management

  • 5 ways to dance through digital disruption

    You’ve probably heard the term and wondered whether it could happen to your company. Maybe it already has. We’re referring to “digital disruption” — when new technologies and business models affect the value proposition of existing goods and services.

    Perhaps the most notorious recent example of this is the rise of ride-sharing companies such as Uber and Lyft, which have turned the taxi industry on its ear. But it’s hardly a fait accompli that a business will fall flat on its face because of digital disruption. You may be able to dance right through it with the right digital transformation strategy. Here are five steps to consider:

    1. Focus on customers. Businesses often view the world through the filters of marketing, sales and maximized revenues. Instead of thinking about business success, target the customer experience.

  • Could stronger governance benefit your business?

    Every company has at least one owner. And, in many cases, there exists leadership down through the organizational chart. But not every business has strong governance.

    In a nutshell, governance is the set of rules, practices and processes by which a company is directed and controlled. Strengthening it can help ensure productivity, reduce legal risks and, when the time comes, ease ownership transitions.

    Looking at business structure

    Good governance starts with the initial organization (or reorganization) of a business. Corporations, for example, are required by law to have a board of directors and officers and to observe certain other formalities. So this entity type is a good place to explore the concept.

    Other business structures, such as partnerships and limited liability companies (LLCs), have greater flexibility in designing their management and ownership structures. But these entities can achieve strong governance with well-designed partnership or LLC operating agreements and a centralized management structure. They might, for instance, establish management committees that exercise powers similar to those of a corporate board.

  • Critical connection: How costs impact pricing

    As we head toward year end, your company may be reviewing its business strategy for 2017 or devising plans for 2018. As you do so, be sure to give some attention to the prices you’re asking for your existing products and services, as well as those you plan to launch in the near future.

    The cost of production is a logical starting point. After all, if your prices don’t exceed costs over the long run, your business will fail. This critical connection demands regular re-evaluation.

    Reconsider everything

    One simple way to assess costs is to apply a desired “markup” percentage to your expected costs. For example, if it costs $1 to produce a widget and you want to achieve a 10% return, your selling price should be $1.10.

    Of course, you’ve got to factor more than just direct materials and labor into the equation. You should consider all of the costs of producing, marketing and distributing your products, including overhead expenses. Some indirect costs, such as sales commissions and shipping, vary based on the number of units you sell. But most are fixed in the current accounting period, including rent, research and development, depreciation, insurance, and selling and administrative salaries.

  • Listen and Trust the Power of Collaborative Management

    Many business owners are accustomed to running the whole show. But as your company grows, you’ll likely be better off sharing responsibility for major decisions. Whether you’ve recruited experienced managers or developed “home grown” talent, you can empower these employees by taking a more collaborative approach to management.

    Not employees — team members

    Successful collaboration starts with a new mindset. Stop thinking of your managers as employees and instead regard them as team members working toward the same common goals. To promote collaboration and make the best use of your human resources, clearly communicate your strategic objectives. For example, if you’ve prioritized expanding into new territories, make sure your managers aren’t still focusing on extracting new business from current sales areas.

  • Looking for concentration risks in your supply chain

    Concentration risks are a threat to your supply chain. These occur when a company relies on a customer or supplier for 10% or more of its revenue or materials, or on several customers or suppliers located in the same geographic region. If a key customer or supplier experiences turmoil, the repercussions travel up or down the supply chain and can quickly and negatively impact your business.

    To protect yourself, it’s important to look for concentration risks as you monitor your financials and engage in strategic planning. Remember to evaluate not only your own success and stability, but also that of your key customers and supply chain partners.

    2 types of concentration

    Businesses tend to experience two main types of concentration risks:

    1. Product-related. If your company’s most profitable product line depends on a few key customers, you’re essentially at their mercy. Key customers that unexpectedly cut budgets or switch to a competitor could significantly lower revenues.