Business Basics 5: People buy from people

I haven’t seen Geoff for about 10 years, but he still had my contact details through Linked-in and newsletters. He gave me a call because the multi-national he works for is bidding for some business with a major sporting event, and wondered if I would be able to help. In the end nothing came of it, but it illustrates a key point about business – people buy from people. There are pages of consultants on Google, and in the Yellow Pages if anyone still uses that, but people prefer to buy from people that they know personally and have dealt with before. How do you know whom to choose from a long list of names?

There is always a risk when appointing an unknown supplier. Maybe they will exceed expectations and everyone will be delighted. Or maybe they will be terrible. Who knows? At least with existing suppliers you know what their faults are and where the likely problems are going to be, and can try to manage round them.

On a recent project looking at suppliers for major sporting events we asked event organisers what they were looking for, and almost to a man (or woman) they said a relevant track record. When that track record is wedded to a personal relationship the combination is very strong.

So there is always an inbuilt advantage to suppliers already known to the buyer. You might ask whether tendering processes are meant to eliminate that bias, and in principle they should. In practice knowing a supplier gives a least a tiny, unintentional, unconscious weighting to the scoring and might mean a known supplier getting the benefit of the doubt and an extra point or two that makes all the difference if the scoring is close.

On top of that there is the fact that people tend to get along with people who share similar values, styles and experiences. There is a story that Bill Gates made all the guys at Microsoft where shirts and ties the first time they met IBM, just to make them seem more like IBM then all the tie dyed t-shirted code writers they met on the rest of their trip. If he did, it was a brilliant move.

And the more times you meet someone the more you get to know and understand each other. If there is a clash of personalities – then you had better either change your personality or more realistically get someone else to manage that client. It is the approach that we take with one major client where a clash of personalities was a major problem until we worked out the best people to work together and lead the project on both sides.

So, the key message? Get out there and meet your customers. You never know when they are going to have a need and your name will come to mind. Could be tomorrow (wouldn’t that be nice), or it could be in a decade. You don’t know. But if they don’t know you personally, they will probably go with someone they do know.

Chemical Industry Purchasing & Supply chain course 2012

Rob Milner Associates and PAWA Consulting are running the above course at the Heath Runcorn in February 2010. More details in the flier.

Market Research - open training course 2010

Rob Milner Associates and PAWA Consulting are pleased to announce that we are running a course on Market research, focussing on the Chemicals industry at the Heath in Runcorn in February.
Details in the attachment.

Training Event - Newcastle

I shall be running the Quality and London 2012 workshops again for BiP Solutions on Thursday 26th November 2009, at the Hilton Newcastle Gateshead Hotel, which is actually in Gateshead. The event in Leeds had an interesting mix of delegates and both sessions had lively debates. I look forward to similar in Gateshead.

Booking is £75 for each event, details in previous blog.

Training events - Leeds - 2012 and Quality

I shall be running 2 training events for BiP Solutions in Leeds on Wednesday 18th November
The first is "Using Quality Standards to create Competitive Advantage", and the second is "Winning Business through London 2012".

You can attend either event or both, and they are being held at the Jury's Inn, Leeds. Cost is £75 for each half day session.

They can be booked by clicking here.

Procurex 09

I had a very interesting and productive time at the Procurex 09 conference on behalf of BiP solutions. Very busy, and some very interesting discussions at the sessions and on the stand.
Obviously there is a focus on Scottish Procurement, but there were a lot of English and Irish people there as well - and at the Procurex National event in Birmingham in March no doubt there will be even more. I am hoping to write an article about the event with one of the attendees - more details if it comes off.

The presentations from the 2 days (not just mine) are up on the site at
www.procurexscotland.co.uk/day1zone3

Preregistration for 2010 is already on line at

www.procurexscotland.com/2010

I hope to be there.

YCF Conference - Buying in Uncertain Times

Here is the presentation I gave 14th October 2009 at the Yorkshire Chemical Focus annual Conference in Bradford. Any questions or comments please fire away. Sorry, I can't seem to find an easier way of putting the powerpoint slides in the blog.

