June 29, 2017


















                                                                                                            Strategic Insights 35

CORE-RENEWAL BY-THE-NUMBERS

I’ve written 34 Insights to date. They have been postcards from the front lines where Pioneering Distributors are uncovering hidden gold using Line Item, Proftit Analytics (LIPA). The most ambitious have, in 24-30 month periods:  

1.     Doubled sales with key accounts:

o    By identifying and reducing previously unnoticed and unmeasured, small-line-and-order transactional activity costs for both parties.

o    The re-tunings have also improved the customers’:  uptime hours; on-time output; and their customers’ satisfaction.

o    Lower service costs improve each customer’s profitability.

o    And, customers reward distributors with more sales.    

2.     Increased profits 5-10 fold due to #1 and other net-profit re- tunings

3.     Re-engaged well-rewarded employees and suppliers.

How much hidden upside exists in your business? If you knew exactly, which customers and items were the net-profit winners and losers (“Core Profits”), could you execute like the Pioneers above?

By using their playbooks, I think so! Innovation is cool, but imitation is faster and less risky. Be sure, though, to be the first fast-follower to re-tune best accounts’ buy-sell activity in your marketplace. Don’t let the competition get the gold first!         

HOW “CORE RENEWAL” BECAME AN ACCESSIBLE SCIENCE FROM:  ’68 TO ‘14

Our LIPA Pioneers have all executed a three-part,” Core Renewal Strategy”:  (1) Define the Profit Core which is: the selling intersection of your most profitable customers buying your most profitable items. (2) Determine how to sell more of the best items to your best customers in a deeper, win-win, “supply-chain-math” way. (3) And, in parallel, determine how to fix or exit selling activity that is unprofitable.    

Boston Consulting Group first pitched Core Renewal solutions in the late ‘60’s. For a $3 million-plus fee, they would measure the Profit Core hiding within the “Dog” divisions of conglomerates. But, 90% of the entrenched managers and sales forces didn’t believe in selling: a streamlined, product line to fewer, better customers on a “deeper, better basis” (?).

Old-Way Selling worked well from ’48 to ’67. Why not: keep selling ever more items to ever more customers for sales volume and product-share (not share of customer or customer niche). Why not coast in your well-paid, tenured position and fine-tune what everyone already knew how to do? Won’t using same old tactics with new lipstick, turnaround fading profits next year?  

So: the other 10% of the players seized the Core Renewal opportunities. Some highlight cases:

·        Jack Welch of GE did Core Renewals on 580 divisions from ’81-’01. GE stock soared 4000%.

·        Illinois Tool Works (ITW) bought many manufacturing businesses from ’81 to ’00 and renewed them with their “80/20 Management System”.

·        Leveraged buy-out firms feasted on Core Renewal work from ’82 on. (Romney did well!)

·        From ’81 to ’00, “Core Renewal” strategy went from an “art” to a “science” as documented in three books by Chris Zook written between ‘01 to ’07.

THE BARRIERS TO DOING A CORE RENEWAL ARE NOW GONE FOR DISTRIBUTORS!    

Are you thinking:

·        We can’t afford $3 million for consultants?

·        Our management team is not as good as GE’s or ITW’s?

·        Translating Zook’s book-wisdom into how-to specifics for a distributor is a non-starter?

·         And, we can’t afford analytics people to get and maintain LIPA information?  

Well, these concerns have been zeroed out!  

·        Don’t - buy, own, develop - your own in-house analytics capability. Rent (by the month) 200+ reports that are turnkey solutions for distributors. Be up and going in three weeks. (Get a desktop demo whenever you would like from Waypoint Analytics.)   

·        Borrow the 5 levels of upside vision and the 8-step road-map that LIPA distributor pioneers have already discovered for you (see video link below).

·        Use the pioneers’ open-source training materials as needed.

But, can you get tenured managers and reps to ALL believe in and pursue Core Renewal principles and plays? Thorough education - about (bigger) upside benefits involving low risk, less work and forgiveness for all past unintended sins - will help.

UPSIDE EDUCATION ASSIGNMENT:

As a team, watch an excellent videotaping/editing of a (light-myself-on-fire) presentation I did on: “Renew Your Profit Core”. (Delivered last March at the “Advanced Profit Innovation Conference”. Next APIC is Oct.1-2 in Phoenix. Attend! For more go to: apicconference.com).

When watching this sizzling tape, stop for discussions and to write down: “Questions for Bruce”. Then, feel free to schedule a (free) teleconference session with me. Email me at bruce@merrifield.com when you are ready.

THE LINK:  http://www.profit-ideas.com/bruce/renew_the_core.asp

FINAL QUESTION: IS CORE RENEWAL PART OF YOUR “2020 VISION”?

In a little over five years, 2020 will be here. If you would like to have the most Exit Options from owning and running your firm with the greatest, wealth-creation and hero-appreciation, what will work best?

·        Keep fine-tuning what you have always done while the competitive landscape keeps changing?

·        Or, do a Core Renewal to then figure out what to do with the huge cash-flow?