BAKER’S GROUPON ERROR IS A SIMPLE DEMONSTRATION OF CONSULTANT VALUE

Last week’s Daily Telegraph reported on the Need A Cake Bakery, a cupcake manufacturer who nearly went out of business because an offer they placed on Groupon was too successful!

While some might argue that common sense was all that needed applying, this is exactly the asset that would have come with a good consultant for all too often what was common sense is clear in hindsight but, without the right consultant, not so clear in advance.

Like many small business owners, Reading baker Rachel Brown saw the potential in using Groupon to introduce her product to a larger market. It seemed a great way of attracting new customers to try her high quality cupcakes and by offering a 75% discount on a pack of 12 her assumption seemed reasonable. But, as so often asked on this blog, what of cause and effect? What requirements would servicing this offer place on her business? What impact might those requirements have?

Mrs Brown very quickly found out. 8500 new customers took her up on the offer and she ended up losing between £2.50 and £3.00 on each batch she sold and also had to pay a further £12,500 for extra staffing and to send the products out. In short, the incredible response to her Groupon offer might have introduced her cupcakes to a far wider audience but in doing so wiped out all of this year’s profits on her business.

Cause and effect? The simple version says offer the discount and more business will be generated. Indeed, it was but business is not the same thing as profitable business.

Real cause and effect would mean costing out the various scenarios and identifying the limits that should have been placed on the offer, for example first 200 only, possibly repeated monthly.

What would the likely fee have been for a strategy consultant to come into Mrs Brown’s business and plan a proper strategy out for attacking the opportunities Groupon presents to small businesses like hers? Possibly less than £1000, definitely far less than going it alone cost her.

There will be those who have laughed at Mrs Brown’s Groupon experience and those who shook their heads. But which of those doing the laughing and the head shaking have never made a mistake which, with hindsight, they realise should have been foreseen? Most, I will wager.

In the same way that Cowan Global are not a specialist cupcake maker and do not try to be, many small business owners should remember that they are not specialist strategists. They have their specialism as we have ours. But where our specialism varies from many others is that in utilising our skills in your business you will save yourself time and money – and not every strategy exercise is apparently as simple as the Need A Cake Bakery’s.

Please, don’t be the next Mrs Brown.

© Jim Cowan, Cowan Global Limited, November 2011

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“HELLO; I’M A CONSULTANT”

If recent media reports are to be believed (and people are believing them) then introducing myself in this way now gives me a somewhat lower social standing than, let’s say bankers or estate agents.

However sensationalist newspaper headlines hide a sector which offers much to Britain emerging stronger from our current economic problems and, far from what the media reports claim, the vast majority of us are not out to rip you off!

The problem with modern media news reporting is that very often ‘sensational’ will trump ‘balanced’ and ‘headline’ will frequently beat ‘proper research’.

Take last week’s news that the Ministry of Defence (MoD) has run up a £600 million consultants bill and you will see what I mean. Great headline and definitely sensational but how many news carriers that you saw balanced their report by seeking the view of a consultant? How many compared the one ‘shock, horror story’ with the hundreds where good consultants offer exceptional value for money.

It is not as if the good consultants are not prepared to make our case. When the above story broke I contacted the news desks at the BBC, ITV and Sky offering my services (free of charge I add) in order to provide balance to the reporting. Not one of them even acknowledged me let alone replied. I know of colleagues in consultancy with similar tales.

At the last election the public services union Unison ran a poster campaign decrying the money spent on consultants by local government. Not once did they look at cost v benefit, not once did they ask about value. As with the media, I wrote to Unison and offered to discuss what it is that consultants do; the benefits we provide and ways in which (good) consultants will ensure that cost and benefit are carefully weighted from the outset and then monitored as work progresses. Their response? I don’t know; I still haven’t received it.

A couple of weeks ago I had lunch with the Director of a government quango. We discussed the difference between simple cuts and bigger picture effectiveness, efficiency and economy. We discussed the lack of real consultation with the people footing the bill (the taxpayer) and we talked about how single issue policy costs so much more than properly integrating strategy. “Jim,” he said, “we could do with your services, indeed they (the government) could do with your services but the Minister has made it clear; no consultants.”

I am left wondering at the damage done to my profession by a few bad and greedy consultants who have tarred the decent, honest majority with the same brush. Yet the question that recurs in my mind is the paucity in logic in all of the above thinking by media, unions and now government.

If you employ a specialist to do a job and they get it wrong or overcharge you have (or should have) recourse. Didn’t the people in (eg the MoD) who negotiated these contracts stop and say; “hang on a minute, this looks a bit pricey?” or maybe “our budget is £xx and therefore the job must, contractually, be done within that budget.”

