4-Profit Denver Conference- Operational Excellence
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4-Profit Denver Conference- Operational Excellence
- 1. Platinum Sponsor Gold Sponsors 4-Profit Leadership Forum | September 30 – October 2, 2013 Inverness Hotel & Conference Center | West Englewood, Colorado Fostering Efficiency
- 2. It’s About Moving the Needle
- 3. Shoes are made for walking
- 4. Top 5 Costs Attributed to Shortcomings in Managing/Using Data (the stuff our systems generate) 1. Wasted time that could be spent in other areas of the business 2. Internal confusion over priorities 3. Inefficient or slow decision--‐making / Lack of agility 4. Inability to effectively assess staff performance 5. Lost sales and reduced margins due to operational inefficiencies - source CompTIA September, 2013 • Look at the similarities above - it seems the first 4 are *management issues* leading to point #5. We have a “big data” opportunity here and often need to start with ourselves.
- 5. What is the goal of our time together today? • Understanding metrics and how they change over time? • Sourcing the optimal org structure? • When to hire that next tech, pm or admin? • Finding the “ideal” PSA or quoting tool? • Clarifying the 2020 landscape?
- 6. No, really. • What are we doing and why? • Who’s on board? • How do we do it? • How do we know if we are doing a good job? • What’s next? Oh, and does it drive a better “service” experience for customer’s?
- 7. Solution Provider 2013 2020
- 9. Services Frenzy.. A proactive model
- 11. Gross Margin Defined • Gross Margin (or Gross Profit) is: Sales – COGS (Sales – COGS)/Sales = % Labor-loaded Gross Margin
- 13. How “unique” are you? • Efficiency • Value • People • Sustainability • Key metrics
- 16. Gross Margin Transformation Six barriers that can slow transformation Cautious Management Culture Business-as-usual Management Process Initiative Gridlock Executive’s at odds Disengaged Employees Loss of Focus During Execution Robert H. Miles Harvard Business Review
- 18. IT Service Management When considering gross margin targeting and growth, cloud need not be a panacea.. Nor is full hosted (cloud) an end game for all but the largest hosted providers (eg; Amazon as a low cost provider). Hybrid models are likely.
- 19. IT Service Management ITSM (IT Service Management): The adoption of cloud-based ITSM solutions will peak in 2014; and by 2015, 30% of those companies that swung to cloud implementations will go back to on-premise ITSM deployments. - Gartner, 2013
- 20. Goal: Finding the Optimal Path
- 21. Growing Gross Margin Exercise: Brainstorm key actions or opportunities you are working on today or you could work on toward raising gross margin (and stability) in your business? (20 minutes from each table and share)
- 22. Leading Ways to Increase Gross Margin • PRICING! – yes, what are we charging our customers and what do we leave on the table? • Attach/bundling higher margin services with core projects/advanced services (USP’s) • Obtain the highest discount rates and rebates • Help Desk and Customer Service Efficiency (crew drill) • Professional Service Efficiency • Client retention and per client spend/hooks • Focus and discipline of staying within target client • Rigorous review of client loss – especially managed • Maximize systems, process and training thereof • Utilization (% hours worked) and realization ($ generated/hr)
- 23. The soft stuff that moves gross margin • Customer service skills! - first impressions, how to collect money, how to manage difficult conversations, connectedness between sales and technical • Clear visioning • Urgency to pick up a ringing phone (training) • Client “touch” frequency and consistency (proactive) • Customer retention • Time recording • Realization vs utilization • Employee health - hiring/retention • The really soft stuff like customer thank you’s
- 24. People
- 27. Move the needle…
Notas del editor
- Welcome and thanks to Scott for joining me in this session. And as Larry mentioned, I do prefer small groups and by the way, Chris really isn’t my name, Larry just hired me to appear before you because he needed to fill this speaking slot. I’ll start off with a brief background – I was fortunate to have started my career at Xerox – for sure, best of breed in manufacturing and in clients service as well – a company that had such great innovation and potential but will have a legacy of poor execution. I then spent a few years at VIS, a public company with IT staffing, engineering and software development which developed and managed the bell system operator voice software. I also managed finance for the sizeable and early managed services company within called Maintech and then started my first business called LTBN with Larry and 2 other partners back in 1996. Always enjoyed sports and find great parallels to sports and business. My dinner companions last night were great fun. And I learned Mr Burgess is such an ardent NY Yankee fan, there’s a baseball cap in the mail to you to get you ready for next season and to console you on such a disappointing year for you.
