Abundance thinking in business

As I mentioned in my last post, my business partner has a philosophy of helping the customer get what they want, even if it means sending them to someone else. I mentioned the positive impact it has on our customers and customer loyalty.

But there’s another benefit to it–our competitors often return the favor. Sometimes it’s because my partner has worked for those companies before, and they trust him. But even stores that don’t know us have become friendly as they’ve come to realize what we’re doing.

The abundance mentality is the opposite of the “pie mentality”, which says I can’t take a bigger piece of pie without yours getting smaller. The abundance mentality says there’s enough to go around, and growing all the time.

Is there enough for everyone?

Referring our customers to other stores shows them that we’re operating from an abundance mentality–that we don’t want our success to come at their expense. Rather, we view them as partners in the bigger game of taking care of the customer.

Not that everyone gets this. There are a few stores who seem to view us as a threat. We’ve had them get upset at us when we call to see if they have something, and refuse to tell us anything. We shrug it off, and still refer customers there, but as it’s a blind referral (not knowing if they do indeed have the item), I doubt the customers are likely to go there.

What’s more funny is that many of the competitors who do cooperate with us usually have no qualms about sharing information, even if we’re blatantly spying. We’ll call and ask them what they’re selling certain items for, and they tell us.

We don’t screen our calls, either. What’s the point? If they really want to know our “secret pricing” they can come over and look. Why not be friendly about it? In fact, one of our competitor’s employeesdoes shop our store regularly. We’ve got nothing to hide, and can talk shop for hours.

I’d go so far as to say this open, abundance attitude does wonders for our psyches as well. We don’t have to waste energy fretting over our competitors, because they’re not strictly competitors in our minds. Sure, we do our best offer our customers more when we can, but it’s hard to dislike someone who sends you business. Positive feelings toward your competition can be…well, liberating.

And, dare I say it, it makes for a more delicious pie.

What do you think? Are we crazy? Have you seen it work with your business? Leave a comment!

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“Macy’s sending customers to Gimbels! I just don’t get it!”

One of my business partners has an interesting take on customer service, which is one of the reasons I went into business with him. His take is nothing new–he and I both got it from “Miracle on 34th Street”. The idea is this: When you enter my store, my job is to help you get what you want, even if it means sending you somewhere else to get it.

And he means it. If we don’t have it, he’ll get on the phone or the internet and check with our competitors to see if they have it. If they do, he’ll refer the customer there. A majority of the time they do go elsewhere, though seldom without insisting that they’ll do all their shopping with us in the future.

"I don't get it! I just don't get it! Macy's sending people to Gimbels!"

But even more interesting are the customers who, knowing they can get what they’re looking for that very day, will nevertheless special-order it through us, even if it costs a little more. That is the power of customer service. Few things build customer loyalty faster than proving that they are more important to you than their money.

Have you had similar experiences with businesses you’ve encountered? How did you respond? Or do you think we’re naive? Drop a comment below.

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Computing in a cloud

I have to admit I’m somewhat ambivalent about cloud computing, in which a company’s websites, data, and applications can be spread out among several web servers across the internet.

In some instances it makes sense–most companies can’t afford their own data centers. My company, for example, pays a hosting service to host our website. We’re also taking advantage of some free data hosting sites to serve as an off-site backup for our critical data. This, however, is only an experiment at this stage.

Clouds

Is cloud computing a beautiful solution or a gathering storm?

You see, there are advantages to hosting your own sites and data. In my company’s case we’re probably too small to attract the attention of hackers. It’s the big companies they go after (such as Sony, whose PlayStation Network was knocked offline by hackers last week). And when you control your own data you know exactly what it happening with it and what you’re doing to protect it.

Even as I’m writing this I’m thinking about what might happen if our backup data were hacked into. My first thought was “nothing”. It’s a backup, and the chances our server crashing irreparably at the same time our web storage service goes down are pretty slim. For example, Amazon.com’s web services crashed recently for most of a day, and I never even noticed.

But then I started thinking about what data is in our backup files. We have personal identification and financial data on our customers. The loss of the data might not be a problem, but theft of that data could be catastrophic to our customers and our business. I am going to remove that data as soon as I finish writing this and go back to our previous physical storage solution. It’s not worth the risk.

In the end that’s the question we all need to ask ourselves before engaging in the various solutions cloud computing has to offer. Can we afford the risk? In the case of hosting our company website, I think we can. In the case of our company’s sensitive data, I don’t think we can.

If you’re using hosted services in your business it might be a useful exercise to consider what risks you might be exposed to, and if your business can afford that risk.

