As we marvel at the speed and agility of the four America’s Cup teams on Auckland’s harbour this weekend, it is interesting to reflect on how they got there and how they continuously innovate and improve.
To innovate you need an open and collaborative process and sometimes, businesses of all types rest on their laurels and forget the creativity and passion that got them started. Many years ago, Edward De Bono developed the Six Hats thinking process to encourage productive discussion and innovation in organisations, rather than blame or arguments. The Thinking Hats take away ‘right and wrong’ and encourage people working in a team to take different views.
First is the ‘Blue Hat’ that facilitates or conducts the process and keeps the team on track.
The ‘White Hat’ analyses – for example, it produces the engineering data which helps the high performance teams work out how to get the boats to go faster.
The ‘Green Hat’ is the creative hat full of alternative ideas – who else would have thought of leg-powered bicycle grinders on our boat in Bermuda?
The ‘Yellow Hat’ is the sunshine – full of optimism, it looks for benefits. In our Bermuda bicycle example leg muscles are larger than arms. This gave the AC50 grinders more power to supply the hydraulic systems which raise and lower the foils and pull in the huge wingsail.
The ‘Red Hat’ is the intuition hat, driven by emotion. “My gut feeling is this will or will not work.” Intuition is often built on complex judgement based on years of experience and may be an art rather than a science. Boatbuilding is an art and it is worth reflecting that, in business, restructuring often fails because the human element, the emotion, is not properly taken into account.
The ‘Black Hat’ is the caution or critical judgement hat. Engineers try to make sure the loads on these boats are safe. Get it wrong and death is a real possibility. However, imposing too much health and safety too early can kill creativity.
The boats we see in January and February will be very different to those we see this weekend. The ‘Blue Hat’ will oversee continuously trialing and optimisation on the water – proof that innovation is a continuous process.
As a small business owner, you’ll be wearing many hats – De Bono’s colourful collection and the Captain’s Hat too, as you steer your enterprise through the choppy waters of 2020 and beyond. A start up business is often born from a Green Hat creative idea, or from an optimistic Yellow Hat applying someone else’s crazy thinking. Bridging the ‘valley of death’ and not running out of cash in a start-up requires a big Blue Hat to navigate uncharted territory. Often it takes many years – and continuous innovation – to get your business model right.
I am currently working with a customer whose Black Hat thinking began an innovation process, building an automated system that manages lead generation and marketing through to sales, operations, accounting and pricing. Any information technology system implementation requires all the hats to get it to work, and because of the new automation his net profit margins are now much higher than his competitors.
As your business matures, it is easy to become stale – competitors whittle away your super profits and you continue to cut overheads. If you look at breweries, beer is in decline, and they have had to develop or acquire new categories to achieve growth or sustain profits. Innovation and creativity is the lifeblood of your business and is underpinned by your passion for what you do. Keeping your creativity alive is essential, as is innovation because, if you stop innovating or let your creativity stagnate, you can end up like Kodak.
Kodak was so blinded by its success in selling film it completely overlooked the disruptive potential of the digital camera invented by Steve Sasson, one of its engineers, in 1975. However, the real disruption occurred when cameras merged with phones and people shifted from printing pictures to posting them on social media. Kodak missed the trend and had to deal with the resulting consequences.
So remember as you watch the boats fly through the harbour this weekend, every captain must innovate, be prepared to change course and adapt – or run the risk of losing the race.
Skilled workers are getting harder to find – as our Spring Pulse Check revealed. The big question is how do you keep your employees happy and engaged so they’re not tempted to head somewhere new?
In pre-COVID times a pay rise might have been just the thing to keep them onboard but as times get tougher that may not be feasible. How do we tackle this tricky topic in these difficult days?
Pay and conditions are top of the list for many employees but in today’s world people look for more from their employer including the opportunity for personal and professional growth. Excellent internal communication is vital to ensure your employees know what is going on and that they feel listened to and understood. Small businesses frequently report that their staff are like family but sometimes, as can happen in any family, people don’t talk to each other enough and problems arise.
