does this market work? Why is this market not working? Why are we not growing as fast in this area or region? Asking questions help your team to focus and infuses energy into their efforts.

Support and Protect New Projects.
As businesses grow some bureaucracy is bound to creep in, although he believes that Delivery Helper has very little bureaucracy, Niklas shields new ideas from the organization to protect them from being killed. Trust the person you discuss the idea with. Hire people with expertise. Provide context and information, ensure resources are available and the let them do the work. If it is a success it will be integrated into the company, if not it will be killed off. 

Build an empowered organization.
Give your team the authority to make decisions. This provides ownership, people with ownership fight hard to make things work. Your team can focus on the project, not second guessing what the boss wants, or how to present the idea to him. Avoid steering committees, these drive a different mindset around ownership and accountability.

When launching a new product or business – set an audacious goal. No business launch should take more than 100 days. This requires defining the scope and the problems to solved.  Ask questions such as Who should be on the team? What does the product need to do? This provides direction and drive to get things done. 

Once the product is live its easy to rally the team, now we have orders how do we make the product better? This approach focuses attention on the next version and the next and so on.

Have large goals.
Today Delivery Helper has a GMV of $22 billion. Mr. Ostberg believes in 10 years it could be $300 billion + with EBITDA of 5% to 8%. That is $20 billion per year in earnings.

Delivery Helper is now a solid blue chip company with a solid capital base. It has managed to retain its entrepreneurial flair, no mean fit for a company with over 40,000 employees. To achieve Mr. Ostberg’s goal of over $300 billion in turnover in ten years’ time it will need to double in size every year. Now that is an audacious goal. Whether that goal will be met remains to be seen. 

But looking at the key takeaways for the lessons learned from Delivery Helpers growth from a startup it seems that the company does have every chance of succeeding.

Those take aways are:

• When things get tough develop a problem-solving mindset
• When you have a monster problem and do not know where to start; make a list and solve the problem one step at a time.
• Build a team that you can trust and that has your back 
• Be open with your team ‘Here is the good and the bad, here are my weaknesses and here is our current status
• As your company grows – you need to adjust your personal priorities
• Dedicating 1% of time to every topic is much less effective than spending 100% of your time on one thing. Do what only you can do,

Give ideas the resources needed, protect them until they are ready to launch or kill them off

Provide context and information, ensure resources are available and the let them do the work.

Empower people to own their decisions; they will have more accountability and drive to see the decisions through, helping the organization to launch fast.

Give your team the authority to make decisions. This provides ownership,

It should take no more than 100 days to launch a product or service.
Thees ideas should be part of every startups DNA. There are lessons for us all here, whether we are aiming to be a unicorn or just earn a living for ourselves.
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Link https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/scaling-from-start-up-to-blue-chip-company-lessons-from-delivery-hero

Tags: How to start a business, achieve start up success, employee strengths, Task execution, profit improvement, engagement business growth, market penetration, the successful entrepreneur, business common mistakes small business start-up; avoid these common mistakes of business, mistakes in business, IBGR.network, Jeremy Gray, Practical Solutions to Difficult Problems

