The Four Business Drivers
This lesson is so important I have some version of it in all of my courses. It applies to virtually all businesses, and therefore to most college courses.
Do you every see a business decision like one of the ones below and wonder, WHY?
1. A major company starts a layoff process that fires some of their most senior employees, even though many are the most talented and experienced on the team?
2. A major car company merges with another major car company?
3. A company moves all of its accounting work from the district office in each state, and consolidates it all to a new group in the corporate office?
4. A company moves all of its I.T. process to the cloud, OR outsources all of its I.T., OR outsources all of its H.R., OR outsources all of its distribution?
5. Your boss wants you to stay in his department for another year or two to master some skills, and does not want you to advance or transfer to another department?
6. Your boss cheats on his monthly reports and gets fired? (or promoted?)
These sorts of things, and millions of others happens because decision makers are trying to improve one of the Business Drivers. (Also called priorities, “levers”, and a number of other things.)
Driver #1. Increase Annual Sales: This means whatever we are selling, we need to sell MORE per quarter than we did last quarter, MORE per year than last year, MORE than biggest competitor, MORE than what Wall Street Analysts predict we will sell this quarter/year/decade. And if you are thinking, “Well, just cut the price down,” that probably won’t work because of Driver #3.
Driver #2. Cut Costs: This means, renegotiating contracts for all services and parts our company uses, becoming more efficient in the warehouse. Using a cheaper delivery company. Moving production to China. OR moving production from China to Vietnam. This means cutting employees, cutting overtime, moving from print advertising to cheaper and more effective digital…
Driver #3. Increase Margin: (always written as a percentage) AND Profit (always written as a dollar figure). Your company exists as a money machine. It competes with all other companies to make more money, faster, at a lower cost. Decision makers who prove they can do this at one company, get hired for far higher salaries at the next, and so on, and so on. When you increase sales, if nothing else changes, you have increase margin. If, rather, you decrease cost, and nothing else changes, then you have also increased margin. If you do both, then you have REALLY increased margin. Now, Margin is the reason you can’t just cut costs so much that it lowers quality or quantity and decreases sales, or decrease the retail rate for your product so much that it increases sales, but also lowers overall margin and profit. Wall Street analysts – well known public figures – are watching your business, making predictions, and when you do better than they predict, your stock goes up fast. When you do worse, then your stock goes down.
Driver #4. Customer Experience: This is the one that most businesses fool themselves into believing the care about, but most just barely pay attention to it. Ever bought a cup of coffee at a vending machine and discovered that the design forces you to spill hot coffee on your fingers? Ever call a large organization and wait on hold, navigating a phone tree for 15 minutes before you finally get a message that says they are closed today? Ever have a professor write so much stuff all the time that you thought you would lose your mind? (Uh, well forget that last one.) Improving customer experience is when Android adds several new high tech features to a phone that was already selling just fine – delighting the customer. Customer experience is when a car dealer sells you an expensive luxury car – and all maintenance is included – and they even automate your bi-annual oil change scheduling, let you just drop it off and step into a rental for the day, and communicate with you via text, phone, and let you dial straight to own known service advisor when you call.
Assignment (Pick one that you have not done before for me):
Management Consulting Firms
1. Go to a management consulting firm site like Mckinsey.com, BCG.com, EY.com, Deloitte.com, Accenture.com, or PWC.com.
2. Search for the part of their site called “Insights” or something like that. This is where they share free research and opinions with the public to show off their brain power.
3. Find an article on something that impacts one or more of the four business drivers and give me a write up on it.
4. Explain in your write-up how what you learned can improve the performance of your next corporate employer or your next startup.
Geekwire.com
1. Go to Geekwire.com
2. Find an article on some local company that impacts one or more of the four business drivers and give me a write up on it.
3. Explain in your write-up how what you learned can improve the performance of your next corporate employer or your next startup.
New York Times / Wall Street Journal or Other Major Nationally Known Newspaper
1. Go to…uh…there.
2. Find an article some trend that impacts one or more of the four business drivers and give me a write up on it.
3. Explain in your write-up how what you learned can improve the performance of your next corporate employer or your next startup.
Criteria:
One page double spaced – not much longer – not much shorter – 10 points
Professional use of quotes and references – 10 points
Followed the instructions of the assignment you picked – 10 points
Good content, interesting, informative, relevant – 10 points.