All businesses – small or large – must remember that while employee engagement is important, the employee experience is now a critical consideration. The employee experience has a number of different aspects, internal communications being one, with the others including training and development, recognition of their work, how change is managed, flexibility and a sense of purpose.
You may not be able to provide a pay rise at this point in time but the other aspects of the employee experience are within your grasp.
Focus on training and development and, again, if budgets are tight, look for help and support through schemes like the Regional Business Partner Network. Communicate constantly – keep your employees briefed on the changes and challenges the business may face and celebrate the wins. Recognise their efforts – it could be as simple as publicly acknowledging a job well done – but let them know you appreciate their skills and abilities.
After our year of working from home, working through disruption or not working at all, we all understand the need to keep people engaged when the organisation is operating remotely and there are many approaches to help with this but don’t forget to maintain the good communication habits you cultivated during the crisis and stay connected to your employees.
If you find you can’t recruit someone who has the skills necessary to support your business look to your existing staff – there may well be someone already working for you who is willing to grow and is capable of doing the job but they will need you to invest in the extra training or development to undertake the role and, of course, pay them appropriately for their work.
Above all, be a trustworthy employer. Your employees will be looking to you to lead them through this period of time and effective communication, a good employee experience and a demonstration that you care will help keep your ‘work family’ together and growing happily.
Our recent Business Pulse Check showed 7% of respondents have experienced more late payers and defaults, while 4% are struggling to pay creditors. In recent client coaching sessions, I am also noticing that there is an emergence of fiddly credit issues that are starting to take up a little more time for both business owners and their credit staff. These issues range from company liquidations, more creative excuses for not paying, down to just not paying on time, or paying later than normal. In some cases, the debtor has grown their exposure with the company over recent months without any further analysis of the increasing credit risk.
In a paper I wrote earlier this year on the Changing Face of Credit Risk I emphasised the need to continue to be vigilant with your credit control processes and procedures.
With the Christmas break coming up it is critical that everyone makes sure they have robust processes in place for collecting outstanding debts – including pro-actively following up overdue amounts expediently. Anything left outstanding on Christmas Day is unlikely to be paid until late January, with the resultant impact on your company cashflow at a time when it is most needed.
In the meantime I would suggest you remain focused on the following:
Watch for changing signs with any clients i.e. increased exposure/delays or excuses in paying.
Where appropriate be pro-active in updating Terms of Trade, particularly in cases where you may not have personal guarantees and exposure is increasing.
Use credit checking more regularly for clients who are showing different patterns in their payments.
If appropriate, consider registering under the PPSR register.
For clients showing changes in trading/payment patterns consider putting in place credit watch processes.
As business owners we all undertake activities every day that loosely sit under one of four categories-:
Important and Urgent
Important and Not Urgent
Not Important but Urgent
Not important and Not Urgent
At one of our recent meetings of The Alternative Board in Christchurch, we undertook an exercise to establish how our business owners planned their activities during a normal day. The results were not only relatively consistent but also quite alarming!
Everyone was able to put a particular activity they had undertaken in the previous day into one of the above categories and the following themes emanated from the ensuing conversations.
For obvious reasons everyone placed priority on the Important and Urgent activities above everything else
A significant part of some people’s day was taken up with activities relating to the Not Important but Urgent category. Further discussion reveals that a lot of this activity came from staff and other enquiries. In some cases, this reflected a lack of training or specific operating processes and procedures within the organisation. This then necessitated the business owner getting involved in urgent issues that could have been handled elsewhere had better training or processes and procedures been put in place.
A surprising amount of time was spent on the Not Important and Not Urgent category. This including following social media, looking at emails of little relevance to the business owner and reading the media.
The biggest concern that came out of this assessment was the lack of time and effort put into the Important but Not Urgent activities. This category included such activities as-:
Proactive communication with key clients with a view to building key strategic alliances
Development of Databases/CRM systems to allow proactive communication with clients and prospects
Further development of websites, particularly around providing online sales capability
Development of written processes and procedures
“Why is this the case?” was the question asked. And “What was required?” to ensure that more emphasis was placed on this important category of daily activities in every business owner’s life.