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Episode 48 Scale Up Like a Rock Star. Lessons from Food Panda 
In the last episode we learned how Delivery Helper plans to maintain its entrepreneurial flair and start up agility now it is a major corporation. And how this will help it grow into an even larger business. In this episode we will look at how one part of Delivery Helpers network started and grew into a highly successful business. 
Food Panda is part of Delivery Helpers global network of food-delivery services. It launched in Singapore. The CEO of Jakob Angele Food Panda APAC describes how the business launched and grew by moving fast and creating a trusted brand.
Knocking on doors: 
When launched nine years ago, food delivery was not a hot topic. The little media interest and not a lot of money flowing into the industry. A lot of groundwork was needed, educating potential investors and explaining the business model to restaurants, why would someone like to order food online?
Jakob and his team when around knocking on doors of restaurants and signing them up. Missing were the big brands such as McDonalds Burger King and Pizza Hut.
Small beginnings:
Initially restaurants signed up because they were interested in the technology. Home delivery was a small part of their business. A breakthrough came when Burger King agreed to give Food Panda a trial at one outlet. From the start they had decent orders and Burger King expanded quickly. 
It took a lot of effort to get that first Burger King, but after a couple of weeks BK were asking to add more outlets. Can we onboard another 10 in two weeks’ time?
Right product-market fit
Food delivery was the right product, but it requires the right content. The market covers top brands, the local restaurant around the corner. In food delivery you must have hundreds or even thousands of choices.
Service levels were a barrier to growth. Delivery times were 60 to 90 minutes, and most restaurants did their own delivery which led to inconsistencies in service. 
Re-evaluate your business:
It’s important to keep an eye of on each product launch and keep the vision behind it. A lot of good ideas get killed too soon.
With startups the P&L often looks terrible so how do you evaluate if this is a good business or not? Better not to look at the absolute numbers but at whether making progress, are things moving in the right direction? This includes KPIs. One that Food Panda used was customer re-order rate.  It started low but gradually improved be better than you would normally see for an e-commerce business.
A culture of speed.
It’s important that startups execute fast. Many companies say they want to execute fast but do not follow through. Speed comes with tradeoffs in excellence, perfectionism, fully thought through solutions. When Food Panda launched it was all about speed.
Hiring for speed
Senior leaders with the right mindset need to be found, then get them hooked on the right idea and the right approach. As they live these values the right company culture is developed.
Hiring highly experienced people can be a mistake, their past careers may not have prepared them to move quickly. Hire someone who is more junior but has potential. If they can see and take on the challenge to make it work. Although stretched they will be more able to execute with speed.
Execution speed is closely tied to decision making speed. Food Panda was operating in 8 market. Bangladesh and Singapore could not be more different, so decision making was pushed down to country organizations.
Decentralized decision making was crucial as covid struck.
Food Panda faced diverse situations in different countries with different regulations. All countries were empowered to make their own decisions from country to country, even city to city. What made sense from a team and business perspective. 
The question Food Panda asked was how the regional team could support the countries. They decided on a no contact delivery feature, which was produced in one and half weeks. This was achieved by making the decision rapidly and creating a simple functional feature which met the market needs.
They also decided to accelerate the launch of their grocery business, launching across the region faster than they had originally planned
Launching Japan Brand Awareness vs Direct Impact Marketing. 
When Food Panda launched in Japan, they want to make progress rapidly because other companies were getting ready to launch at the same time. Also, there was a sizeable incumbent in the market and it would take time for Food Panda to catch up.
There are long term benefits in building brand awareness when you start out. When you do not have many restaurants signed up and with limited geographic coverage marketing does not convert into orders
Food Panda used a high-profile influencer to spread the message before they launched in Tokyo. This gave them a good launch from day one. So, the investment was not wasted.
Focus on Brand Awareness from the start.
Early stage startups should build an emotional brand from the start. If you begin by focusing on the tangible attributes, then it is hard to move away from that mindset and introduce emotional marketing.
A common theme of Jakob’s interview has been speed. A culture of speed, hiring for speed, decentralized decision making, the rapid rollout of the contactless delivery app. But remember it took a long time to get that breakthrough customer – Burger King. Nearly two years. But once the business concept had been validated by Burger King’s rapid expansion Speed became critical. A culture of speed comes down to leadership and pushing decision making down in the organization. What might have driven speed is a realization if they did not move fast the competition would overtake them in the market.
An acceptance that speed does not always equal perfect is important. The freedom to learn from mistakes. Let’s learn from these experiments and let’s make sure everyone can hear the same lessons. 
People close to the ground often come up with the best ideas. They also know how to lean processes, they can identify what steps add little value.
Key takeaways:
When launching a novel business you need to educate potential customers. Your early adopters may not be the major players. Perseverance is needed. But once that break through is made react rapidly. 
Recognize that different cultures exist in different countries and push decision making down to the appropriate level. Singapore is very different to Bangladesh, Thailand is very different to Japan.
In this type of business developing an emotional connection is key. But this must be supported with high service levels. What is an acceptable wait time for a meal to be delivered?
Track progress rather than absolute numbers.
Link https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/scaling-up-rock-star-fast-a-conversation-with-foodpandas-jakob-angele
Tags: How to start a business, inflation, supply chain, procurement, cost control, contract negotiations, achieve start up success The successful entrepreneur; business common mistakes; small business startup; avoid these common mistakes of business; mistakes in business; IBGR.network; Jeremy Gray; Practical Solutions to Difficult Problems​


I am committed to helping entrepreneurs succeed. I can bring the experience of 30+ years of experience at the C-Suite level in an MNC from Europe, North America, and Asia. Combine this with seven years of helping a diverse range of businesses and I can provide you with practical solutions to any difficult problems you may be facing. 
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