- We’ve covered the notion that many of you are either in the middle of or in deep thought about transition for tomorrow and toward 2020. I don’t know of any of you that feel you’ve really arrived and we work with several of you to help get you there and many are getting it done. Our time together today will be about how to maximize the key value-creating resources as we explore many of the trendstoward “aaS”Remember “the needle” - what moves it for owners, management, current employees, future employeesand of course, the customer. We have many different business models in the room and a variety of different business goals from lifestyle to high growth and business models from voice and IT to those moving toward managed and hosted. Some are still deciding on next moves. There are many factors and influencers from geography to client base and then risk aversion to just plain old fear about making a wrong move. As Larry mentioned yesterday we as owners and leaders in key roles often give ourselves less latitude in making mistakes. Part of that fear often stems from generally only a few months of working capital and our goal today is to help provide ideas on creating more safety for many of you to take better risks. So whether you chose to lead with hardware or services down the road our discussion today will hopefully apply to you.
- “Cobbler’s Son Analogy”Solution Providers historically distribute advanced technology and services as productivity enablers, yet our businesses generally have no better (often worse) financial practice, reporting, CRM, dashboards, and process controls leading to decreased gross margin. This deficiency is a huge barrier to understanding our businesses and business model performance and profitablegrowth in a rapidly changing industry.How many of you believe you have strong internal systems that support efficiency? (show hands)How many of you believe you have effective process and procedure within your departments?In over 10 years of employee surveys just 63% of those employees believe their own company has internal systems and technology that work towards their efficiency. And just 46% of employees believe they have effective process and procedures within departments.
- Most of us have at least 3 different systems – one study showed the average company uses about 35% of the capacity of tools they have – and in many cases employees didn’t even have easy access to tools. We spend far too much time in selection and far too little in training and implementation.New ideas always popping up… Vendor dependency can numb our senses. Rebates can create dependencies. They can make you slow and vulnerable. Every business should want to feel successful and driven toward some vision. As Frank mentioned yesterday, we as leaders often get caught up in tactical without a good blend - that doesn’t always move the needle. How do we know if our people are as effective as they can be? How do they know how are they doing? Slow decision making is usually the result of procrastination and accountability. Not having enough information leads to slow or no decisions – the leader need not have all the answersTop Grading should be a regular exercise – you can then decide if we want to make changes according to our culture and planLet’s take another look at our employee satisfaction surveys. In one of our questions, over 90% of employees believe they know what is expected of them yet only 60% believe they are effective in using internal systems, process and communication. Why? Because they think they are in business to sell something or make something work or to make money for the company. It happens on every survey because employees aren’t actually thinking about what really moves the needle:Helping the company work more productively Delighting customers and creating lifelong relationshipsTearing down process roadblocks and silo’s
- We realize you are handling a lot. Often too much. Our assessments show too many initiatives with too little focus and too few resources. How many initiatives are you looking to execute today? How do you know if it’s the right number? Is your business of the size and capacity to execute on them? Do you seek to add efficiency in places that don’t move the needle? Scott example
- How many shiny pennies do we chase? How are they chosen? Rationale? Do you understand the total cost of various investment/re-investment opportunities?How might these priorities add to stakeholder value? Affordable growth?What are you working on today? Why? How will it be measured and what does success look like? Communicated?What business are you really in? (and do your employees and clients feel the same way?)
- Everyone “feels that pang to grow services” – especially professional services initially to keep our highly paid people paid and add a good USP and then the more sexy managed and hosted services. Some in this audience have been more successful and on a good path to creating multiple revenue streams – congrats. But the majority get stuck at certain Break Points and other don’t know how it can scale – for more traditional project businesses, the moment you begin hiring toward a new service model is the moment you tilt the wheel - from how clients see you to comp plans and even valuation. Many clients with a tighter and shorter exit plan that spend on new service investment can dramatically reduce valuation
- http://www.youtube.com/watch?v=2k1uOqRb0HUThank you Jack Palance (Curly). We’re going to help you out a bit with that one thing we’d like you to take away from today. Let’s have some fun and see who was paying attention. We mentioned a metric in the Cobbler’s son analogy. Does anyone remember the metric? Blended Gross Margin.. is king!
