Where has all the money gone? – you wouldn’t believe it

Part one – why?

Previous installments:
IT investment for the small businessman and novice
Why the SMB/SME holds all the aces when it comes to IT
In our last instalment we talked about the advantage an SME/SMB has over it’s bigger rivals when it comes to implementing technology, especially around the aspects of communication, business change and lack of red tape.¬
Don’t let this reference to red tape fool you. It is mission critical to understand the difference between vital¬† process and red tape and it’s not always immediately obvious.
The key to cost cutting in any area is knowing what to cut. The word we are after is waste, but even that can be misleading.  In the world of Lean everything outside of the critical value adding moment is deemed to be waste, but nobody imagines that you can eliminate most of it let alone all.
The best approach is to look at where the money goes in a typical systems implementation.
Let’s take ACME¬† cash registers.
They have a turnover of 200 million and they have countless systems handling different aspects of their relationship with customers.  Nobody in the organisation has the full picture at any time bout any customer.
Sales people call with an Upsell proposition within an hour of the customer complaining bitterly to support.

  • Customer enquiries get written on cards and handed to salespeople who then lose a percentage or forget to mark them up so 14% of leads are never followed through. (any of this sound familiar)
  • The last time they tried a mass emailing they only had email addresses for 34% and two thirds of those were returned undelivered. This resulted in their IP address being registered as a spam house and for three months their emails were being destroyed by a robot and never arriving.

Ok this is just the tip of the iceberg, but you get the picture. The new VP of sales has read the riot act and reluctantly he has been promised that they will try and find some budget to help out. Where do we go now?
In our next contribution we will provide an insight into how not to approach it and the we will move on to  look at a simple model for getting this job done.
Requirement gathering the first big mistake

  About the author

 

Why the SMB/SME holds all the aces when it comes to IT

I know you probably wanted me to tell you how unfair and inequitable the world is and how tough it is to be small. We’re in that sort of phase just now. Well you are going to be disappointed, but I challenge you to read on anyhow.
Not only is it easier, cheaper and less risky to implement state of the art IT, but rarely do your big brothers tap into the advantage effectively once they have implemented it. Now there is a new twist that puts the smaller business back at the cutting edge.

Small is beautiful when it comes to costs

When I rolled out a nine million pound IT investment for a government department, I spent more than a million getting the messages through to the workforce that things would be changing and preparing them and yet another million fighting the bonfires to get it rolled out and accepted.
When I rescued a large project a few years ago, they had already spent close on a million on feasibility and had got nowhere with it.
Implementing a mission critical system for a huge nationwide organisation, I got to roll-out stage and not even the CEO could make IT go any faster, we waited three months while they  put us off with new problems each day and they negotiated for increased budgets for running the system that would have supported a medium sized island, despite having agreed all of this previously at planning stage. Each slight effort from IT requires forms, a process and a very long wait.(Partly justified, because bigger IT comes with bigger risks).

Small is beautiful when it comes to change

Bringing about even fairly small changes in a very big organisation is slow, very expensive and not at all guaranteed. ¬†The employees have no sense of connection to anything , or anyone, it’s just a huge employer and change is inconvenient. Customers have a stronger relationship with the brand than employees with their management and shareholders. Established employees can easily resist change without suffering any consequences and often do so just to prove that they can.

When a big business is forced to compete with small business on a level playing field, it is like a train attempting to  catch a rabbit.  Trains are only good for long straight and fairly even roads. While the train is moving the tracks, the rabbit is enjoying the grass on a greener slope.

Business case

The average cost of a feasibility study and business case for a large business today is estimated at around ¬£60,000. There are more stakeholders with more complex propositions and communication grinds to a slow shuffle. There is usually little or no true big picture and everything you produce then has to be reviewed on the basis of, “do I really look like that that?” .I recently completed a feasibility and prepared a business case for a large SME/SMB and it cost just¬† ¬£7k.
Rapid painless implementation
When that business described above comes to implement their plans, the system will be hosted on the cloud without a single click of a mouse by their IT department and it will be running and operational in a one day.
It will have world class back-up, disaster recovery, failover and  all the things an SME/SMB struggles to afford and  it will be maintained 24/7.
They won’t buy any hardware or purchase anything up front and their modest budget will be spent on improving their business to take advantage of the new system’s capability, communicating their requirements accurately to the service provider, training people to make their lives easier and their jobs more secure with this new super tool and getting their data into good shape to take maximum advantage.
 Dynamics of IT investment for the SME/SMB
 Where has all the money gone?
 About the author

 

 

 

Fifteen common sense cost cutting ideas

View of Wall Street, Manhattan.