No? Am I alone in thinking these are probably the sort of people who respond to emails from Nigerian princes who have a few million quid they need help moving to Britain? Maybe that was their plan for raising the £600m? A contract is a two-way agreement and while these particular consultants took the proverbial; who was letting them?

I am reminded of another story from last year which, on the basis of a single experience, criticised consultants. Dame Mary Perkins is, by any standards, an extremely successful businesswoman and if you haven’t heard of her, you will have heard of her brand – Specsavers. So when Dame Mary said last year; “I’ll never hire consultants again,” the media were ready with their sensationalist headlines but no one thought to ask a (good) consultant any questions to gain a balanced view.

In a nutshell; the story centred on Specsavers growth into the Netherlands, a move for which a consultant was hired. The consultant’s advice proved to be poor, Dame Mary stepped in and changed course and decided never to use a consultant again (and to tell the world about it).

Consultants being marginally less popular than Satan right now, the media lapped it up however; allow me to put a slightly different take on Dame Mary’s approach:

Imagine I visited an optician for an eye test and received bad advice. Would it be wise, or even moderately sensible, to say that I would never use an optician again? Probably not. How far does that principle apply? Plumbers? Doctors? Mechanics? Consultants?

You tell me.

As in all walks of life there are good consultants, bad consultants and indifferent consultants. As in all walks of life the buyer needs to be aware for the bad and try to seek out the good. If in doubt, ask advice and take references. When drawing up contracts clarify budgets, charges and what will or won’t be included. Ask the consultant how they add value and monitor them against this. Don’t ask the consultant to do jobs your own staff can do at a fraction of the cost – they will charge in the same way you would them, at their going rate.

Consultants can play a key role in helping Britain move forward from our many current issues; economic, social and otherwise. Please, apply a little common sense and don’t ask the good, honest majority to carry the can for few rogues.

© Jim Cowan, Cowan Global Limited, November 2011

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SMALL BUSINESS OWNERS AND PROCRASTINATION!

Guest Blog by Beverley Corson, owner of ‘Future Inspired Business Owner’.

Future Inspired are one of Cowan Global’s partners in the Branduin Business Support Network. Owner Beverley is widely recognised as an expert in leadership training and is also noted for producing informative and entertaining blogs on the subject.

We were especially tickled by this one and asked Beverley if she would mind us sharing with readers of Cowan Global Blog:

The definition of Procrastination is pretty simple – it’s when you put off essential tasks until a later time, sometimes indefinitely!   Often essential tasks are done instead of the more critical ones.

How often do you focus on something like going through your emails rather than the more critical stuff like calling a potential customer?  Or if you are going through a particularly difficult time you may take this to the extreme and be doing anything but work to avoid the really critical things you must do!!!!

The effects of procrastination may not be so simple and it could be one of the biggest challenges you will have to overcome to succeed and grow your business.

Before I say any more check out this hilarious video by Ellen Degeneres on procrastination………………………

Isn’t that funny….how do you see yourself in that?  Isn’t it good to laugh about it!

For some reason we have an emotional reaction when we have to do something we don’t want to do, don’t enjoy doing, or are convinced we simply cannot do.  As a small business owner you are likely to have to do many things you don’t want to do, don’t enjoy doing, or are convinced you can’t do, so it’s not a surprise if you procrastinate.

What areas do you procrastinate the most?

A little bit of self-analysis in this area is really useful.  Really self-evaluating and questioning your feelings and actions around a task is the first step to stop procrastinating and behaving more proactively in the areas that most significant to your success.

Procrastination will be no more common than in sales and new business development.  This is an area that many business owners don’t want to do, don’t enjoy doing, or are convinced they can’t do.  Even when you have a huge amount of experience in sales like me, you can still fall into this trap.  But we don’t have to stay there!

Watch out for my blogging series next week on 3 mistakes business owners make in generating more customers – all are linked to procrastination.

AND sign up for a free webinar all about stopping procrastination to generate more customers CLICK HERE

If you aren’t already on my mailing list then do register in the top right hand box to receive the invitation to this and future inspiring webinars.

Finally, do share this with others as this is clearly a really pertinent area for many business owners out there.

Thanks

Beverley

© Beverley Corson, Future Inspired Business Owner, November 2011

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WHEN WANT AND NEED OVERLOOK CAUSE AND EFFECT

Or; a lesson in poor strategic thinking and poor vertical integration.

