Sustainable Business Practices

Over the last couple days we have been exploring how to maintain a sustainable business. Yesterday we looked at some things you can do right now to better prepare you for recognizing business threats that may come your way. Today we will look at some things you can do to make your business practices more sustainable.

It is sometimes helpful in understanding a topic to look at what it is not. Sustainable business practices do not deplete or endanger non-renewable business assets or resources. You do not kill the goose that lays the golden egg. Sustainable business practices do not harm humans or devalue human relationships. You do not treat your customers like dirt. Sustainable business practices are also not unnecessarily complex. You do not define a business practice that requires that a detailed manual be referenced every time it is used because of all the subtleties, special conditions and nuances.

Sustainable business practices are easily repeatable. They are intuitive or nearly intuitive once the underlying strategies are understood. For instance, it may not be intuitive to give things away for free if you are trying to make money. However, once the strategy of free samples is understood, giving things away in a controlled sort of way (small, infrequent, with appropriate incentives to buy, etc.) can make sense. Sustainable business practices reflect balance and control without being controlling. They do not oscillate between extremes or fail to consider the impact on the whole system. For instance, a grocery store that ran a sale on bread every Tuesday when a week’s bread shipment arrived, sold out all it received, and was breadless for the rest of the week would not be utilizing a sustainable business practice. Customers want bread when they are there, not only on the special day of your choosing. The impact on the whole system would probably include a reduction in regular customers, a nightmare for stockers, and an overall reduction in revenue. Sustainable business practices are designed with the whole system in mind and require a whole-system-oriented mindset for optimum effectiveness in their execution.

There are undoubtedly other characteristics we could add to the list, but if your practices follow these, they will have a much higher probability of being sustainable for the long term.

Join me next time for a look at sustainable leadership skills.

* * * * *
Leadership QuickTip Application Question: What other characteristics of sustainable business practices would you add to this list?
* * * * *

Please feel free to use the blog comments to share hints from your personal experience.
* * * * *
Lead as though the future depends upon it!

(originally posted to my “Leadership QuickTips” blog in April 2007)

A Sustainable Business

We are in the midst of exploring sustainability in a business setting. Today I want to challenge you to think about an activity you can do right now to help assure a sustainable business. A sustainable business does not imply an unchanging business. Your high-tech consulting business might morph into a bio-tech training business as high-tech wanes and bio-tech booms. Your training business could morph into a coaching business as businesses seek more personalized help. Your life insurance business might morph into a long-term care insurance business as baby boomers age. For purposes of this discussion I’ll define a sustainable business as one that continues to support you and your goals at a consistent and growing level, while meeting customers’ needs in ways that satisfy their expectations and motivate them to want more of what you offer. How would you describe a sustainable business?

The starting point for sustainability is deciding what business you are in right now and what your strengths are. The classic examples are deciding whether you are in the railroad business or the transportation business, whether you are in the telephone business or the communication business. Rail companies today haul containers and have trucks. Amtrak runs buses. AT&T offers Internet access and television programming. Can you define your business in a way that does not paint you into a corner? Take a moment to make a first stab at it. It may take some serious pondering over the next weeks and months to come up with a satisfying answer.

To be sustainable a business must also adapt to changing surroundings. The sooner the business can start to adapt to the changing business realities, the better its chances of survival. IBM used to depend on large margins in its hardware businesses. Now it is largely a services company, and a very successful one at that. GM used to depend exclusively on margins on cars for its profits. Now their loan-making arm, GMAC, accounts for large contributions to corporate profits. This shift is less sustainable: As imports continue to eat away at GM market share, car loans for GM vehicles will be shrinking, too. Berkshire Hathaway used to make textiles. Now they are an investment company. Warren Buffett understands sustainability.

To adapt to changing surroundings, a business needs to recognize the change and then find a way to leverage their strengths into the new reality. The key word is “recognize.” Most businesses that peak and plunge do not recognize the threat until it is too late.

What are some possible changes that could become threats in your own business area? Whether you are a leader in an organization or an independent professional, nothing is forever. Remember when organizations eliminated middle management to “flatten the organization”? How many of those middle managers were expecting their jobs to go away? I was one who was not expecting it. It still went away.

