Perspectives – Seeing through the eyes of others

it is all about perspectiveA conversation recently took an interesting turn when it came to a space that had just been remodeled. And by remodeled, it was really only a change in the flooring. The interesting thing about this change was the amount of discussion it generated. For some, the focus was on the floor – by going to a lighter color, the room seemed larger. For others there was discussion about the clash of colors with the existing furniture and the new flooring. Depending upon the perspective, people either really liked the change or really didn’t. It was all a matter of perspective.

Situations like this take place in business every day, only the stakes are much higher. Depending upon the perspective of the people, differences in perspective if not discussed can create conflict in an organization. Creating an environment where people can openly discuss their perspectives can lead to creative and innovative growth in the organization. Is your company culture supportive of discussions about perspectives?

You caught my attention. Now what?

you got my attentionAs I was walking my dog through the nearby university campus, a young man crossed our path. He wore a large hat – almost a foot tall, had a beard, and was wearing a coat and tie. He had a striking resemblance to Abraham Lincoln. My mind immediately went wandering. Was he giving a talk on leadership? Did he intend to dress like Abe Lincoln or was it just a coincidence? And just then he jumped up on a short wall and then right back off. My dog let out one loud bark as if to say: “You got my attention”. And just as fast, he was gone leaving me to wonder.

How often do you grab the attention of others in your business? Are potential customers intrigued by you, but left to wonder now what? How can you translate those moments into business?

The Double Whammy

double whammy resultsAbout once a week, if not more, I find myself in conversations that revolve around some combination of earnings and multiples of earnings to get to a valuation. The most recent conversation revolved around a dramatic increase in valuation. How did the valuation increase so quickly? Early on, the company was underperforming relative to peers. When companies underperform, they are typically valued with a lower multiple. This is what I call the double whammy because the low earnings and the low multiple results in a low valuation. In the example under discussion, the company dramatically increased its EBITDA and was able to demonstrate that it was sustainable. So, the multiple went up as well. Here’s an example of what I mean:

Let’s say EBITDA is $10 million, low by industry standards, and the EBITDA multiple is 4x reflective of low performers in the industry. For simplicity sake, no other adjustments come into play, so the valuation is $40 million.

The company undergoes a transformation and is able to get EBITDA up to $40 million and can demonstrate it is sustainable, now a top performer with more upside. The EBIDA multiple may be more like 8x, which yields a valuation of $320 million. That’s a big difference!

While EBITDA multiples aren’t the only way to value a business, it is a very common approach. You can see the double whammy in play in the example above and the dramatic difference it has on a business. How are you avoiding the double whammy in your business?

What is the real problem?

what is the real problemIt is a common challenge in the business world and in life. Providing a solution without knowing the real problem. That was the topic of conversation yesterday with a colleague. We were discussing some recent challenges and the striking and consistent thing about the conversation was – in each point of discussion, the problem being “solved” was not the real problem.

Let me be more specific by using an example that I often run across. The solution – we need a new ERP system because we don’t understand our financials. Many times the issue isn’t that the system is a problem, the issue is that no one ever spent the time to design reporting that helps people understand what is going on in the company and provides information (not data) for decision making.

When I run across this type of situation, I typically ask a number of questions designed to get at the real problem. In the case above, it may be that the only real solution needed is a reporting tool (generally, a much less expensive and many times a faster and more flexible solution). The key is to understand what the real problem is. How are you getting to the real problems in your world?

Do you believe?

Do you believe?Over the last few weeks, I’ve had a number of conversations with people about whether it is necessary to believe in and support the products or services that a company provides in order to work there. On one side of the argument, people take the position that as long as you have the skills that the company needs, it makes sense to work there. Fulfillment can come from bringing a perspective the company doesn’t currently have. The other side of the argument is that you must believe in the company’s products or services as a prerequisite to working there. There is an essence of believing that is necessary to really do your best work.

My perspective is aligned with the later. It is that intangible element that makes the difference between high performing and average companies. When people believe in what they do and get satisfaction from providing a good or service that they believe in, the company does better and the people are more satisfied. It is a virtuous cycle because the people and the company are providing a product or service that is valuable to its customers. It is meeting a need that has not been satisfied without it. Ultimately there is alignment between the needs of all the stakeholders. Where do you stand on the continuum?