FUEL TAX DEBATE HIGHLIGHTS POOR STRATEGIC THINKING BY GOVERNMENT

I have visited the Government’s war on the motorist on this blog before when I highlighted how fuel is the only essential commodity subject to a double tax (the fuel levy and VAT). At current prices this combined tax sees the motorist paying a rate of around 160% tax on the fuel he or she buys at the pump.

Taxation at that level on any other essential commodity would likely see rioting in the streets however, for this article, I intend to ignore the debate of fair versus unfair and instead focus on how flawed strategic thinking is now undermining the Chancellor’s predictions of income from fuel taxation while, at the same time, contributing to the general public’s reticence to return to the high street.

I will apologise in advance for addressing the matter in simplistic terms and would like to point out that the main purpose of the article is to demonstrate to those who develop strategy the importance of vertically integrating thinking and of taking into consideration cause and effect. The Government’s poor understanding of strategy is merely the vehicle for the lesson.

Starting at the beginning, I will address two of the Government’s stated strategic aims:

1. To raise income via taxation on fuel in order to address the national debt.
2. To encourage the public to return to the high street where an increase in consumer spending will boost a near flat-lining economy.

When looked at in isolation, Aim 1 seems reasonable; the scale of the dual taxes on petrol should create income for the Exchequer, an income enhanced by the increase in VAT to 20%. And although the rate of the fuel levy has recently levelled further increases of 3p per litre are due in both January and August of next year.

However, the income generated from this taxation has actually fallen. The AA reports that in the first twelve weeks of 2011 the Government lost almost £650m in tax revenue due to a drop in the amount of petrol and diesel being sold at the pumps. In short, the consumer can only afford so much before he/she simply has to buy less, exposing the myth that higher taxation will mean higher income for the Exchequer.

As a direct result of this high taxation, Aim 2 is also undermined. Consider how many daily household items, essential or otherwise, are not affected by petrol (and diesel) prices; without fuel the goods are not delivered to the shops from warehouses or to warehouses from manufacturers or farms. The manufacturers have sales forces travelling by car; the farmers have tractors working the farm. All use petrol or diesel and therefore all have to allow for the higher cost of fuel by increasing their prices. Ultimately this means higher prices for the consumer who, already struggling to fill the car has to cut how much he/she spends on other commodities as prices rise.

That is the knock on effect a single, poorly thought through strategy, one that considers want and need without considering cause and effect. When we introduce how well vertically integrated this strategy is with other strategies the picture only worsens.

The Government is not expecting taxation on fuel to encourage the consumer back to the high street. The principle mechanism for that has been Quantitative Easing or QE. Under this mechanism more money is produced and released into circulation under the assumption that more money in the economy will lead to more spending. QE has a chequered history being blamed for driving inflation into four figures in pre-war Germany as well as having some modest successes in other countries.

Successful or not, one effect of QE, wherever it has been employed in the past, has been weaker currency, in our case Sterling. In theory, a weaker Sterling is not a huge price to pay for ‘rebooting’ the economy. It can assist with exports for British industry however drives the cost of imports up. It can make Britain more attractive to tourists however makes overseas holidays for Britons more expensive.

And where a commodity is traded in another currency (e.g. Dollars) it will inevitably mean it becomes more expensive for the British consumer; meaning that oil, traded on the markets in Dollars, goes up in price as a direct result of a policy (QE) designed to put more money into the economy and to encourage consumer confidence and spending.

And more expensive petrol means, less money spent at the pumps resulting in less income from fuel for the exchequer and resulting in more expensive goods in the shops as both import and delivery costs inevitably rise.

End result? Both of the stated Government aims are falling short.

The more strands you add to the necessary vertical integration of strategy, the more we see strategy failing. Gas is also traded in Dollars meaning a higher percentage of household income will be needed for winter heating bills meaning less to spend on the high street, and so on.

Single issue, unintegrated strategy is risky at the best of times. Failing to properly consider cause and effect is to undermine strategy even given the best intentions.

The Government have consistently told us there is only Plan A, there can be no Plan B and that is not necessarily an issue provided Plan A has inbuilt flexibility, that it is subject to proper, regular review and that where it ‘underperforms’ adjustment and adaptation are carried out.

Without, it is difficult to see where either the extra income to the Exchequer or the return of confidence in the high street will come from.

(Author’s note: It is the nature of blogs that they continue to be read long after they were written. To put the above into context, at 11.38 this morning, 16^th November 2011, the Dollar stood at $1.5758 representing a drop of 5% since the policy of QE began in the UK. Many analysts believe that the fall could have been far worse but for the US maintaining interest rates lower than those in the UK making it less attractive to investors. It should also be noted that the US Federal Reserve has also used QE in an attempt to breathe life into the US economy which, although still risky, is seen as less risky by investors due to the Dollar’s status as a ‘safe haven’ currency. Should the US not apply further QE and/or raise interest rates, even to parity with those in the UK, forecasters predict that Sterling will appear far less appealing).