2009/10 Training programmes

We are delighted to announce that we shall be running our own training programmes in 2010, starting on 22nd February with Market Research for the Chemical Industry, at The Heath Runcorn (with Robert Milner Associates).
The next day 23rd February 2010 we shall be running Chemical Industry Purchasing and suppy Chain Management, also at the Heath.

At a date to be arranged we shall be running "Beat the Buyer" a half day course focussing on sales and purchasing negotiations (in conjunction with NBA4Business).

In the remainder of this year we have;
Purchasing, Negotiation and Cost control 19-23rd October 2009 in Kuala Lumpur, and
Professional Purchasing Skills, 8th-12th October 2009 in Dubai, and
Complete Course in Purchasing Management, 13th - 17th December 09 in Cairo.

In addition we have a full programme of international training programmes in 2010.

The Complete Course on Purchasing Management
15 - 19 February Kuala Lumpur
The Complete Course on Purchasing Management
16 - 20 May Cairo
Purchasing Management Master Class (Certified Purchasing Professional)
5 - 9 July Vienna
The Complete Course on Purchasing Management
26 - 30 July London
Purchasing Management Master Class (Certified Purchasing Professional)
2 - 6 August Geneva
Purchasing Management Master Class (Certified Purchasing Professional)
1 - 5 November London
The Complete Course on Purchasing Management
29 Nov - 3 Dec Kuala Lumpur
Purchasing Management Master Class (Certified Purchasing Professional)
20 - 24 December Kuala Lumpur

Rio 2016

Hard to believe that it is more than 4 years since London won the right to stage the 2012 Olympics. What a thrill it was, coupled with a certain Schadenfreude at the French disappointment. London 2012 made a great pitch - pointing out the UK is such as young country, and that London is one of the great international cities. Maybe only New York has that same buzz. And now less than 3 years until the Games themselves.

Although it may have been easier for UK companies to get business in Madrid or Chicago because of proximity or a common language, there should be lots of opportunities in Rio. The fact that this is the first Olympics in South America, means that there will not be the level of established infrastructure and preferred suppliers that there is in Europe and North America.
Obviously some of that will develop during the World cup of 2014 - but the page will be blanker than it is for most Games, and UK companies should have the momentum coming out of 2012 to do well.

Business Basics 4: Turnover is ego - profit is everything

When I was about the same age as my children are now, my father became insolvent and lost the chain of television shops he had spent a decade building up. His business, as I now understand, was profitable – but the amount of money he was owed by debtors and the amount of money he owed his creditors balanced – and there was no way through the cashflow crisis that created. As a child I didn’t understand the reasons for the change in our circumstances but as I grew up I had two simple messages reinforced to me by my father: Turnover is good for your ego, but profit is everything. And Cashflow is king – but that is another Business basic.

During the dotcom boom, and several other booms, business sometimes seems to find a way round this dictum but, inexorable as gravity, in the end we all need to make a profit. Google did not make money for a long time, but now is a cash machine with the profits from online advertising. Skype on the other hand now seems to be worth a lot less than ebay paid for it.It is an easy thing to assume that if the turnover is there, then the profitability will follow – at a reasonable percentage. However the evidence is there that lots of businesses are what are uncharitably known as “busy fools” – working harder, bringing in more work, but not increasing profits at the same rate (or even at all). How long will Twitter and Spotify be able to go on growing without making a profit? Will they survive?

The holy grail of business is to increase volumes and margins at the same time, and it is the mantra of many sales managers (“sell more at higher prices”), which is instantly dismissed as impossible by many salesmen. It seems far easier to increase volumes by eating away at margins – which means we have to work harder to make the same money. That is the Red Queen’s Race in Alice in Wonderland, where we have to run just as fast as we can to stand still. In the end it is often unsustainable, and volumes drop without margins returning to previous levels and then the trouble starts.

