04 June, 2014

BBC Great Lives: Isambard Kingdom Brunel

Fellow aficionados of Isambard Kingdom Brunel will want to listen to this recent BBC Radio 4 broadcast in the Great Lives series, to which Mike Riversdale alerted me .  Warning: it's a very BBC British dialogue.

26 May, 2014

Don’t be stupid with your business

Time and time again, I hear business leaders complaining that their business is barely viable. Typical issues:
  • providing essential attributes of a service for free because the customer refuses to pay for it.
  • allowing arbitrary changes in terms e.g. stretching out payment at no extra charge.
  • giving away customisation for free.
  • agreeing to prices below the true long-run cost (including cost of capital).
  • the list goes on.
Product-bundling and loss leadership may be relevant to your business, but the total deal has to be even more profitable than any deal without it.  If someone comes up with a genuinely smart new way of doing business, and chooses to compete on price, that’s a real challenge. But many businesses - especially those offering similar services - are essentially distinguished not by lower costs or different business models, but by their knowledge, modus operandi, reputation for delivery, and relationships. Getting trapped into a downward price spiral, especially when you’ve got competitors even more stupid than you, is a road to nowhere. Your business becomes a death march.

To get out of this mess, you have to do five things:
  • develop a distinctive market offer which is designed to appeal to the customers you want and who are prepared to pay for it;
  • understand in depth the operating cost model for your business, including the cost of risk and capital, and use that to define your absolute bottom-line on pricing and terms;
  • understand your target customers and develop your business to sell and deliver your market offer to them;
  • don’t sell to people who don’t want your offer;
  • walk away from existing customers with whom you can’t do viable business.
That last one is the hardest to do. Sometimes you have to wean yourself off unprofitable customers over time, so you don’t destroy your business during the change. But be very clear, if you can’t make a decent buck out of what you’re selling to your customers, either change what you sell, change how you make and fulfill your offer, or change your customers. Don’t compete with stupid competitors, and don’t serve customers who don’t value what you have to offer.

First posted 23 September 2007

22 April, 2014

Get rid of public holidays

Along comes another public holiday, and with it, as in every year in recent memory, the perennial debate arises regarding shopping and other commercial activities on certain public holidays (assuming you’re in a part of the world where they are prohibited). The pro-restriction lobby always trots out the same pieties against crass commercialism and abuse of workers’ rights: it’s one day families can all rely on to get together, it’s a mark of respect to our religious and cultural heritage, it’s one day that sporting and cultural festival organisers can rely on (attracting crowds they otherwise wouldn’t get). That’s fine for those people who want to put aside those particular days for the things they want to do; but why should everyone else be captive to their demands, especially when the vast majority actually take no part in the special events on those holidays?

I have a radical alternative which I reckon should appeal to nearly everyone (other than the would-be regulators of my life) once they give it some thought. Get rid of public holidays altogether, and in return increase annual leave entitlements by the same number of days. Say you currently get 20 days annual leave and 10 public holidays; instead you’d get 30 days annual leave, to take whenever you like.

To cater for the people who want to fix certain dates for religious or cultural activities, you could allow them to nominate up to, say, 5 days a year where they can definitely take time off (i.e. the employer has no choice). To avoid gaming, once nominated those days MUST be taken, unless the employer and employee otherwise both agree. Of course you’d have to allow for essential services, but I’d keep it a very short list.

Families and friends could organise get-togethers when it suited them - and avoid the peak fares and traffic jams of the most popular days. Most people would still take fixed days off for some major festivals.  Small firms could still implement mid-winter and mid-summer close-downs where everyone takes a break together. The economy, businesses and consumers would effectively gain several days trading a year.  Oh, and by the way, no-one is forced to go shopping on any day, let alone a public holiday.

In a nutshell, ordinary workers would be free to take more days off when they and their employer agree, not when someone else outside the relationship says they should. Just think:
  • 20 days annual leave plus the odd day when some bigwig says you must; or
  • 30 days annual leave when you want.
I’d bet that most people and businesses would prefer the latter. And think of the administrative simplicity. Unfortunately, too many vested interests love the petty power, anti-competitiveness and big-noting associated with public holidays.

First published 21 March 2008.  I'll keep republishing this until the idea gains political traction.