Profitability benchmarks, Arguing with fools, NAXALT, Coaching today, Namelix & Purpose of technology
14th February 2021 Evolution Partners Newsletter
“Q. What words of encouragement would you give an entrepreneur? A. If you need words of encouragement, don’t become an entrepreneur.” Elon Musk answering a question in a Clubhouse chat session last week
Hope you’re Thriving!
It was great to be out of lockdown this week, and today we’re again able to go out in public without masks, that is at least until the next outbreak. The Dance (after the hammer) can get pretty tiring, pretty quickly.
It was a very busy week for me with two x 2-day annual planning strategy workshops and a very full day in between.
During one of the workshops this week I’m facilitating a leadership team for a $100m business, and we’re reviewing the numbers as a team. I’d been working with this company for a few years, and they’d been losing money for maybe 6 or 7 years. In that environment, one needs to execute flawlessly first, to get things done, to control costs and produce a profit, while also planting the seeds for a genuine strategy that can create a unique and valuable position in the market after we arrest the profit and cash issues. Much of that execution was working to transform the business from an execution perspective – so we could First Survive and then Thrive and the CEO took the floor to present the results to the leadership team in a session I call the ‘State of the Nation’, a key Ambassadorial part of their role. But before we discuss his state of the nation presentation this week, let’s talk about profitability benchmarks.
A few years ago when we started working together, I explain to them the profitability benchmarks I use.
According to Greg Crabtree and his book Simple Numbers, Straight Talk, Big Profits almost all businesses’ profitability should be rated across these four profitability benchmarks.
- Less than 5% profit you’re on life support, you can’t sustain the business
- 10% profit you have a good business
- 15% profit you have an excellent business
- Greater than 15% profit get it while you can before the competition come after you
And so back to the story, a few years ago I explain to this CEO the profitability benchmark system above, and how really in the short term that our goal should be for us get to 10%, and then after a while, as our strategy matures, we should be aiming for 15%.“You don’t understand our industry Brad”, came the reply “No one makes that kind of money here, in our best year ever, we made 3.5%. If we made 2.5% profit, it would be a dream for us.”
Let’s fast forward to this week, and back to the story above where the CEO is giving his state of the nation. He proudly announces “We achieved a 10% net profit, something we didn’t even believe was possible, and three times more than any profit percentage since we founded in the 1970’s.” He went on, “there was a bit of Government assistance in there, but when we analysed the data, as well as industry-wide growth, we were probably gifted overall 2 percent from those two, so likely our efforts and focus through this strategy program led to an 8% profit before tax.”
Well, back to work…
So later that night I’m reading LinkedIn and come across a post from a coaching organisation, and a person who appears to own a small franchise in another field posts a reply comment “Those who can’t…. coach”.
Now I don’t know that person, or what makes them want to make such comments for no real reason or prompting. And normally I would never bring such a thing into this newsletter. I try to always make it positive and useful for readers.
But that day felt So. Darn. Paradoxical.
Arguing with fools
“Do not argue with a fool. He will drag you down to his level and beat you with experience.”
I know, the internet, and especially comments sections of social media are a toxic cesspool. I try to avoid them like the plague. And that means that I don’t meet the success criteria for the social media website algorithms by commenting and debating all over the place, thereby harming the efficacy of my regular posts but I revert to the comments above.
But this individual’s comments made me reflect on two things that frustrate (or interest) me more than the toxicity of the internet. Logical Fallacies which inappropriately use data, and the problem with coaching today.
NAXALT and Logical Fallacies which inappropriately use data
When I was much younger, smokers would explain to me how they heard about a 90-year-old grandmother who smoked her whole life and didn’t have lung cancer. “She was completely fine” they would argue as if this meant that they were dealt a different set of DNA health cards to the rest of humanity because they heard of this story. But this is a perfect example of NAXALT which is an acronym for Not All [X] Are Like That.
And without entering into the toxic comments our friend above mentioned, it might be possible that he is in fact not accurately assessing all coaches on the coaching capability bell curve when he makes the statement “Those who can’t…. coach”.
Further to this, I found the Taxonomy of Logical fallacies below quite interesting. It seems our world today is void of reasoned debate, where the primary objective of both mainstream and social media is to amplify controversy.
The problem with coaching today
The paradox I experienced above is that of the entire industry if you can call it that.
And it’s something that is discussed at the top levels of the coaching world regularly.
What should we call ourselves if not coaches in the midst of confusion with people who are not professional? Advisors? Strategists? Facilitators?
I wonder if the commenting gentleman above would note the same of his favourite sports team. Does the coach hold no role in the team’s success? Is the coach only a coach because they cannot play?
I don’t write the story above to advertise my prowess, or to brag, it’s to illustrate this point.
The paradoxical challenge for business coaching today is that of naming.
There is no doubt that many people look at successful coaches, think that chatting to people is easy, quit their job and start marketing their new coaching business.
A couple of weeks ago I was at a barbeque and a retired gentleman asked me what I do for a living, I explained that I’m a coach who helps leadership teams build and execute a strategy. He then, somewhat sceptically asked what credibility I had to do such work and I replied, “I’ve founded and built 6 companies and studied entrepreneurship and strategy for 20 years, oh and it’s not a part-time job, it’s all I do every day”.