What do you think? Am I too paranoid? Do I not appreciate the risks enough? Leave a comment.

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The fine art of resource allocation

In a the previous entry, I discussed the Project Triangle and how it can be applied to building a business as well. With a business your three corners are Product, Marketing, and Delivery. You can expand your business at any of these three corners, but chances are you’re going to need to also devote resources to one or both of the other corners as well.

The trouble is that pushing any of these corners out farther usually requires a significant commitment. Adding a small amount of inventory probably won’t bring more than an incremental improvement in sales. Marketing mediums that don’t cost much don’t usually have much reach, and most require consistent investment over time to achieve results. Adding a few hours to payroll or adding some minor equipment isn’t likely to achieve much, either.

Since often a significant “tweak” is required at one or more corners to achieve noticeable results, the trick is determining which corner will most benefit from the larger gamble. Anyone who knows me can probably guess what I’m going to propose as the solution. Yup, analysis and planning! As an analyst-type, that’s my golden hammer.

But seriously, even if there are other ways to figure out where to invest, you would do well to consider some of the following questions before you act:

  • How much growth do you expect as a result of investing in one of the corners?
  • How do you plan to measure that growth?
  • What would achieving that much growth mean to the other two corners?
  • How quickly might the growth occur?
  • How much would you need to spend to expand the other corners to meet that growth?
  • How soon would you need to do so? What warning signs should you look for?
  • Do you have enough resources to meet the expanded demand?
  • What happens if you achieve double your expected growth? Triple?

If you haven’t thought through these questions you shouldn’t be surprised if even success becomes your enemy. I’ve heard horror stories of companies failed to anticipate the level of success brought about by one of their initiatives, and their company reputation took a serious hit as a result. “Catastrophic Success” can be just as lethal to a company as failure.

We recently had a conversation at our business about what we would do if our business suddenly tripled. We tried to convince ourselves we would take it in stride, but I remain unconvinced. I remember other conversations we’ve had about times when store traffic picked up substantially for one reason or another and we weren’t prepared. There were far too many customers who we’ve not seen again.

As I said, I’m a firm believer in planning, even if it’s just having a few conversations about “What if…?” I also believe in reviewing your plans and your metrics to determine how effective your plans were. Your business may be able to absorb a mistake or two, but there is no reason to keep making the same mistakes. Planning, measuring, and reviewing will help you recognize mistakes more quickly and learn from those mistakes.

Plan your growth. Investment may be a gamble, but it doesn’t have to be a risky one.

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Business constraints and resource allocation

Anyone who has been near the project management discipline has heard about the “Project Triangle“. That’s the rule of thumb that essentially says that when you’re building something you can have it good, fast, or cheap–pick any two. You can make a good product quickly, but it won’t be cheap. You can build it good and cheap, but it won’t be done quickly. Or you can build it fast and cheap, but it won’t be very good.

The Project Triangle

The Project Triangle

This same concept applies to building a business. Good businesses can be built either fast or cheap, but not both as a general rule. There is the occasional exception–a service business, for example, that has very low overhead and just happens to tap into an unexploited market–but for the most part you’re going to need either a lot of money or a lot of time (and patience) to build a good, solid business.

This same concept of balance can be useful in looking at resource allocation within your business, as well. In this instance we replace the three corners with Product, Marketing, and Delivery:

  • Product: The goods or services your business sells, including the people who give the service.
  • Marketing: The means by which your business attracts buyers for your goods or services, including the people who seek buyers.
  • Delivery: The means by which your business delivers the goods or services to the customer, also known as capacity or infrastructure, and including the people who support the production and marketing of products and services.
The Business Triangle

The Business Triangle

In this model you have capital to invest into your business. While you can invest in just one corner of the triangle, such expansion in that direction will often require expansion in one of the other two corners as well. For example, expanding your company’s ability to deliver goods or services will only be effective by itself in the long term if that particular corner is currently lagging behind the other two. Expanding delivery by itself generally results in a lot of unused capacity unless the demand for the product also increases.

Similarly, you can invest in acquiring more inventory or developing more service offerings, but without increasing the demand your services will go unused and your added inventory will gather dust. Or you could invest in marketing, but run into trouble when you have neither the supply to satisfy the demand nor the capacity that deliver the increased demand.

You may be able to focus on just one corner of the business for awhile without touching the others, but eventually it will catch up with you. You could increase marketing, resulting in a higher demand. You may be able to meet that demand by letting stock levels get low, or by getting your service providers to work harder, but eventually both will hit the wall, unable to give any more. Without some follow-up effort to bolster one or both of the other corners any growth will be short-lived.

