A little over 20 years ago, I entered the hallowed halls of the Wharton School of Business at the University of Pennsylvania. Through 21 years’ post-MBA experience, I find these lessons from Wharton have proved most valuable in the business world.
Finance & Accounting—It’s All About Cash
Cash flow is what matters. This is the fundamental of finance and accounting that constantly gets forgotten or obscured in the day-to-day business. At the end of the day, accounting done right is just a way to keep track of whether you have more money in your bank account today than you had at the end of the day yesterday.
Yes, growth needs to be funded, and so projects and business lines can often consume cash for months or even years. But, that has to end and the project or business line needs to start generating cash. The Enrons, MCIs, Adelphia’s, Lehman Brothers, et al., in the world were all quite foreseeable if you looked to see whether they were truly spinning off cash. None of them really were, even if their accounting statements said so.
Marketing—It’s All About What the Customer Values
Marketing is all about taking off the blinders that your love of your product and/or service has created. Instead, you need to look at the world through the lens of the customer. What is the value of your product and service to the customer?
Yes, your product and service may be the best. And I mean the BEST. Further, it may be a product or service that the customer should need and truly value. But, if the customer does not value it, you have lost. It is quite simple.
Looking at the world through the customer’s eyes has stuck with me ever since my then-rookie marketing professor, Pete Fader, gave us a pricing case in the first few months of school. I don’t remember the exact details, only the magnitude. We were required to price a spare part used in the oil-drilling industry. Using all the data, the class came up with a variable cost of a few hundred dollars, which most of us then doubled to price at say $500 for a healthy 50–60 percent margin.
As Professor Fader worked through the problem from the perspective of the customer, we all quickly realized that this unique part had a value to the customer in the range of $10,000, with the actual price being somewhere near $4,000. In this case, the value to the customer was far higher than our internally focused radar would suggest.
Strategic Planning—It’s All About Being in the Right Market
This one is easy to say, devilishly tricky to do. The fundamental of strategic planning is to be in the right market. That is, to be in a good industry or market niche with growth and healthy profit opportunities. A good market makes your life a whole lot easier and more profitable. As Warren Buffett said so well, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
Twenty years ago, we had a few fellow grads go into the airline industry. Guess what? Within a few years, all had left. As a business to make money and grow and personally advance, the airline industry stunk back then. And it still stinks today.
Leadership—It’s All About the Best Team
As you advance in your career, your capabilities and individual brilliance will only take you so far. Vastly more important will be your ability to lead and unite a diverse team and drive them to success. As Satchel Paige said, “None of us is as smart as all of us.”
The teamwork, team activities and team building encountered in business school should resonate. The best answers and the deepest insights come when working with a good and diverse team that includes committed people with a wide background (finance, HR, management, marketing, sales, even the customer), unafraid to share their views and be heard. Alas, many corporations have forgotten this simple premise. Their top management teams are either a team of clones or too cowered by an over-bearing CEO to ever share their true views. The net result is often groupthink and abysmal corporate failures.
International Business—It’s All About Understanding the Other Person’s Culture
“The world is flat.” “The end of history.” “English is the global language.” Maybe. But, doing business internationally remains all about understanding your Chinese supplier or your Brazilian consumer or your German joint venture partner. I think comedian Dave Barry summarizes well the blinders and distorted view of many Americans in our increasingly international world.
Americans who travel abroad for the first time are often shocked to discover that, despite all the progress that has been made in the last 30 years, many foreign people still speak in foreign languages. So, look around your market and get to know the increasing number of international colleagues and customers. Besides the advantage of networking, your new friends will challenge you to think more broadly and see the world through their eyes.
Moving your company forward
As we enter the second quarter, I remain confident 2012 is the year companies that have taken the right steps during the economic downturn can once again begin to soar. To that end, here are six suggestions on how you can make a substantive change in your business.
Bring in fresh blood: Your operations-oriented leaders who have not yet adapted to the sales and marketing world we live in, will never adapt. It is time to change them out and bring in some fresh ideas to re-vitalize the company.
Delete layers: Many companies still need to downsize. Not with their workers or lower-level employees, but in their management structure. If you have leaders managing fewer than five employees, why? It is time to thin out those layers and reduce the over-management and extra programs and initiatives that the managers in these extra layers inevitably call for to justify their existence.
Manage less and lead more: Do you remember the boom time when you might have gotten updates from your best employees only on a weekly basis because there was so much going on? Guess what: Those same employees are still just as good as they were then (if not better). But, they are likely chafing under your daily and constant micro-management and the endless progress review meetings. Trust them once again, and they will perform. Remember, as Peter Drucker said, “So much of what we call management consists of making it difficult for people to work.”
Use video more: Video can be a great promotional tool (see the success of YouTube). But, further it is a great operational and management tool. Use Skype or other video services to have internal calls or conference calls. In these video calls, you can see the other party and read their body language to ensure that they understand and agree. This makes the communication more effective (a higher-bandwidth communication) and saves countless dollars and hours in useless internal travel. Use video to conduct screening calls and interviews. Use video in the plant or operations so that management and employees can see exactly what is going on and discover ways to fix it. Think about sports: What high school, college or professional athlete today does not use video and video review to find ways to improve their performance?
Get serious about CRM (Customer Relationship Management Software): If you or any of your sales team is not using CRM such as ACT, SalesForce.com, Constant Contact, etc., then they are just like those dumb-lug hockey players who did not wear helmets for years. Your customers, current and potential, are vital. Thus, understanding their needs and following up with them consistently is fundamental to your company success. Specifically, use your CRM software to set up regular visits with your good customers to thank them for their business and find out what more you can do for them.
Get serious about social media: Social media is not going away. You do not need to go whole hog, but moving forward with social media ensures that you are responsive, progressive and interested in reaching new customers. Some ideas to get started:
- Personalize your website. Show pictures of your team. Show biographies of top management. People want to buy from people and know that you are legitimate.
- Start a blog. With the blog (which you can do as rarely as once a month), tell stories about your companies’ successes and victories. Written in a more informal language, the blog stories help your company and brand come alive as opposed to the stale copy on most websites. These blog stories are also accessible to your salespeople and make effective sales tools for them in their customer meetings. Finally, regular blog postings help you with your Google search engine optimization (SEO).
- Set up an e-mail list and create an informative monthly newsletter. Use services such as Aweber to create multiple lists. Get customers, potential customers and influencers to sign up by giving out useful information (it need only be one page) in a monthly newsletter. This creates an easy way to touch all of these stakeholders on a monthly basis and begin to develop a relationship.