As a consultant I am aware of some of my colleagues and competitors working for low rates that they hope will keep them busy. During the bad times, like the ones we have now in 2009, if the volume of work drops then they no longer able to sustain their business. If more profitable work becomes available they are often unable to take advantage because their time is fully booked with low value work. Clients buy our expertise, but they buy it in time based units. When it is gone, it is gone.

There are valid reasons for pushing for increased turnover – some Buyers will insist that a single contract is no more than 25% of a suppliers turnover, so the bigger the turnover the bigger the contract you can bid for. It can make the company seem more substantial that it is in reality. And as an owner or director it sounds great to define your business by the turnover - £1m, £10m, £100m. It is worth remembering that that is the way the big bankrupt companies described themselves, rather than their profitability - £10k, £20k or even nothing at all.

Of course, if you can maintain reasonable margins, then growth in turnover is excellent. We just have to remember that what we are trying to achieve is more profit, and that does not inevitably follow from increased turnover.

In the North we have a phrase about being all fur coat and no underwear… (to use the polite version). It is worthwhile for all of us to have a good look at the business we are gaining and checking that it really is generating a respectable profit (or that we have other reasons for taking it on), and that we are not just fooling ourselves into taking on more work for no gain.

Details of YCF Seminars 14th Oct 2009

PAWA at YCF 14th October 2009

I shall be presenting at the Yorkshire Chemical Focus Annual Conference on 14th October 2009 in Bradford. Time should be late afternoon, and the venue will be the Cedar Court Hotel at the top of the M606.

Procurex 2009

I shall be presenting a couple of sessions at Procurex Scotland 2009, the Scottish Procurement exhibition 28-29th October 2009. More details to follow.

Business Basics 3. What is in a name?

Large corporations put a lot of time and effort into branding - much of which seems to be a waste of time to those of us Luddites who still think that Snickers should be called Marathon bars. The change of name can sometimes seem bizarre, when as part of a restructuring a well known brand or company name is thrown away - as seemed to happen when the Virgin Megastores were briefly taken over and run as Zaavi. Whatever value there was in a music retail store in the days of instant downloads, surely a lot of it resided in the Virgin brand which has been around for 40 years.

So there is worth to company names. As part of a current project we are researching into suppliers to major sporting events. As part of the process we have to look a huge range of companies, and a few things very quickly come to mind. The first is that you can very tell many of the one man bands - they are called things like John Smith and Associates (there is at least one in the UK, and I am sure it is a very fine business). Nothing wrong with the name, but it can lead customers to think that you are small and not as capable as you might be.

Secondly, companies that have quite specific names describing what they do, often keep the name after they have expanded away from their original priority. That makes it difficult for new customers to recognise them. An example we came across was an agricultural business that now makes temporary buildings for many different applications - but the Agricultural in their name possibly puts people off.

Third thing is that having a common name can make it very difficult to distinguish you from similar sounding companies. Your Company Ltd. may be practically indistinguishable from Yourcompany, and Your Company International, and Your Company Trading etc. Often companies are stuck in the bind of having built up a reputation over years, but now being indistinguishable from lots of others with similar names. Likewise companys named after places are hard to find on Google.

Finally if you have made your company stand out by having an unusual spelling, or using X instead of ex- or something similar - you had better hope that your advertising is strong enough for your individual spelling to stick in the mind - otherwise people won't find it.

The easier it is for people to find your business the better. Tradition or a fancy name should not stick in the way of easy recognition on the internet.
Do we follow these rules? Well, we do have difficulties with people not knowing how to spell PAWA if they hear it rather than see it. Something we will think about as we grow.

Business Basics 2 : It's a numbers game

Another truism – the more customers you see, and the more you see your customers, the more successful you are likely to be. Obvious, but for many of us there can be a gap between what we know intellectually and what we believe in our hearts and do as a result. Outside of work life as well as inside.

Of course there is no guarantee that if you get in front of a lot of customers you will win business – your proposition could be so unappealing that no matter how many people you see no one will buy (though people will buy quite remarkable things – do you remember pet rocks?). But whatever your success rate, 99% or 1%, if you see more existing and potential clients more often you are likely to get more business. As said in the book Rainmaking, by Ford Harding, if my success rate is 10% and yours is 20%, I’ll still win more business than you if I see 21 customers and you only see 10.