Image via Wikipedia

  With a forecast of rising inflation putting pressure on costs coupled with shrinking sales in certain industries,  then many businesses will be paying  extra  attention to cost cutting opportunities. In this blog I have identified the top 15 generic opportunities for cost savings that can be applied either directly or in a modified state to almost any business.

Cost cutting should be viewed in a positive light

Done correctly, the benefits of a cost cutting exercise can deliver more than just excellent immediate financial returns. It can also be a vehicle for consolidation of management process and shedding of wastage after a long period of growth, when there may not always have been time to prune and shape the expansion for maximum value.

Each industry will have it’s own specific cost areas that are high on the agenda, but there is also a great deal that is shared across business in all industries.

Fundamental rules for cost cutting exercises

The first rule of finding good opportunities is to look in the most likely places. Natural human weaknesses are a dead cert; poor communication, empire building, hanging on to bad routines, loss of direction and purpose, poor decision making, fear of hiring good people, fear of encouraging good people.

The second rule of finding cost cutting opportunities is to avoid the ones that reduce the value proposition to your customers, the ones that harm communication, especially with the customer and the ones that rely on volatile currency rates or political situations and ones that de-motivate key personnel.

Below is a first stab at creating a universally applicable list of good cost cutting ideas:

1.       Reduce the size of HR and bring most of the hiring procedures inside business units. Let outgoing good people choose replacements and failing that let colleagues do it.
Every person they introduce will save an agency fee, the communications loop is cut to a fraction saving wasted time and effort and the new person will fit the job perfectly and blend in well.

2.       Offer bonuses to all staff and ex staff to help you fill vacancies, not only will you get better people you will save a fortune in agency fees.

3.       Get rid of the call centre and make each account manager responsible for maintaining the relationship with customers, if not directly then directly supervised. Task them to up sell and cross sell at every opportunity and to discover product opportunities and to get on first name terms.  Not only will your turn a liability into an asset through more sales, you will strengthen customer retention and be better informed about new product opportunities.  Every time you solve a problem for your customer, even if your product created it, you are strengthening the brand and deepening the relationship, provided you handle it well.

4.       Share your marketing costs through joint campaigns. Partner with non competitive  and complimentary businesses in your industry to share the cost of your mailings and other marketing initiatives. As well as sharing the cost of the campaign, you may also gain access to their database.

5.       Stop posting letters and use email for everything. It sounds simple, but the mail vans are still delivering sacks full of messages days later at substantial expense when they could have been delivered instantly and for free.

6.¬†¬†¬†¬†¬†¬† Clamp down on meetings. By this I don’t mean stop them or give them a stigma, they are vital. Make sure they are used correctly and only when needed. Make sure there is an agenda and minutes and they are chaired.¬† Consider training or coaching prople or even having a meetings baron who chairs all the important ones and supervises the rest.
Make sure that people who work together sit together.

7.       Make sure everyone can type with more than two fingers and has been trained in advanced usage of the basic productivity software packages to get the best out of them. Like email, it sounds like a no-brainer, but the world is full of people who have struggled for years at 50% capacity all for the want of half a day in the classroom.

8.       Install VOIP and use it. If you want to try it out first, you can put Skype on every pc and cut out all costs attached to internal voice communications, this costs nothing, just an email explaining to the staff how to download and use it.
A well chosen VOIP system can also dramatically reduce all of your messaging costs for a moderate initial investment.  This is a must have, just like email.

9.       Negotiate tighter costs on your big purchases, if your market shrinks, your suppliers will shrink too. Give them a chance to secure your business and gain some extra discounts from them.

10.¬†¬† Combat wage demands by making the staff happier at work so they don’t want to consider leaving. Encourage the people who are gifted in this way to organise sport and recreation groups. Provide child care for pre-school children and after school care to keep young mums at their desks and happy. Organise bulk buying clubs and help your employees to reduce their costs by buying the regular stuff at wholesale prices.

11.   Encourage all your people to work from home at least one day a week, this will reduce their motoring costs by 20% and hence their cost of living by  as much as 5%. It will also motivate them and help to retain them.

12.   Train your managers to show appreciation regularly, Ideally do it by example. This can substantially  mitigate pay demands.

13.   When you need new software consider the open source option first. With the right advice you can discover a great deal of very high quality software with no licensing costs and low initial costs and support costs.

14.   If you develop software hire a good agile project manager to deliver the low hanging fruit quickly and bring benefits in early, this will dramatically improve the business case.

15.¬†¬† When you make changes, don’t just assume they will work, get away from your desk and make sure they are working.

 

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