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?
