McKinsey consulting cranks out lots of quality business research. I noticed that their “Top 10 Insights of 2017” blog has three interrelated themes: successful companies have effective CEOs, are creating innovative cultures and are becoming digitally effective enterprises.
Reduce generalities and create your action scripts
Generalized advice can ring true, but what vision do you want to share with your employees tomorrow? How will you package your unique and best opportunities into an enthralling plan? CEOs must at least:
- Define the uncomfortable truths about the business in concrete terms based on data
Offer a vision that will benefit all stakeholder groups, What’s in it for We!
Shrink the vision to discrete plans (or scripts) that everyone can understand and not fear
- Create sustainable levels of urgency and action, while steadily cheering and publicizing every small win
Profit-core customer renewal
Over the past 20 years, financial performance surveys for all types of distributors have confirmed that:
- The same top-performing 5% of companies make a pre-tax Return on Assets of over 20%. this is presumably due to effective leadership and perpetually innovating cultures.
- The bottom 90% make commodity-hell returns of about 7% by pursuing the herd’s best practices and having no competitive edge. Unmeasured delusions of “good service” and trying harder based on common wisdom isn’t working.
Customer Profitability Analytics (CPA) reveals that for the bottom 90% there are a few super-profitable customers paying for many losing accounts. But, these distributors don’t have the talent, free cash flow and courage to innovate. They must first improve service value for their best accounts to further grow and retain them. Then, they can cure the subgroups of losing accounts. I call this profit-core customer renewal.
The profit-core renewal vision declaration
What if you trumpeted to all employees: “We are going to increase everyone’s compensation, job security, growth and pride, starting immediately, by pursuing a detailed list of sequential action plays!” Would everyone be listening?
While there is no magic recipe with silver bullet shortcuts for general corporate innovation, there is a process with specific plays (or scripts) distributors can put into action to:
- Retain and grow the most profitable accounts
- Fix the losers
- Deal with the psychological and political resistance to change
I’ve summarized this CPA-enabled path into an evolving document called The Core Renewal Roadmap. For my latest draft email me at: email@example.com.