The general answer to these questions was that in some cases the activity needed to move into the Important and Urgent category to prompt more proactive activity. A common comment was “No one will die if I do not do this activity.”
But guess what? Covid-19 came along and what was previously deemed Important but Not Urgent suddenly became Important and Urgent. This new sense of urgency was created through;
Business owners unable to communicate with clients about their status under Covid levels because they had not put the time into developing their Database/CRM system. This had a direct impact on revenue streams.
Business owners unable to automatically ramp up online sales due to a lack of investment of time in putting the process in place.
So, what’s the message here?
If you leave something that you have deemed as important for too long, at some stage it will go from being not urgent to urgent. This will not only cause unnecessary stress but may lead to wrong decision making because of the urgency now created.
It’s critical that business owners have-:
clearly identified what the activities in this IMPORTANT and NOTURGENT category are
ensure that they understand the risks should that activity become IMPORTANT and URGENT at short notice
understand what those risks mean to the underlying stability of the business and
make sure there is enough time going into this activity to reflect the ongoing risk.
These Important but Not Urgent activities form part of the monthly reporting from members of our Peer Group Advisory Boards. Fellow members continue to remind each other of the importance of ongoing regular work being done on these particular objectives to avoid some of the practical pitfalls that Covid has shown us can occur, as a result of failing to do so.
A sudden slip into Alert Level Three, the blast of the emergency ‘COVID’ warning through our phones and once again we’re into the balancing act of keeping our businesses moving in exceptional circumstances.
Last month our Pulse Check results told us how adaptable and flexible New Zealand’s small business are, with business owners altering operations and changing practice in order to survive the challenges that 2020 has thrown at us all. Just as we have rolled out our August Pulse Check – which you can access here if you would like to participate – the beat has changed again and, in Auckland, we are facing at least three days at Level 3, probably more, with the rest of New Zealand parked up at Level 2 for the time being.
We asked our Auckland team for their thoughts on the current situation and their advice was simple — we’ve been here before, rely on past experience and know that it will pass.
The Alternative Board’s managing director Stephen James said: “Knowing it will pass, spend some time addressing a few scenarios. For example, if Level 3 lasts, as announced, for three days what do you need to do? Or, if it remains in place for two weeks or if Level 4 is declared and we have full lockdown for an indefinite period — what then? Develop plans of action for each scenario and communicate these to your staff and stakeholders.”
As we move back down through the Covid-19 alert levels and more businesses commence trading, it is clear that it will not be ‘business as usual’ for most businesses for some time. There may well be a small short surge as businesses open, but at present most business owners have little confidence in predicted business and public confidence beyond that period, as the impact of restructuring and redundancies take hold.
This raises the question of what steps business owners should now be taking to assess the risk of doing business with clients going forward. It would be great to be able to tighten terms of trade and insist on higher deposits or shorter payment terms, but practically that is unlikely to work in a lot of cases.
So what can a business owner do to improve credit management processes? Here are some ideas.
1. Review and update your terms of trade to ensure they are robust enough
2. Ensure, where appropriate, that you have protection through the Personal Property Securities Register by registering your interest in the goods sold.
3. Set up a credit watch arrangement with your credit agency to ensure that any issues with major clients are advised early. This at least gives you a head start over other unsecured creditors.
4. Review your client base and determine those clients where a failure to pay two months debt would severely impact on your business viability and look at taking our debtor insurance on those clients.
5. Where practical, look for higher deposits or shorter repayment terms.
6. Do proper due diligence on new customers including credit checks. This is a time when customers may be changing suppliers because of credit issues with the current one.
Like with health and safety and employment law, it is not sensible to use the old adage: “It will never happen to me”. Over the past few years some well-known companies have fallen over and I would love to have a dollar for everyone who said to me: ‘That was a surprise”.
Well-known brands in the media at present are publicly advising of difficulties, so one would be naive to think that any company is immune from failure
Now is the time to review and improve your credit risk procedures to bring them in line with the significant improvement that has occurred with health and safety processes in recent times.
– Steve Wilkinson, TAB Business Owner, Christchurch & North Canterbury