Salesmen are used to thinking that every rejection moves them closer to a sale – the rest of us are less sanguine. It hurts when a client says no. When times are hard – like they are at the moment – and possible projects are being put on the shelf it takes a strong mental attitude to keep putting yourself in the way of rejection. And of course, when things get better we are all often too busy doing the work in hand to spend too much time seeing people other that existing clients.

As a consultancy we can talk ourselves out of business quite easily – our current project we nearly didn’t bid for on the grounds that the client knew us well but did not invite us in.. Naturally (and wrongly) we thought they did not want us. Another client I saw recently asked why we didn’t bid on a piece of work that was a follow up to an earlier project of ours – the answer was that we did not know about it. Talking more to our clients more often would have avoided both of the those problems.

In industries like Speciality Chemicals, the risks of a new supplier can be high – and so customers want to see consistent commitment to them as an account before taking a chance on change. Other times technical requirements change quite quickly, which an incumbent supplier might not notice but a hungry supplier on the outside might notice and take advantage of. And sometimes you get lucky and call straight after a need for your services has just arisen.

Of course call rate along guarantees nothing, but little and often (and for a long time) can be the way to get business.

Beat the Buyer - 14th October 2009

We are delighted to announce a new joint development with NBA4Business - a negotiation skills Workshop entitled "Beat the Buyer". This is part of a very reasonably priced series of 5 workshops which are being held at the award winning Shine Business Centre in Leeds - more details here.

Nick Bramley is an experienced saleman and trainer, and I will be bringing my expertise as a buyer to give people an opportunity to practice negotiation skills in a realistic setting. This is a unique opportunity to see negotiation from the viewpoints of both the Buyer and the Seller.

Prices for the workshop start at a very reasonable £75+VAT. Booking through NBA4Business .

Business Basics 1. More businesses go wrong by not doing the basics than not being sufficiently advanced

This may sound like a consultant talking himself out of business – where would we be if there were no fancy new business model every few years? Some ground breaking new innovation that will change everything about business beyond recognition. Be it the internet, or supply chain integration, or “organic” produce.

Well, I am not saying that these things are not vitally important, and that for some businesses failing to embrace them will mean the end of their business. After all the number of Fletchers decreased after the invention of the gun. But not immediately. Arrows and guns co-existed for a while (at least according to the Western movies of my youth), even if in the end there was only going to be one winner in that technology shift. There are even a few niche fletchers around now.

A fletcher who, unable to transfer his skills to metalworking, ignored the coming of guns surely found that the number of his customers declined over time (presumably after every battle) – but it would have tailed off rather than stopped instantly. However a fletcher who did not pay his bills, made wonky arrows and worked in a shed no one could find would go about of business even quicker.

So, getting the basics of business right is essential in order that you are around in business long enough to worry about the new, new thing. So, what are the basics of business – in a nutshell (or sheaf) they are cashflow, customer satisfaction, profitability, quality of production, security of supply, and promotion. And that has not changed in centuries – internet or not.

Feel free to disagree or tell me something essential I have missed out.

Business Basics: Introduction

One of the interesting things about being a consultant and trainer is that over the years you find that some of the same issues recur on regular basis. The great thing about this for a consultant is that we can quickly come up with an opinion, viewpoint or (ideally) an answer because we have already thought about it. The surprising thing is that many of the repeating issues are fairly standard issues in business, and are addressed in lots of books, training videos, MBA courses etc. You might think that they would never occur again – but they do. And as a consultant I find myself saying some of the same lines over again to different clients.

I thought it might be useful, for me as well as any clients, to put some of these on the blog. I make no claims for these to be the result of years of scientific study, or to be the leading edge of business management research. For that read Harvard Business Review. This simply an occasional series of posts dealing with some of the common issues in business. You may disagree (with either the problem or the answer), and I look forward to hearing from you if you do.