Here is an exercise you can use to sharpen your awareness of potential threats. The process involves three steps. They are simple to state but challenging to do well. First, list the key ingredients in your success. Include people, processes, organizational structure, technology, products, services, business models, government action or policy, global realities (How will China’s voracious appetite for raw materials impact your custom cabinet business, for instance?), the customer problems you solve and the options they have to solve them, or anything else which, if it changed dramatically or went away, would radically change—or doom—your business. Be as specific as you can. Don’t just say, “Customers.” Use detail to narrow the list to your best, your most numerous, your target customers. You might for instance write, “Married couples with at least one child who own their own home and live within 30 miles of my business.” Don’t say, “Insurance.” Elaborate, as in, “health insurance and life insurance.” In a corporate setting, you might describe your customer as “the CFO” and your product as “the weekly operations cost analysis.” The more complete and detailed you make your list, the more sensitized you will be to watching for potential changes in an “ingredient” that could impact your business.

The next step is to list as many ways as you can think of that each ingredient could be changed and impact your business. For instance, the married couples above could lose their interest in health insurance if the government implements a comprehensive health care program. That would eliminate those costs from the family budget. The CFO could lose interest in your reports if the IT department implements a click on a web page to automatically produce the report you have spent hours creating every week for years and years. By the way, the danger here is that you will go into denial as you think of a possible change, “But that won’t happen.” Don’t evaluate the likelihood of the changes that come to mind. Just list the different threats and write them down. Your aim is a long, potential list rather than a brief, likely one.

The third step is to try to identify early warning signs that the potential changes you listed might be on their way: rising clamor about health care starts to get political traction, the IT department starts talking about package integration and online business reporting, a report comes out highlighting the next generation’s tendency to discard rather than collect—which bodes ill for your collectibles business, etc. Repeat or review your lists and this process at least once a year, looking for any early evidence of a potential threat and adding to your lists any new ideas, based on current events. One goal here is to sensitize your unconscious mind to make you aware of things your conscious mind might otherwise miss.

Using this exercise in conjunction with a classic S.W.O.T. analysis (strengths, weaknesses, threats and opportunities) can make it even more powerful and useful. Will it guarantee your business can avoid catastrophic market change? No, but having your eyes open gives you a chance to maybe anticipate a significant threat. That might give you time to do something about its impact before it does something to you.

Join me tomorrow to explore sustainable business practices.
* * * * *
Leadership QuickTip Application Question: What are you willing to do today to take your preparedness for catastrophic change to the next level?
* * * * *
Please feel free to use the blog comments to share hints from your personal experience about maintaining a sustainable business.
* * * * *
Lead as though the future depends upon it!

(originally posted to my “Leadership QuickTips” blog in April 2007)

Keeping Your Chin Up in the Face of Leadership Opposition

I ran across an insightful quote today while working on my new book. I would like to share it with you.

Many of the executives and leaders with whom I work feel drained and almost demoralized due to the subtle resistance, outright opposition, and overt attacks they encounter as they try to lead their organization to the best of their ability. This is a very understandable response. It is lonely at the top. That is one of the reasons they find the services of a coach so helpful.

If you are currently in such a hot seat, I hope you find this quote from a former president as reassuring and inspiring as I did. (And please don’t let the masculine pronouns from another era make you think it does not apply to you women as well!)

“It is not the critic who counts; not the man who points out how the strong man stumbled, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs and comes short again and again; who knows the great enthusiasms, the great devotions; who spends himself in a worthy cause; who, at the best, knows in the end the triumph of high achievement, and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those timid souls who know neither victory or defeat.” – Theodore Roosevelt, American President

This quote is about reminding ourselves about the “glass half full” rather than “half empty.” Remind yourself about the triumphs, the exhilarating times, the refreshing times, and the joyful times. The world today needs leaders (coping with change), not just managers (coping with complexity). Both are needed, but few are willing or able to take on the role of leading.

Go for it! Keep on keeping on, as they used to say!

* * * * *

Leadership QuickTip Application Question: From the opposition you are now facing, what can you learn that will change for the better the way you lead? Think of at least one thing you will do differently TODAY as a result.

* * * * *

Please feel free to use blog comments to share other quotes you have found inspiring.

(originally posted to my “Leadership QuickTips” blog in July 2006)