| Today I downloaded an E-book that set off a | | | | Answering these questions usually requires some |
| new train of thought that I think is worth sharing | | | | digging into the past, and because you are |
| with you. The E-book was "8 profit triggers for | | | | working with raw numbers, some creative |
| explosive growth in any economic climate" by Bob | | | | analysis. My experience is that time and again, |
| Serling. Bob made the powerful point that the | | | | this approach to analysis has produced strategic |
| way to leapfrog your competition is to own a | | | | initiatives that proved to be real breakthroughs. |
| way of generating higher quality Ideas; real | | | | This is a form of market segment analysis, and it |
| breakthrough ideas. | | | | is so important that every business strategist, not |
| This is seems so obvious when you read it that I | | | | just the marketing jockeys, should make sure |
| have to ask "How do you generate your | | | | that Fred's time machine collects the data. If the |
| breakthrough business ideas?" | | | | accounting time machine is to be really useful it |
| After some reflection I concluded that I have a | | | | eliminate the needs for forensic archeology to |
| just a few ways, so here is my list. | | | | reconstruct the past. |
| - Solve a problem; this has been the source of | | | | How can we decide what will be important |
| most of my best ideas, the ones that are so | | | | tomorrow? |
| obviously right that everyone accepts the solution | | | | This dilemma can be resolved by creating a |
| as soon as it is explained. | | | | business model that enables you to track the |
| - Talking to my friends and clients. This is a | | | | performance of individual customer and product |
| constant source of triggers for new ways of | | | | segments and to use the accounting system to |
| improving business performance. | | | | feed the numbers into the model. You will need |
| - A favourite question is "What might happen if | | | | to set up the model to measure market segment |
| ........?" | | | | contribution using this formula: |
| - Ideas rarely translate from one type of business | | | | Segment contribution = segment gross profit - |
| to the next, but if you ask "What do we have to | | | | segment marketing and selling costs. |
| do to create a brand, like Nike did, in our market | | | | Now you can do something really useful. You can |
| space?" the ideas that will translate the strategy | | | | look for: |
| will flow. | | | | - The segments that yield the highest contribution, |
| - Reading good books and articles. The ideas in | | | | both total and per transaction. |
| what I read are rarely the direct solution, but | | | | - The marketing campaigns that generated the |
| when I connect the idea with some other idea | | | | highest contribution. |
| from the past, a truly innovative solution so often | | | | - The segments that had the lowest marketing |
| emerges. The time I spend reading is never | | | | and selling cost, both total and per transaction. |
| wasted. | | | | - The lowest yielding segments. |
| The trigger for this newsletter was Bob Serling's | | | | And now you can ask the really important "what |
| Profit Trigger Question 2. "Where have you | | | | if?' questions. |
| hidden your time machine? He then makes the | | | | What if we applied Marketing campaign D to |
| surprising statement that: | | | | Market segment K? What would we have to do |
| "the captain of the ship always has been and | | | | to translate D so that it works in K? What if we |
| always will be Fred in accounting." | | | | dropped segment Z and applied the resources to |
| He argues that this is because Fred knows what | | | | segment K? |
| is producing results and what has stopped | | | | Yes - it is obvious. |
| working. Fred should make the decision about | | | | What is more, it always works. |
| pulling the plug on a formerly successful marketing | | | | The lessons for me are: |
| campaign. | | | | Your accounting system is not your business |
| This is a great argument except for one problem | | | | model; it should feed your business model with |
| that I have observed too often for it to be an | | | | high quality data. Your business model should be a |
| accident. Most accounting systems tell you a lot | | | | KPI Model that shows you the effect of a change |
| about what worked in the past but little about | | | | in marketing strategy on your business return. |
| what will work in the future. The common reason | | | | A business model based on your key |
| is that the accounting system does not provide | | | | performance indicators will enable you to test the |
| sufficient detail to enable analysis of the return on | | | | most likely effect of a change in strategy before |
| specific products or marketing campaigns. Most | | | | you spend money on it. |
| times, when I have asked for this information, it | | | | One of the ideas that prompted this article was |
| is simply buried in the totals and Fred can only tell | | | | my recent investment in a Time Capsule and |
| me what the total marketing spend was for a | | | | setting up Time Machine on my new Imac, so |
| period. | | | | now I have my own personal history of my |
| Connecting the dots. | | | | business. I am sure that it will help me generate |
| One of the most useful trigger questions is "who | | | | great new ideas for a long time to come. Many |
| buys what?" Now extend this by asking " ... and | | | | thanks to Bob Serling for prompting me to make |
| how much do we make from it?" | | | | the connection. |