- If not already, the metric to begin planning for 2014 and towards 2020. And if it is in your targets, we see that many of you need a more concerted communication focus on it. We use a 3 yr modeling plan. Even the those that do a nice job targeting, it should be a constant and built from mission/vision, sales, technical and of course a strong communications program around itLess vendor relianceLess risk – especially important for the lifestyle companies in the audience todayLess reliance on new sales/sales team generallyMore free cash flowAbility to fund pay for performance and incentive plans (WIIFM)Add significantly to company value The “net” result is also a company that can better manage billable talent which in this focus and is both your greatest oppty and potentially your greatest liability. A straight line 92/8 run leads to a 1-2% business. It’s a difficult metric to move. It happens with a combination of intense focus and “soft stuff” Raising blended gross margin in concert with driving customer needs is key
- Where gross margin is grown.. Seek “diversity” within your blended gm targeting. Different types of companies in room. In a targeted gm plan consider vendor quality and future strength in your gross margin development plans.
- GM is the business model “de-terminator” and equalizer. You are all “service” businesses whether 98% or better. For sure with unique history. Services and specifically managed services/MRR space is often the greatest area for improvements to be made within each company. Lower cost resources, lower cost of sales, and client hooksMore than 80 vendors today supply help desk tools – the ones who “win” will provide the most value - consolidation and commoditizationPeople – we aren’t making enough new ones – we see several of our core advanced services project companies stuggle to find talent which is hurting growthSustainable goals, practice and resultKey metrics, what they mean and how to make change – we collect about 50 metrics
- Clarity for a blended gm plan and targeting methodology with quarterly review and communication keeps everyone driven toward an economically viable mission/vision – yes, it starts there.
- Transition as mentioned will be a constant. Strong gross margins from multiple streams and less vendor reliance is key. Recall our back/seat front seat discussion from yesterday. Though as mentioned a full managed/hosted business is a “different business” – a highly proactive business. Key“break point” clients have often followed a reactive (project) client approach and even though help desks replaced pagers we still wait for calls and in turn may be waiting for other businesses to eat our lunch... Key focus areas toward 2020 include “outcome-based objectives, value demonstration, incident updates, visual reporting of impactful business measurement and for the very best a clear tie to business outcomes. Strong recurring services and MRR build requires a proactive approach. What type of sustained proactive client relationship have you been able to maintain? This will be key in any hybrid delivery model with one time, support and recurring model.
- Insufficient, time, attention and/or fundingRisk aversion – often sales owners that say go, go, go and technical owners that say hold on. What things that you are working on today contribute either directly or in a measurable indirect way to gross margin production or improved client experience? Many of you have developed excellent dashboards in Salesforce and elsewhere. Those in one-on-one coaching and peer groups are familiar with our BI metrics and management tool called prof-fit which is our 4 qtr rolling average web-based tool that slices and dices many metrics – with a very strong emphasis on the various components of gross margin contributions from products, services through labor. Some of you have done a great job here but we often see companies come up short in communicating plans and getting all on board. Your people often don’t have just don’t get it and executives sometimes aren’t delivering the message clearly enoughIf employees aren’t on board, stop the carwe always need to keep the shiny penny in mind
- Those companies that are most successful find ways to advance their top talent and deliverables and start with those that can “buy in”. Are your people up to the task of growing gross margin? In all business lines? That can include slicing up your services targets. Do they understand the importance? Most companies try to have existing legacy sales teams sell it and it doesn’t work. Several Reasons: one is the elevator pitch. We all can create first and sometimes lasting impressions.. acceptance isn’t happening in sales and engineering meetings – the success of new offerings often depend on how your people and your clients see you and the confidence that you can deliver… attention should be squarely focused on the 80/20 rule and advancing areas of strength that can move the needle “sustainably”. For initiatives to have a lasting impact, they must receive lasting attention…
- Focus on service delivery models that work for you and your specific customer and your USP’s using current best of breed. Creating diverse gm focused revenue streams with gm targets is key – that can include breaking out specific services. Align billable technical timecards to jobs and profit centers. Watch the market closely and use peer group opportunities, boards and all learning opptys fully. Security concerns abound today which may sway future decisions. The legacy business partner model will deteriorate over time – faster for some depending upon UVP. Hybrid models will evolve and companies that transition will likely leverage the commodity resources of companies like Amazon to develop a blended gross margin model.