The Engineer's view of Purchasing - Dave Hannon BizConnect

The link here illustrates some of the tensions between Purchasing and their clients. The key part is;

"Dave: "So what do you think of purchasing professionals in general?"

Engineer Friend (EF): "I haven't met one yet I didn't try to get fired."

Dave: "Really? Why so bitter?"

EF: "Well, imagine this. I've been working closely with a supplier on narrowing down a spec, spending a lot of phone and face time with the supplier, figuring out exactly what I want to work in my design. And then I submit it to purchasing and they come back and tell me they have a different supplier that can save us $1. And then the design fails and I get the heat."" Dave Hannon on BizConnect

I have worked with both Engineers and Purchasing people for years, and the mistrust can be mutual. Purchasing people are rightly suspicious of Engineers who specify requirements so tightly that only one supplier can do the job - who just happens to be the one that the Engineer always uses. Why is that? Are they the best, or do they just have the best salesman, or the best Golf day?

As so often, these are best issues are best resolved by communication - and the best way to do that is to get the Engineers and Buyers together regularly, formally and informally so that they can get a feel for the role that other plays. I am a great believer in short term (3 to 6 month) secondments as a way of raising awareness and co-operation across the business. You might think your business cannot afford that, but how else are you going to get people trusting each other?

Summer Experience with PAWA Consulting

Hello,

My name is Bartosz Kozinski. I come from Poland. I am a student working for PAWA Consulting this summer. I have just finished my second year on undergraduate Business and Management course at Bradford University School of Management.
My summer project's aim is to develop and populate a CRM system for PAWA Consulting. I am already looking forward to gaining new skills and learning how to put theory into practice. My first few days at PAWA Consulting were fantastic and I look forward to next weeks of my project with great enthusiasm.

Bartosz Kozinski

Good and Bad Speeches

David Hepworth at Word Magazine makes a very good point - click here

"In the course of attending a lifetime of speech days I have finally realised you can tell a good speaker from a mediocre one without actually hearing a word of what they're saying. The poor speaker looks at their notes. The good speaker looks at their audience. The poor one thinks you're listening to hear what they're going to say. The good one knows you're listening to them because they're interesting to listen to."

Follow up: NICE and the Price of Life

A quick follow up to the last post - a documentary by Adam Wishart covering the same ground as his article on NICE is available on the BBC I-player until 25th June 2009.
Details here.

It is called "the Price of Life".

In place of Negotiation - NICE and the cost of drugs

In the Sunday Times on 7th June 2009 Adam Wishart had an interesting article on the procurement of drugs by the NHS, and the role of NICE. The article is "the unbearable cost of living". I apologise if my summary of the article in any way misrepresents it, and I suggest people read it themselves.

Adam Wishart has himself lost a parent to cancer, and so at the start of the article is very much on the side of the patients who are asking why they are being denied new treatments which they think might help them, which have been rejected by the National Council for Clinical Excellence on the grounds that they cannot be justified in terms of value for money. Naturally the patients believe that the lives of their loved ones (usually their loved ones, not themselves) is worth any amount of money.

This is a very emotive, and emotional, issue and some people will think that the NHS should be about saving lives and not about the cost of treatment. Adam Wishart explores this and quite unusually moves beyond his initial position to recognising that finances are limited, and if we spend too much on any one treatment we reduce the amount available for other treatments. He asks the very difficult question, that has to be tackled by the NHS and by NICE, "should we give preference to terminally ill patients by giving them access to expensive new treatments that could extend their life, or should we spend the money on less ill patients who will benefit from their treatment for years to come". The wisdom of Solomon indeed is needed for such questions.

He raises the question of why the drug companies charge so much for their new products, and quite reasonably explains that they are out to make a profit, and the way to do that is to charge a high price. And if people will pay $100 000 for another year of life (and wouldn't we all if we had the money) then it is in their interests to charge that - even if it means some people cannot afford it.

The point I wanted to get to though is his final point - "why can't NICE negotiate lower prices?". The NICE process is to approve drugs for clinical use on the basis of value for money - and it is a pass/fail system. If you cannot demonstrate that the efficacy of your new drug justifies its cost, then it is not approved and will not be provided on the NHS.