Is your front line prepared?

is your front line preparedThe street by my house was partially closed to traffic, requiring flaggers to safely direct traffic. No advance warning, just what appeared to be a weeks worth of utility work. While out walking my dog, I spoke with one of the flaggers. He was very friendly and happy to speak with me. The only issue was – no one told him what was going on. He didn’t know the length of the project, and could only guess based on what he saw. He probably received inquiries multiple times during the course of the day given the high traffic area.

Situations like this exist all over the place and your front line is the first window people have into your business. It’s a great opportunity to arm folks with useful information for customers, potential customers or folks that come into contact with your business. You know the difference when you have a great experience with a business versus one that leaves you left wondering. Is your front line prepared?

Risk Can Be A Good Thing

risk measurement and managementMany years ago, I worked with a man who said that people misunderstand risk. His perspective was risk is a variable – it can be a differentiator that creates tremendous value, or if not managed, can make things go very wrong in your business.

I’ve adopted his perspective over the years. And he is right. The critical factors are deeply understanding the nature of the risk, how it can be managed and if you have the capabilities to manage it or someone else is better off doing with that role. If you can’t or don’t have a perspective on what the entirety of the risk is, don’t take it on.

Successful businesses and people understand this. They take on risks that they have the ability to manage, but carefully evaluate those they don’t so as to not risk the entire ship if it doesn’t go the way they expect. Do you have a good grasp of the risks in your business and how to manage them?

Are you missing sales opportunities?

missed salesI love Starbucks. Yes, I’ve fallen into the wide swath of followers that pop in on a regular basis. The product is always consistent and I know that anywhere in the world, I can count on it. But, I’ve been surprised lately by how early in the day they run out of food. I regularly frequent five different locations and have found at each location the salads (as well as all fresh items) ran out starting at 2:00 and over a period of weeks worked down to stock outs by 9:00 am. I’ve inquired at each store about this and all tell me they regularly run out of food early in the day, leaving many like me to search for lunch (or other food options) elsewhere. Wow! What a missed opportunity.

That got me to thinking about why this is happening. Is it lack of understanding of the true demand of the product? Does anyone look at what time of day food runs out? Surely, the cost of goods potentially not sold is so minor in comparison to the number of sales they are missing. Is there a supply chain problem somewhere (the situation became a supplier issue with no fresh food for a week)? I don’t really know, but as a customer, I’m frequently disappointed. So, how are you making sure you aren’t missing opportunities to satisfy the demand for your product? Do you have mechanisms in place to understand what your customers want and when? Do you have a supply chain that works and can seamlessly address any supplier failures? How do you not miss that sale?

Are You Signaling?

signaling directionDriving around town lately has been an adventure. There are lots of people visiting to see the stunning sights. There are also lots of people driving around on cell phones or absorbed in other ways and not paying attention. Stopping in the middle of the street, turning left from the right lane across traffic, and slamming on brakes to make a sudden turns have become commonplace. All of these occur without warning or signaling. Aside from being the law, it lets people know what is about to come and safely prepare for to the change that is about to be made.

Signaling isn’t just important in driving, it is critically important in leading an organization. Abrupt changes in direction can create confusion and problems. The purpose of a signal in driving is to catch the attention of those around to say “hey – pay attention, I’m about to change direction.” So, why not apply that same philosophy in leading your organization?

The Platinum Rule

the platinum ruleA friend recently talked about the golden rule in one of his posts – treat others as you would like to be treated. It was a great prompt to talk about what people really want – is it the golden rule or the platinum rule? The platinum rule suggests you treat people as they would want to be treated, not as you would want to be treated. The point being, your preferences may be different than theirs. It requires a deeper understanding of the people you interact with, usually by asking them about their interests and observing their preferences.

On the customer side of the house, I’ve been on both the sending and receiving end of information about what customers want from the business. If done well, the business can draw a closer connection with the customer by understanding their needs and preferences and evolving accordingly. As a customer, there is nothing more frustrating than getting a survey, spending the time to complete it, never hearing anything back and seeing no change in the business. On the flip side, it is fantastic when the company takes the feedback and makes a change for the better.

From an employee perspective, great companies engage people. They understand that having a culture that encourages dialogue and fosters engagement is better for the company and for the people. For some people, regular praise is important. For others, it may be a promotion or a raise. And yet for others, it is actively participating in the direction of the company. By having an active dialogue, the virtuous cycle can emerge where people are excited to come to work every day and make an impact, and as a result the company gets better. Everyone gets what they need.

How are you engaging with your customers? With your people? Do you truly understand what they want and how you can deliver on it?