- IT Service Management (ITSM) is a process-based practice intended to align the delivery of information technology (IT) services with needs of the enterprise, emphasizing benefits to customers. ITSM involves a paradigm shift from managing IT as stacks of individual components to focusing on the delivery of end-to-end services using best practice process models. ITIL (Information Technology Infrastructure Library) is a globally recognized collection of best practices for information technology (IT) service management.
- Know your next step and the path from an internal build perspective:Create assets and equityCreate Strong Margin – Services, Recurring revenue, value-addsMinimize “large client concentration” – add diversified services and recurring revenue which is more efficient and less risky that geo expansion, acquistion etc. Drive services volume – MRRServices is THE main area you can grow blended gross margin without a wholesale strategy shift…Create “hooks” into clients – variety of services, recurring, touch points and make work more interesting and less stressful
- Taken from an advisory board group as an example. Our clients today and over the past 5 years having over 20 employees range from 50% to 84%. The percent of people in total doesn’t define success but the performance of each “class” of employee such as billable technical and revenue generating sales does. Discuss balance of support people and management but no more than 15% totalHow is your labor trending over time? We expect to see more customer support below the gross margin line.. Cheaper, available, impactful and less technical.
- With 75% utilization for every 4 people you have one person “unused”. For every 8 you have 2 and so on. A straight line need for more can inhibit gross margin sustainability with inconsistent sales timing and volume. The ability to “sustain” customer satisfaction AND lower employee inputs and thus lower inputs consistently over future quarters is the result of efficient business model, efficient tools and efficient training of “what moves the needle in your business”
- If you don’t ask, you don’t get.. Pricing may be a legacy from downturn. Make sure your PSA systems or spreadsheets have minimal triggers or gm that is actively managed.To avoid commoditization you need core USP’s as well as UDP (Unique Delivery Proposition)Clearly understand your engineering utilization and increasingly more important, realization – more highly defined time cards to the gross margin in each profit center you wish to grow (of course, you are breaking them out)Engineering mix – are your highest paid doing the advanced work? Who handles and how efficient is scheduling?
- Peopleare you greatest spend and provide your greatest opportunity. It is up to you whether to develop awesome relationships where they feel great about their opportunity each day to reach certain targets like blended gm and hopefully see a WIIFM as a result or whether it’s a job for them. Focus and success in various sales categories and offerings defines the need, numbers and skills sets of technical staffMaximize two key billable resources – revenue generating sales people and billable technical people. Technical success follows the sales success pattern. But by how much in your current and future business model?
- Focus and clarity are key
- Blended Gross Margin defines your business model potential and can be a very important component of your planning/succession/destination plan. While it is a constant drive toward better, better, better, the result is a company ability to manage expensivetalent and expenses with a much higher level of safety. Though it’s a difficult metric to move after the often low hanging fruit of efficientpricing which we work on closely with clients. It happens with a combination of intense focus and “soft stuff”
- I’m very interested in the early Industrial rev and collect early woodworking tools and take classes from time to time. I took a 5 day course on boat building in Vt. There were about 10 of us. “I get completely focused on the outcome” Brands often evoke powerful feelings in us - what do you want your offering to feel like for your customer? How do we make that happen?If you are engaged with your people on how to improve gross margin and fostering efficiency in your model you can continue to move the needle and create a far more sustainable business with motivation and prosperity for all. And maybe the most important point is more peace of mind which we would like to see for all of you. I’ve enjoyed my time with all of you and got to know many of you quite a bit better. Thank you. Questions?