11 November, 2016

Protectionism is the worst response to an economic crisis

Around the world, governments are under increasing pressure from their unions, manufacturers and farmers to re-erect trade barriers and instruct government agencies to buy local. In times of economic crisis, that’s the worst possible thing to do.

Buying imports enables others to buy your exports. In general, providing you live within your means, trade tends to balance out, and the more trade the merrier for everyone. You sell more of what you’re good at, and buy more of what others are good at. There’s possibly an argument to be made for temporary specific protectionism when you’re building a new industry which will be genuinely globally competitive once it has achieved scale and the barriers are removed; but generally, protectionism only transfers wealth from consumers and taxpayers to uncompetitive local suppliers.

Whether it’s in response to calls for US highway builders to use US steel, the NZ Army to buy locally made wet-weather-gear, or British hospitals schools and prisons to buy only British meat fruit and dairy products, governments must not yield to popular pressure (and their manufacturers’ and farmers’ naked self-interest). Otherwise, as the chart below shows, things will only get very very much worse. The Great Depression of the 1930’s may have been triggered by a stock market crash, but it was made many times worse by well-meaning protectionist initiatives and retaliatory moves by other countries. World trade plunged by two-thirds, industries collapsed, and many millions were thrown into the breadline. Let’s not even start going down that slippery slope.

First posted February 26th, 2009 and reposted post Brexit, Trump, et al

28 September, 2016

Donovan's 70-word guide to building and operating a great business

A great business requires:
  • a purpose: what you offer the world, to whom (customers, shareholders, staff, communities, business partners), and why they'd want it;
  • a clear, coherent, consistent and elegant design of how you will make and fulfil that offer - core principles, processes, people, products, promotion, etc.;
  • doing what should be done to build that business (and not doing what shouldn't);
  • thinking, planning and acting for greatness.
First published 27 May 2013

12 September, 2016

Sell to those who see your value

I bemoan buyers who confuse cheapness with value. As a director, I want to see project proposals based on best value outcomes, which is not the same as lowest input costs. But, as I also pointed out, it’s my role as a seller to demonstrate value that’s relevant to the buyer. As Greg remarked in a comment on my earlier post:
“… the problem is more often the sellers inability to convey the value they offer to the buyer. They don’t really understand the customer’s problem and why their product is a unique solution to it. People don’t want to buy an inferior solution, they just don’t want to pay extra for a solution that doesn’t look much different from the cheaper version”.
Let’s put that another way:
  • Do you understand the customer’s need? (That needn’t necessarily be what the customer originally said it was).
  • Does the customer agree with your perception of that need?
  • Does your proposition satisfy that need? Again, does the customer agree?
  • Does your proposition offer superior value compared to the alternatives?
  • Can you clearly explain your superior value proposition?
  • Does your customer accept that proposition and agree that the extra value is worth it to them?
If the answer to that last question is no, it can mean one or more things:
  • You need to improve your prospecting, qualification and selling process.
  • The customer needs to improve their need definition/buying process.
  • Your market offer needs to be improved in some way so that it does represent superior value.
  • Your basis of superiority is irrelevant to this customer.
  • You’re in the wrong business.
Only one of these is a fault on the customer’s part. The rest are down to you. And remember, unless you are aiming to be a monopoly, you shouldn’t expect to win every opportunity. But you can choose customers in the same way that customers chose suppliers. Focus on customers for whom your market offer superiority is relevant, and avoid customers for whom it isn’t. It will save both sides a lot of wasted time, effort and angst.

First published 3 August 2009