Monday, 7 January 2013
A New Year heralds the time of the year when many of us set new goals and resolutions. Unless we believe strongly enough in the Goals or the need to change, it is unlikely we’ll be successful. Most people resent change, but there is a great book written by Spencer Johnson in 1998 titled “Who Moved My Cheese?” It depicts peoples’ adversity to changing with the times, in particular highlighting that an arrogance to not embracing change can impact on our very existence. Commonly used as a phrase to promote “change or die” agendas, the true message of the book is that by continuously exploring new options, the characters of the book find nicer cheese and a greater variety of choices.
Our Real world becomes faster changing as each year moves on. There are more and more flavours of cheese on offer, and they get moved more frequently. Just listen to the cries of Retailers about online shopping’s impact on sales – they are now stuck in a self-inflicted continuous cycle of discounting to maintain viability. And now the fastest growing segment on the internet is the promotion of Services, so expect to see more change in how we conduct business ahead.
The Earth Moving Contracting industry is perhaps seen as the most mobile industry in Australia – we physically move with each new job depending on where the work is. We also gradually improve the methodologies in terms of how we conduct our work, embracing new technology such as new trenching techniques, exploring automated dump trucks on mine sites etc.
But we are dinosaurs in terms of changing our business models. For example, the status quo has been that Government has a select list of Head Contractors who oversee and sub-contract to smaller contractors, who do most of the heavy shifting. The Victorian Government has just moved the cheese in December in a move that once the ripples settle is likely to be followed in Queensland, WA and possibly other states. They look like banning Lend Lease from Victorian Government work for up to 4 years. The background is that the Government has calculated it can save an estimated 25% of the cost on its’ jobs, allowing it instead to complete more jobs by spreading the work amongst smaller contractors. That’s a huge productivity improvement that can’t be ignored. Part of the reason for the cost driven change is that the agreement between Lendlease and its Unions break State rules by dictating inefficiencies into the projects. The big cheese has moved, and it’s an opportunity for many small and medium Construction businesses to show they are up to the task of providing cost effective jobs to promised deadlines.
The 1% Challenge
The change with the most impact is usually the change which we have control over ourselves. There are two keys to successfully enacting change in a business:
- Set a clear goal that you can get everyone in the business to buy into
- Break it down to manageable chunks that everyone can work on daily
About 15 years ago, whilst working for a successful and quite profitable Global Market leader, we were effectively told to double the bottom line in one year. However, if we told the whole organisation that was our goal, it would have been met with scepticism and seen as unachievable – after all, historically a 10% increase was a Mt Everest conquering achievement. Instead, it was launched as “The 1% challenge” – all aspects of the business must improve by 1%. Nobody in the whole company could argue with the achievability of that? Increase workshop productivity, order fulfilment/delivery accuracy, number of customers, number of products they buy and prices etc by 1% each. Reduce product cost, consumables, debtor days, stock levels etc by 1%. And so on. Every part of the company became a cog in achieving the goal. It was exceeded, of course.
The outcome will obviously vary based on the starting point. Our Federal Government for instance just announced that they had lost less than 1% of their revenue this year, except they announced it as having lost $3.9 Billion in expected Tax receipts (still collecting more tax than any previous year) and that now meant they were yet again in the red (continuing to go broke). Nothing was said about that expenses represented a $100 billion per year increase in Spending for the year compared to 5 years earlier. The true story is that we have a deficit because expenses continue to increase at a faster rate than tax receipts. With 20,600 new regulations for us to live under, we start to see where some of the money has gone. A 1% challenge can have benefits in any environment.
The key for most businesses is to continue to monitor where the cheese is, and if there is fresher cheese somewhere else, then add this cheese to your repertoire. If the business is marginal, it may need a bigger target to give a quick enough result, perhaps 5%, which is still only a little more than inflation. By attacking the goal from all angles, what happens is that many small creeks combine to create a River of Wealth.
So, here’s to wishing all our valued customers a very Happy and Prosperous New Year. May the Cheese be with you!
As always, onwards and upwards!