Business Growth News – September 2009
Business confidence surged to its highest level in almost 6 years in August, sending a strong signal the economy continued to grow solidly in the third quarter while cementing the case for a rise in interest rates before the end of the year. Business confidence jumped 8 points in August from July to an index reading of +18 points, its highest reading since October 2003 and well above its long run average levels, according to a monthly survey of businesses by National Australia Bank.
Business conditions rose 3 points in August to an index reading of +4 points, its strongest level since mid-2008, NAB said. The improvement was based on solid increases in both trading and profitability.
NAB economists expect the Reserve Bank of Australia to raise its cash rate target in November by 25 basis points to 3.25%, making it one of the first major central banks to start withdrawing monetary stimulus in the wake of the global financial crisis. "This better domestic outlook and much better confidence levels further erode the case for maintaining emergency lows in interest rates," said Alan Oster, chief economist at NAB.
The NAB data suggested domestic demand retained considerable momentum in the third quarter, defying expectations it would wane as the impact of economic stimulus faded. The improvement in business conditions will be assisted by renewed strength in the global economy with major Asian economies taking the lead, NAB said. Higher confidence levels are also likely to mean that prospective falls in business investment will be less than previously expected, NAB added.
The survey was conducted around 28 Aug which predated the RBA's 1 Sep board meeting where interest rates were left on hold. It also came ahead of news the economy grew a solid 0.6% in the second quarter from the first quarter.
So is your business ready to catch the wave?
In this edition ...
What is your “portfolio momentum growth rate”?
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Imagine flying above some crop fields and looking at all the different patches below. Well, that’s the way directors should be thinking about their markets when making choices about where to compete.
This was the view of Mehrdad Baghai, managing director of Alchemy Growth Partners, at AICD’s Company Directors Conference 2009 in Cairns.
The future of competition, he said, was all about “granularity” and high “micro-share”, where market share was viewed in much finer resolution rather than across the board or through the tyranny of the “averaged view”.
Baghai said it was possible to be very systematic and disciplined about managing granular growth, by zooming down by geography, demographics, product types and the like, and then identifying areas with higher momentum growth rates to focus on.
He said momentum growth rates did not include mergers and acquisitions or market share gain, but rather, the momentum tail winds of different market segments.
“The different mix of micro choices can result in extra revenue. Some of these choices add up to more tail wind,” he noted.
“When we looked across every single industry, we found this trend. What’s interesting is that differences between momentum growth rates among industry players are far greater than the differences in the average momentum growth rate across industries. In other words, it’s not about whether you are in say, telecommunications or some other industry. It’s about how you are exposed to different parts of the markets in telecommunications.”
Baghai noted: “Where-to-compete choices are about four times more important than how-to-compete factors and execution, and they are even more important in a downturn.”
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Even inside low-growth companies there usually were some high-growth pockets. And, even during a downturn, some companies managed to get exposure and a disproportionate share of higher momentum growth parts of the market, he said.
As a result, it was important for boards to understand their organisation’s granular exposure to the growth in markets and to ask questions about this.
“When we go to a company, we notice a lot of times that executives and CFOs present the data in an aggregated, average way and, yet, all of the meaningful information is one or two levels of granularity below what the board is seeing,” said Baghai.
He also advised boards to look at the performance inside their organisation granularly. “It may not even add up to be a huge area of revenue for the company, but at least you get to find out where there are favourable dynamics at play and what’s going on in them,” he said.
He stressed that it was important to look granularly before making across the board cuts during a downturn in order to move the portfolio momentum growth rate upwards. The same applied to making acquisitions or attacking the competition.
He provided the following questions that boards should ask management, to boost granular thinking and momentum growth rates in their organisations:
- What is our portfolio momentum growth rate?
- When we make cuts, is it with a scalpel or a machete, slashing across the board?
- When we acquire, is it into a solid position in high growth patches?
- Are we attacking our competitors in high growth patches?
Extract from CompanyDirectors, Boardrrom Report, 17 June 2009 |
Tips for email marketing
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Some tips on creating an effective email marketing campaign – and the traps to avoid
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There is no doubt that email marketing is taking the world by storm. You might not be into email but your customers probably are. Retailers and restaurants are missing out because very often the people running them are not email savvy, and they forget that their customers are.
How often do Australians check email? 44 per cent surveyed said they checked their email more than 20 times a day and 79 per cent have their email reader set to send/receive emails automatically. If you are after the ‘disposable income’ demographic you are crazy not to be in email contact with your customers because the higher the income bracket, the more they love their email.
In a branding survey done by Epsilon in 2009, 50 per cent of respondents said they’re more likely to buy products from companies which send them email. But don’t take just my word for it – big business knows the value of email marketing too.
Find out more about what to do, and not do when email marketing … 
Visit www.eNewsletterSolutions.com.au and/or www.WebPartner.com.au for some great technology that will assist you with email marketing.
Extract from My Business, August 2009, page 76
Do you need an “Angel Investor”?
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Joining the millionaires’ club
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Angels is an old theatrical term for people who provide the money needed to allow live theatrical productions to go ahead. It is now used extensively in the business world to describe private investors who provide the funds and often the experience to assist small businesses to grow. Below Dr Tom McKaskill, an angel investor and entrepreneur, presents the first in a series of articles about angel investing.
"I was somewhat surprised to discover recently that 80 per cent of millionaires in the USA had created their wealth through selling a business. At the time I was researching the state of angel investing and came across a research article which described the average US angel investor.