© Jim Cowan, Cowan Global Limited, November 2011

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WINTER WONDERLAND CHARITY BALL

For once, a Cowan Global Blog which is not about strategy!

Nottingham based events company Sapphire Events are holding their annual Winter Wonderland Charity Ball on 25^th November and it promises to be a fantastic event. In support of the Alzheimer’s Society and Marie Curie Cancer Care, it promises to be a fantastic night.

Due to a prior commitment, I can’t make it but thoroughly recommend the Winter Wonderland Charity Ball as it will be a fantastic night out and supports two great causes.

(Click on the pictures to expand them or to print them out)

While Cowan Global are not involved in organising the Winter Wonderland Charity Ball we have no hesitation in recommending this and all events staged by Sapphire Events.

If you do make it, have a great time!

Jim Cowan, Cowan Global Limited, November 2011

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LEST WE FORGET…..

LONDON 2012 – NOW TOURISM FLAGS A LACK OF STRATEGY

I make no apology for returning to the theme of the Olympic Games and poor strategy. In the past it has been sport which has failed to live up to expectations and promises by hoping instead of planning. Now, it appears that tourism is following suit.

I would far prefer to be writing of the great example set by the strategies used to deliver our Olympic bid promises but sadly that is not the case. Instead I hope that others will look at the mistakes made and learn from them; at least that way the failed promises will serve some positive purpose.

It never ceases to amaze me how many apparently intelligent people, how many supposedly sharp business minds feel that by crossing their fingers and hoping that success will be delivered.

And yet, without strategy that is exactly what many do including, it seems, those tasked with delivering the promises on which our hosting of the Olympic Games in London next year were built.

I have previously covered (several times) in this blog the lack of strategy to deliver the two legacy promises on which the bid was based (and won) in 2005. The legacy promise of an increase in people taking part in sport across the UK has been shown to be hollow. Indeed, having assured us that the strategy for delivering this legacy does exist, Hugh Robertson the Minister for Sport and the Olympics was asked to show us that strategy as long ago as July 2010. Thank God we didn’t hold our breath waiting as he is still to produce any evidence that it exists.

Then there is the long running farce that is the stadium legacy, one that now looks nothing like that originally promised. If there ever was a strategy for delivering the plans we were promised, again we never saw it and it has been changed on the whim of Ministers, football clubs, UK Athletics, Newham Council and others on such a regular basis as to make any strategy which had existed meaningless.

The promised participation and stadium legacies were written into the bid which won the Games for London in 2005 making the lack of strategy to ensure their delivery all the more puzzling, as is the latest demonstration of poor or no strategy. Not part of the bid promise but nonetheless part of the long-standing promise to the British public was the boost the Games would provide for tourism.

True to form it appears that promise was also made with fingers well and truly crossed behind backs for no strategy to make that tourism boost appears to exist and now the European Tour Operators Association are telling us that tour operators to the UK have seen an average 90% downturn in bookings for the period of the London Olympics (BBC News 6^th November).

Back in 2005 leading voices in the campaign to bring the Games to London, including Sebastian Coe and government Ministers Tessa Jowell and Richard Caborn, were rightly pointing out that no Olympics had ever seen an increase in sporting participation simply because they were held; for that to happen we would need a strategy to ensure the promise was delivered.

The same people were also pointing out that too many previous Olympic stadiums had become ‘white elephants’ once the greatest show on earth left town. Not London they told us as they showed us plans which bear no relation with today’s version.

And the same people were telling us of the boost to both the London and the national economy that tourism brought about by the Games would produce; despite the fact no previous host city could point to the same they assured us that London was different because they had a plan.

Now, the lie has been laid bare. There was never a realistic strategy for increasing sporting participation, neither was there a plan for ensuring tourism met expectations. There was a stadium plan (we saw it) but that has long since been thrown in the bin.

But there is a very positive side to this tale. It is in the lesson it provides to those staging events, running businesses, leading local authorities, managing charities and, in fact anyone who has great dreams of a future to come. It is simply this; if you want your dream to become a reality, crossing your fingers and making promises will not do.

If you genuinely want to pursue excellence, if you genuinely want to achieve whatever you set out to do, make sure you have a proper, functional strategy in place. Alternatively, don’t be surprised when you fail to deliver.

© Jim Cowan, Cowan Global Limited, November 2011

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