“That’s about the best answer I could hope for” he replied.
The coaching market is packed with people who are trying to use marketing hacks or tactics to get leads, and CEOs see through it like a pane of glass. That’s because marketing hacks are bullshit that doesn’t replace a lack of experience, insight and wisdom when standing toe to toe with a CEO.
In any industry, the A-players, the top 10% of people mostly don’t apply for jobs because they don’t need to. If you’re putting a job advert onto an online job board and not getting any A-players to apply, with an A-player being defined as someone who is in the top 10% of an industry at the pay rate you offer, it’s probably because A-players don’t apply for jobs. They are always approached by potential employers. Yet the C-players are always applying for jobs because they’re both rarely approached to be poached and keep losing jobs.
And it’s the same with the coaching industry.
New, perhaps inexperienced coaches, or coaches who don’t provide significant, ongoing value are often always looking for leads, and therefore always advertising and using tactics to capture the attention of CEOs. And there’s a whole marketing industry dedicated to this (Pro tip: grown adults don’t use emoji’s to communicate professionally, especially in their LinkedIn profile).
This means that leaders are inundated with tools that might work with multi-level marketing or selling health supplements, but not to experienced CEOs.
Yet A-player coaches likely have a full calendar and are regularly approached by new prospects because of their reputation, and don’t need to advertise or market for new leads.
Maybe our commenting gentleman had experienced this marketing and maybe I should just get over it, move on and call myself a strategic advisor.
Useful tool I’ve found
If you’ve ever tried to name a business it can be a real challenge. You put together a dozen names, pick a few you like and maybe ask for thoughts from friends — unless you’re Tim Ferris who famously used AdWords to AB test his book title. Then the friends provide advice, and you have a dilemma. Enough data to convince yourself you have tested the name, but the risk that you could be dealing with someone on the edges of the NAXALT bell curve above. Without me trying to sound like a TV advert, why not try AI to find your business name?
Namelix uses a simple filter to identify what type of business name you’re looking for and provides a range of really interesting names.
For example, if I enter the words “Strategy Workshop Business Growth” it comes up with hundreds of potential names including “GrowthGen” “CraftPath” “Growider” and “Strategical.ly” as well as potential logos.
Take a look at the Business Name Generator
The purpose of technology
This week I came across this article by entrepreneur and former General Partner at Andreessen Horowitz, Balaji Srinivasan which I really enjoyed because of its philosophical consideration of technology and how we deal with it in society.
From the article.
“Why doesn’t inspirational content for technological progressives exist in abundance? Part of the reason is adverse selection. While science fiction – even dystopian science fiction – can inspire, the scientists, engineers, founders, and funders thus inspired are often more occupied with building technology than evangelizing it. But this, in turn, means that we aren’t directly educating the next generation or the public at large. We need to change that. Specifically, people who know math and science, who have experience in managing and investing, who are technological progressives rather than technological conservatives – these people need to learn to write, report, publish, and direct. We need to consciously build a parallel tech-driven decentralized media ecosystem, and we need it to become the first point of call for anyone seeking to learn about technology.”
Read the article here The Purpose of Technology
This week on The Growth Whisperers podcast
In episode 44 of The Growth Whisperers, Kevin Lawrence and I talk about the following.
Magic, and power, and simplicity of traffic lights.
Red, Amber and Green as a simple tool to help drive focus for your team and manage, and improve performance. We discuss why the traffic light system works for teams, what’s the best practice for measuring using traffic lights and how can you use it to drive better execution in your team.
Red Yellow Green – Using traffic lights to make your culture of KPI management and goal execution stronger
Listen to The Growth Whisperers
From the vault
The 2 lenses of strategy
What is strategy?
The word strategy, which first started appearing in business literature around the 1960s has many different meanings to different people.
The best definition I find is that of Michael Porter, arguably one of the greatest thinkers on strategy in the last 100 years. In his seminal November 1996 HBR article “What is Strategy” he defines strategy in the following manner: “Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value“. He goes on later in the article “Strategy is the creation of a unique and valuable position, involving a different set of activities“.
When a person says they need a strategy to complete a project, or they want a strategy to open a new office they are in fact not looking for a strategy, they are looking for an execution plan. They already know the goal, they need to know how to achieve that goal.
Strategy, on the other hand, is different no pun intended.
When someone needs a strategy, they don’t know the goal. They only know that the objective is to be different from competitors.
As Michael Porter also said in the article above “A company can outperform rivals only if it can establish a difference that it can preserve“.
I’ve worked with hundreds of leadership teams building strategic plans and so many times people mistake strategy for operational effectiveness. Let me be clear. Strategy is not operational effectiveness. Finding a way to build faster or apply lean to your company is not strategy. Operational effectiveness is essential to performance, but it is not strategy. Operational effectiveness is performing the same activities as competitors in a better way. Operational effectiveness is very important. But it’s not strategy. Strategy is not about being better, strategy is about being different.
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