There are several drug treatments that are quite beneficial, and quite expensive, and fail the NICE test because of their cost - surely if we negotiated with the manufacturers to lower their prices we could provide them on the NHS?

This seems sensible at first glance, certainly to people not used to the commercial environment. What is not apparent is that this will lead to higher prices overall.

What NICE are doing is asking for, effectively, a fixed price proposal. They want the bidding companies to put in their very best price - the one that will give them the best chance of winning business. Removing the oppportunity to negotiate puts the pressure on the drug companies to put in a low price to improve their chance of winning the contract - in effect they are going to always put in a price on the low side of the range of possible pricing points.

If we introduce post bid negotiation we have a number of consequences.
The first is the that the drug company no longer has so much fear of not being succesful, and so is more likely to put in a price in the middle or top of their possible pricing band - if this price is too high they can always reduce it in negotiation to win the business. The fear of not getting the business is a key factor in salesmen setting lower prices - remove it and they will go for higher margins.

So, the average input prices will go up - and the average price paid will go up as a consequence. We will approve anything below our value for money point, though those prices may be higher than under the no-negotiation system, and will negotiate on those that are too expensive. On average this means prices paid increase - not the first time, and not on everthing, but over time and on average they will rise. Note that the performance of the drug has not improved - but the price we pay will rise, meaning the NHS becomes less cost effective.

Note that we have also created more work for ourselves by allowing negotiation, and slowed the process down.

This is not obvious to everyone, and does lead to people feeling their life is undervalued. The reason for NICE's approach is to do the maximum good with the resources available - and the way to do that is to put the drug companies under pressure. Unfortunately it does the same for patients too.

Chemical Business Networking Group

The CBNG (or just CBN) is exactly what it says - a networking group for people in the UK Chemical Business. The membership is drawn from across the whole range of business, but historically draws most strongly from the Chemicals Manufacturing sector. Membership costs nothing, but is by invitation and limited to 140 members. Meetings are 3 times per year and consist of nothing more elaborate than an opportunity to mingle, a pay your own way lunch, and then a chat across the tables. Occassionally we have a guest speaker. The meetings alternate between Manchester, York and London.

This year I have the honour of being co-chairman with Roger Anderson of Griffin Management - a recruitment consultancy specialising in the chemical industry. If you would like to attend then please drop me a line at info@pawa.co.uk, and I will be happy to chat about it. I am particularly keen to continue to attract further members of the manufacturing base, so the we don't end up with too many "enablers" and too few "do-ers" like some networking groups.

Excellence in Public Sector Procurement

Along with Stuart Emmett of Learn and Change, I have been commissioned to write a book on Excellence in Public Sector Procurement by Cambridge Academic. This will be part of their successful "Excellence in...." series, to which Stuart has already contributed a number of titles. The first draft is due in June 2009, for publication early in 2010. It will be available via Amazon, and hopefully CIPS and direct from the authors and publishers. I would like to say "all good booksellers" but there are very few books on procurement that actually get onto the bookshelves - maybe this will be an exception.

I would be grateful for any comments on best (or worst) practices that we should ensure that we include in the book. Case studies also always welcome.

Delivering the London 2012 Olympic Games

We are luckily enough to be involved in helping companies look at supplying the London 2012 and other major events - details when possible.
In the meantime, here is a link to YouTube from the CIPS website, showing one of the showcase speeches at the 2008 conference by John Armitt, Chairman of the Olympic Delivery Authority. In case you were in doubt about the role of the ODA, it is often said that they build theatre and LOCOG put on the show - which indicates the difference in the size of the budgets.

Everychanging Business Jargon

Like everyone, I try to keep on top of the latest buzzwords - if only so that I have some clue what some people are saying.

Lucy Kellaway at the Financial Times has just given out her annual awards for meaningless business phrases - here. I will now go away and try to avoid using any of them in my next report.

How to weather an Economic Downturn

Above are jpegs of the presentation I gave at Business NorthWest in November 2008 on behalf of the EEF.