Paul Wallbank – Brilliant Communications

Tag: business planning

  • The four why’s of Sam Palmisano

    The four why’s of Sam Palmisano

    The New York Times’ profile of IBM’s outgoing CEO, Sam Palmisano, is an interesting study of how an established business can make well thought out long term plans through asking some basic questions.

    Under Palmisano, IBM moved a large part of their business from manufacturing and distributing computers to more Internet based products and services.

    A key part in IBM’s reinvention was recognising the PC hardware business was in decline as commoditisation of the computers and associated components eroded margins.

    To counter this, IBM looked at the areas where they believed the margins would be for the next decade and decided they lay in “on-demand” computing – what we now call “cloud computing”.

    What is particularly notable with IBM’s move to the cloud is this renting time on mainframes was the mainstay of their business up until the 1990s so the culture of reliable, accessible services backed by well priced plans is something not unknown to IBM.

    Having decided on the on-demand computing strategy, IBM then looked at who would buy their hardware division. Here they acted strategically and rather than selling to the highest bidder – someone like Dell or a private equity firm – they sold to China’s Lenovo which enhanced IBM’s standing within the Chinese markets.

    The notable thing with all of these plans is that they were made strategically and executed without the dithering we see at other companies struggling with similar issues. Yahoo! and HP being the two standouts in this area.

    While smaller businesses can’t execute on the same scale companies the size of IBM can should they choose, Sam Palmisano’s thinking was guided by four key questions;

    • “Why would someone spend their money with you — so what is unique about you?”
    •  “Why would somebody work for you?”
    • “Why would society allow you to operate in their defined geography — their country?”
    • “Why would somebody invest their money with you?”

    These four are something all of us could ask of ourselves and those around us. The answers to those questions are will guide what we do, where we do it and how we do it.

    For IBM, the future is fascinating as a new CEO comes in and they apply their investments in cloud computing, consulting and data mining to bigger picture projects like the Smarter Planet initiative.

    How this works for IBM and the other large technology companies remains to be seen although it’s quite clear that unlike many of their contemporaries, IBM’s management has a vision of where their business fits in the 21st Century.

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  • How group buying can work for a business

    How group buying can work for a business

    Online deal finding site The Dealmix has an excellent blog post analysing how daily deals can work for a business.

    As the Dealmix points out, “daily deals can either hurt or help small businesses, depending on how they’re structured.”

    In figuring out whether a deal will work, Dealmix breaks a group buying deal into four elements; expiration, quantity, terms and price;

    Pricing the deal

    Of all the areas, the pricing is the most critical. Get this wrong and you won’t achieve your objectives and it could be very quickly drive you out of business.

    The Dealmix recommends two ways of pricing an offer – by making a net profit on the deal or structuring it a way that the customer’s total spend  offsets the cost of the offer.

    Using Average Customer Spend, or ACS, to estimate how much a customer will spend is problematic with specials and group buying deals as the takers are not going to be your average customers.

    It’s likely group buying customers are going to be far less open with their wallets than your regulars. Trying to upsell price conscious is probably what brings cafes and restaurants unstuck with many of these deals.

    Both methods rely on knowing the Cost Of Goods Sold and the Average Customer Spend. Notable in the stories of group buying disasters is just how many business owners don’t understand these basics.

    If you don’t know what the total cost is to your business in providing the goods or services, you should be talking to an accountant before going near these deals.

    Also keep in mind the group buying service is going to take their cut which will be between 15 and 100% depending on the size and nature of the deal. For many businesses the commission is a deal breaker.

    Quantity

    The biggest complaint from customers about group buying offers is the deals are booked out for months – it’s also how service businesses find themselves overwhelmed by the response to a keenly priced offer.

    Again, before launching a group buying offer, understand the spare capacity of your business and ensure there is a maximum limit to the number of deals available – as The Dealmix points out, a sold out deal is a great marketing tool.

    Terms

    Conditions are probably the trickiest; put in too many gotchas and you’ll scare customers away or find yourself fighting with the 90% of clients who buy the deal without reading the T&Cs.

    You can guarantee some of those fights will end up being public and it’s unlikely your business will win the public relations battle. This is not your business objective.

    Make sure key terms like what days the deal is available on, maximum limits, types of service are reasonable and clearly defined at the time of the offer.

    Expiration

    When the deal expires is the key condition, it’s madness offering deals that never expires as they can come back to haunt you for years and it may even affect the resale value of your business.

    The Dealmix suggests not restricting it to a month as you’ll be overwhelmed with customers while leaving it too long will dilute the value and any measurements.

    Ideally the deal will last three to six months, which is another reason for understanding your business’ capacity at various times of the year.

    Timing the expiry is important to, as The Dealmix suggests, the deal shouldn’t finish on a busy day and equally you should consider when your business is the quietest. If things are slow during school holidays, summer or Christmas then that might be the time you want to have the last minute rush of redemptions happening.

    Business Planning

    Probably the most important aspect of a group buying deal is how does it fit into your business objectives. Are you intending to build a customer base, contact list, pubicise your business, clear stock or give sales a boost? Those objectives are going to determine how you structure the offer.

    As The Dealmix’s diagram shows, group buying deals are complex and the merchant has to give some thought on getting the offer right. Those business who do get the mix right can do very well from a well thought out online offer.

    Like all business tools, group buying sites can be really useful when done well. The key is understanding what you’re doing with that tool.

    We discuss group buying and building your own campaign in e-business, Seven Steps to Online Success. If you need help or advice in building an offer, Netsmarts can help you.

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