“Worrying is like a rocking chair: it gives you something to do, but it doesn't get you anywhere.” ~ unknown
The article stated that only 15 per cent of wealthy individuals made their money through income and the remaining 5 per cent through inheritance. I was also surprised at my reaction to this information. What I realised was that anyone with a good idea, determination – and willingness to have a go – can join the millionaires’ club."
Read more about joining the millionaires' club and how Angel Investors can help …
Extract from BRW,August 2009, pages 24-25
| IN THE NEWS |
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SMEs determined to weather downturn
Small to medium-sized enterprises are revealing a resilient attitude and determination in the face of economic uncertainty, with many employing strategies to ensure they remain competitive for the eventual upturn.
Research by St George Corporate & Business Bank found SMEs were implementing strategies to protect and strengthen their business during expected challenges in the next 18 months.
The research of 1,000 owners or managers of companies employing between two and 199 people across Australia found that 57 per cent of SMEs were now holding extra cash in the bank to provide a buffer against foreseen and unforseen impacts of the downturn.
Four in five companies surveyed were hungry for information to protect their business, seeking advice on marketing (38 percent), cash flow management (28 per cent), finance and banking (27 per cent) and general management (23 per cent).
Meanwhile, Dun & Bradstreet’s National Business Expectations Survey for the December 2009 quarter revealed that confidence was buoyed by sales expectations, with the sales index up 46 percentage points, the largest one-quarter rise in the survey’s history.
Forty-four per cent of companies expect an increase in sales during the final quarter of this year, while 22 per cent expect a decrease.
A KPMG ‘Mood of the Market’ survey has revealed that 20 percent of companies hope to buy assets from underperforming peers in the next year, with 14 per cent of SMEs contemplating outright acquisitions of competitors.
The survey showed that confidence had returned to the small business sector, with 39 per cent of companies expecting economic activity to remain steady, while 43 per cent believe that the economy was likely to expand in the next year.
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Extract from WA Business News, Sep 3, 2009
The new ROE – Return on Engagement
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Payroll represents the largest expense for most organisations, and as Allan Schweyer writes, advantages come first and foremost through better talent management.
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Talent management describes a wide range of activities, and not all positive. Most employers have already frozen or restrained hiring and many have downsized their workforce. While both are at times necessary, it is our contention that the largest opportunity for corporate performance improvement lies in engaging the workforce to drive better customer engagement, better revenue and higher profits. Employers that can improve employee engagement during the downturn will reap immediate and long-term benefits.
The cost of employee disengagement is profound. In the aggregate, employee disengagement is estimated to cost the US economy as much as $US 350 billion ($435 billion) dollars per year in lost productivity, accidents, theft and turnover. For organisations, the difference between an engaged and disengaged workforce can ultimately mean success or failure.
Read more about why engagement counts …
To do something about it ... consider the resources at www.121Match.com and/or www.SalesRecruiters.com.au or Edensilk's own website.
Extract from Human Resources, June 23, 2009, page 10 or visit www.hci.org for the full research report
What makes a team work?
Team learning is vital because teams, not individuals, are the fundamental learning units in modern organisations. This is where ‘the rubber meets the road’. Unless teams can learn, the organisation cannot learn.
However, consider the typical senior management team in many large organisations. We have a CEO and some eight vice presidents, called ‘the management team’. We see a neatly constructed organisational chart. All have officers on the fifth floor of the main building and they meet most Monday mornings in the executive conference room.
On the surface, this group of nine is a team. But when we penetrate the surface, instead we find that each of the vice presidents is managing a silo, a vertical functional area. The silos are steep and have thick walls. The VPs see themselves as guardians of their silos. There is little genuine communication between or among the silos, but no small amount of subterfuge. This is the world of silo management.
Effective leaders can do remarkable things with silos ...
Read what acclaimed business strategist Peter Senge says you can do about silos …
Visit www.121Match.com to discover how you can build and motivate an effective team in the first place.
Extract from MT, May 2009, pages 36-37
Levers for strategic planning and sales growth
We’ve barely crossed the threshold into Spring, but it’s time to think hard about next year. Although the change of calendars is still a few months away, right now is the right time for intensive growth planning and strategizing. That way, when January rolls around, you and your sales team can hit the ground running.
Of course, that’s easier said than done. Many organizations rely on inadequate, fragmented methods of preparing for a future that will be here all too soon.
Often, the biggest problem is the large gap between those working up from the bottom--that is, the field team--and those working down from the top--the corporate leadership team. The field tends to forecast conservatively, worrying about actually making its numbers. Leadership, on the other hand, is usually more generous with its projections because it’s rewarded for its overall sales wins.
The two teams should meet in the middle, but all too often, that doesn’t happen. Instead, they cobble together a compromise that’s reached without solid information or critical thought. That creates tension between the two groups as they work toward those numbers--and the conflict is likely to escalate down the road as they work toward those somewhat arbitrary numbers.
It doesn’t have to be that way. Obviously, it’s important for leaders to push the field team to steadily increase their sales, but it’s equally important to do so based on accurate, well-thought-out information.
Obtaining that information starts with understanding exactly where your organization invests in growth. That knowledge provides everyone involved with a solid platform for strategic planning for the year ahead.
According to a classic study by leading management firm McKinsey & Company, there are really just seven strategies, or “levers,” for growing profitable sales. They are ...
Read about the 7 levers and the two that are most important to focus on …
Then visit our website for tools that will help you manipulate those levers.
Extracted from research by Miller Heiman, Inc.
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Published by Edensilk Pty Ltd. Editor: Paul Curtis. © 2001-2008. All material is copyright. Extracts may be used when 'Edensilk's Business Growth News' is acknowledged as the source including reference to www.edensilk.com.au No liability is accepted for the application of ideas expressed within these articles |
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