That is where many businesses get into trouble. They think only about one corner, invest in expanding their business in that direction, and then have no plan or no resources (or both) to implement to shore up the other corner(s). If you have $10,000 to invest, and you invest it all in marketing, what will you do if you are suddenly selling through your inventory much faster while your collections are lagging farther behind, resulting in a negative cash flow? Sure, it’s a nice problem to have, but you’ve likely just swapped one problem for another just as bad, if not worse.

What to do about it? I’ll offer some ideas next time.

What do you think of this model? Leave a comment! I doubt I’m the first to think of this. If you’ve seen this somewhere before, also drop me a comment to say where.

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Everyone’s an expert–and a critic

Last week I mentioned an encounter with a customer who offered us some unwanted business advice. While this gentleman was a more extreme example of the know-it-all customer, he was by no means the first. When it comes to small business, everyone has an opinion, from your landlord to the Fedex guy, and every customer in between.

People are going to have opinions about how you selected, set up, and run your business that goes far beyond your inventory or your customer service. Some will phrase their questions and advice very well, and you’ll likely have an enjoyable chat with them. Some will be rather abrupt with their criticism. And since they’re your customer, you grin and bear it.

Don’t dismiss your customers’ opinions out of hand, though. Besides the obvious benefits of keeping a customer, some can also be a good source of feedback. Feel free to bounce a few thoughts off them, or explore their suggestions in more detail. Find out what their background is. It may be that they really are your town’s Warren Buffet.

If they’re a store owner themselves, ask them what things have worked for them. If they’re a reasonably informed customer use them as a one-man focus group and try some of your ideas on them. Good feedback can be hard to find.

Of course it could just be that they’re a boorish know-it-all and you don’t really want to engage them any longer than necessary. Wrap up the conversation as politely and diplomatically as you can and move on. Do what you can to keep them as customers, but don’t encourage them to become your regular unpaid consultant.

Before long you’ll learn who is good to talk to and who is not. Value good input when it is given. Business is lonely enough as is.

How do you politely deal with your local, regular critics and still keep them as customers? Put your ideas in a comment below!

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Be a good customer

I had an interesting encounter with a customer today that got me thinking more about how I act in public. Our store’s custom is to call out a greeting to a customer as they enter to let them know we know they’re there and so that they know who to talk to with questions. We’ll then usually follow up with them personally within a few minutes to see if there is anything specific we can help them with. For 99% of our customers this is just fine.

For this gentleman it was not. I’m not sure what he was expecting, but he felt he was being ignored, and expressed his displeasure. I won’t debate right or wrong, because the maxim “the customer is right” is generally true. He had an expectation, and we didn’t meet it. And once we apologized he seemed eager to let it go. He was looking for something we obviously didn’t carry, and we directed him to several nearby stores that did.

But then he decided to stay and talk business with us for awhile, and immediately started to come across as a bit of a know-it-all, and implying that we hadn’t thought things through before making certain decisions. I can assure you (and him) that on the point he raised we deliberated longer and harder than any other decision we made. We knew the risks and the benefits of our decision, and have worked quite hard to mitigate the shortcomings.

It also came out in during the discussion that I’d met this man before, though I don’t think he recognized me. He’d come to my door recently selling a book he’d written. I couldn’t buy the book at the time, but had been impressed enough that I have been considering interviewing him for this blog, and perhaps buying a copy of his book some day. But after our encounter today I’m reconsidering. Just as much as he’d caught my interested then, he’d turned me off today. I know he was trying to be helpful, but it came out wrong. And I admit, I was still defensive over his earlier rebuke.

But there is still a warning for us all, here. Store clerks and salesmen are so ubiquitous in our lives that it’s easy to think of them as not existing outside the stores they serve. It’s easy to be the type of customer to them that you hate to get yourself, assuming you’ll never see them again. Be a gracious customer. Be polite, undemanding (not to be confused with wishy-washy, mind you), and appreciative. Leave everyone in the store with a positive image of you.

You never know when the tables may be turned.

Anyone else experience this sort of thing from either side? Tell me about it in the comments!

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Business Management BS

Matthew Stewart recently posted a lengthy criticism of management theory and MBA’s at The Atlantic. He feels that most management theory is “inane”, and that one would do better pursuing a degree in philosophy (suspiciously, what he studied):

The strange thing about my utter lack of education in management was that it didn’t seem to matter. As a principal and founding partner of a consulting firm that eventually grew to 600 employees, I interviewed, hired, and worked alongside hundreds of business-school graduates, and the impression I formed of the M.B.A. experience was that it involved taking two years out of your life and going deeply into debt, all for the sake of learning how to keep a straight face while using phrases like “out-of-the-box thinking,” “win-win situation,” and “core competencies.” When it came to picking teammates, I generally held out higher hopes for those individuals who had used their university years to learn about something other than business administration.

I got an MBA, but it wasn’t a conventional program. It was a school with a combined online and in-person approach. Our instructors were people who worked in the fields they taught, so the program had a more practical emphasis instead of academic. The stated goal of the program was not to fill us full of theory, but to provide us with a “tool box” we could turn to in order to solve the every-day problems we would face as managers.

It’s helped. I don’t remember as much as I’d like, but I remember enough to provide me with a bit of a “business spider-sense” when faced with something we were warned about. I know enough to say “there may be more to this than we think”, and can then go and do the research to figure out what may be going on. It’s served me well on many occasions.

I’d have to say that my MBA program didn’t really get into management theory, so I can’t speak to Stewart’s concerns that much. I agree that there is some “bad science” out there, and that when it comes to solving business problems just about any degree can serve provided the practitioner has decent research, analytical and problem-solving skills. If those are not being taught in management programs they should be!

My career has largely been as a developer and systems analyst, though my degrees have been in music and business. Now I’m an entrepreneur running a video game store, as well as a consultant in a field that didn’t even exist three years ago. It’s my opinion that it’s not nearly so important what you learn so much as that you can learn. As the world continues to evolve, the successful ones will be those who can evolve with it.

I know Stewart gets long-winded, but give him a read. In the mean time, what do you think of the old “academics vs. practical experience” debate? Which side are you on? Leave a comment below!

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Measuring Social Media effectiveness

Everyone would like you to think that social media is a numbers game, especially the social media platforms themselves. Numbers are easy to measure. They’re empirical. They make nice-looking graphs.

They’re not entirely wrong. You want numbers. You want a lot of customers watching your social media channels. What you don’t want is lots of useless followers. Are you a great business because a lot of people are watching you, or are a lot of people watching you because you’re a great business?

What is more important–and more difficult to measure–is how the followers you have interact with your business through social media. There are several things you should look for when evaluating the health of your social media channels. How often do your followers:

  • Comment on or “like” your updates?
  • Link to your updates?
  • Ask you questions about your products or services, availability, or other information related to your business?
  • Leave unsolicited endorsements?
  • Post interesting information or links to your channel?
  • Post customer service issues?
  • Interact with other followers through your updates?
  • Say online they’ll come to you and buy–and then do?

These metrics more than numbers of followers tell the effectiveness of your social media efforts. If you’re succeeding at the items above, the numbers will come–if they haven’t already.

Let me put it another way: Which would you rather have; 100,000 followers who may or may not read your updates but never interact in any noticeable way, or 100 followers who regularly interact with your business in the ways mentioned above? As a small business owner I know what I’d rather see.

Do you agree or disagree? Drop me a note in the comments! Or check out my own business’ Facebook page to see how we interact with our small, but enthusiastic (and growing) follower base.

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Social Media requires a rifle, not a shotgun

Early on my experience with social media I would start out my day by browsing through all my usual subscribed websites. If I found something I liked I’d post it to my accounts and continue my browsing. I went on like this for several days before my brother messaged me to give me a bit of advice.

I recommended I space out my posts more, because clumping so many together was overwhelming for people following me. It made my posts seem like spam and made it less likely that anyone would read them. I thought he was overreacting a bit, but I took his advice and tried to space out my posts more, through various means.

The other day I noticed that there was one of my Facebook friends who did exactly what I was doing. He would post a bunch of posts within minutes of each other. On my friends feed it would show up as a clump of posts from this person. And, I realized, I wouldn’t even read them. If I did I still wouldn’t click on any of his links. My brother was right. What’s more, I found that even when that person posted individual posts later in the day I was still less inclined to read them.

So let me pass on my brother’s advice. Space out your posts. Now and then it may be okay to post in quick succession, but as a general rule, wait long enough to allow at least a few other people’s posts to come between yours on other people’s friend list. Allow some time to go by and you’ll find people pay more attention to you.

Comments and responses are different! If someone comments on your post feel free to respond as quickly as you like. If a conversation starts, go with it. Don’t worry about spacing if you don’t want to. Comments are usually handled differently and don’t look as “spammy” to people.

If you do find yourself tempted to post frequently, like when you first browse your regular websites each morning, then use a tool to schedule your posts over a longer period. If you don’t have a tool you use, write your posts in a text pad so you won’t forget them, and then copy and paste them throughout the day.

What do you think? Do you pay as much attention to frequent posts, or do you prefer that people space them out more? Weigh in with a comment!

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