Category: Random Thoughts

I had the pleasure of spending a few hours with Dr. Paddi Lund last week in his extraordinary dental practice located in Brisbane, Australia.

I first met Paddi in 1990 at a Bootcamp at a beautiful resort hotel at Leura in the Blue Mountains, west of Sydney. I have to confess that I did not expect to meet a dentist at a marketing Bootcamp but even more surprising, I had no idea at the time that Paddi was going to have such a profound impact on me and many thousands of other people in later years.

Some of the people who read this blog will remember that Paddi was featured in our Towards Awesome Service video training program. Since doing that he has authored several books and has become a sought after speaker around the world.

Paddi’s story is fascinating. He has crafted a concept of business management that focuses on creating a business that gives happiness to all of its stakeholders – its team members, its customers and of course, its managers and owners. His idea that business can be fun and that happiness and profitability can sit very well together has played a big role in helping us frame our own business model.

He has also profoundly impacted many other people’s success, a notable one being Clive Woodward (now Sir Clive Woodward), the celebrated rugby coach who used Paddi’s concepts to transform the English National Rugby team from a very ordinary team to World Cup Winners in 2003.

I have often recommended Paddi’s book Building the Happiness-Centred Business and I do so again. It’s not available through traditional booksellers, indeed, very little of what Paddi does is at all “traditional”.

Paddi suggests that everyone wants to be happy—that’s an over-riding high level life goal. Given that most people spend at least one third of their time involved in “making a living” it makes a lot of sense for that time to be spent doing things that make you happy while making a living. He lives out his own advice.

Paddi has created a dental business that is simply amazing.

• He works just 22.5 hours a week.
• There are no signs on his business premises.
• There is no phone number listed in the phone book.
• The front door is always locked.
• You can only become his patient from a referral.
• You can only refer a patient if he grants you an invitation to do so – you read that correctly, you must be given permission through invitation to be asked to refer, let alone become, a customer.

You’re probably thinking “now I understand why he only gets to work just 2.5 days a week!”

Wait … here’s a bit more information. He makes 2.5 times more than an average dentist in half the time.

My arithmetic tells me that on the “making a living” scale he’s 5 times better at it than the average dentist (and for that you can read any business person.) But there’s more, he also absolutely delights in what he does during his working hours not to mention his playing hours, so I think it’s fair to say he’s found utopia.

At the risk of over-simplifying, he achieves these extraordinary results by focusing absolutely on the little things (he calls them Critical Non-Essentials Cne’s) that together have a big impact and which enable any business to stand-out in an otherwise bland and undifferentiated market place. They’re so important to Paddi that he’s written a book about them and how to use them to create the WOW that most busineses lack.

Seth Godin talks about this sort of thing in his books “The Purple Cow” and “Free Prize Inside” in which is suggests that today it is not good enough to satisfy customers—everyone is doing that to a reasonable degree. What’s needed to be a stand-out business that people notice is to be remarkable. Typically that is not going to be “remarkable” in relation to the core product or service the business sells, it’s going to be in relation to the “non-essentials” that Paddi talks about. These are the things people actually understand, can relate to, can evaluate and do talk about.

What I find amazing is that Paddi was really 20 years ahead of his time when he started to implement the things that have enabled him to create a truly remarkable business. Although Paddi was ahead of Seth when he started to implement his business ideas I’m sure you’ll love Seth’s blog if you like “out of the box” thinking on what’s happening in contemporary marketing.

I was going through my mail this morning and I came across a brochure for a two day Management Accounting program. Programs such as this are attended by corporate accountants who have functional titles such as business analysts, CFOs, controllers, cost accountants and of course management accountants!

One of the sessions being offered is called Fusing Strategy, Operations and Budgets. The blurb notes that organizational success is enhanced by linking strategic intent with business performance management. It talks about identifying cause and effect relationships between goals, actions and outcomes. It emphasizes the critical importance of continual KPI monitoring to achieve fusion of strategy and operations.

Another session is titled Better Reports = Better Decisions. This session recognizes the link between the quality of information and the quality of management. It addresses the issue of timeliness and accuracy as well as integrating non-financial metrics into the reporting framework. It talks about strategy maps and balanced scorecards and it addresses the issue of how report presentation (e.g. visual dashboards) impacts the level of management understanding and therefore operational impact.

There are other sessions that fit this genre but the point I want to make is that the people who present, and those who attend, these classes work for companies that rely on their professional advice and input. As you would imagine these companies would, in the main, be large relative to the SMEs that we generally deal with.

SMEs have precisely the same information needs as larger businesses. In fact a strong case can be made that a large business is nothing more than a small business that has been well informed and well managed!

SMEs need the services of the people who have the necessary training and skill to provide this type of reporting. They don’t need them 5 days a week, 52 weeks a year but they do need them. Enter the public practitioner AKA management accountant, business analyst, CFO – what ever you want to call yourself.

SME’s need your help with their management information system. You have the basic training, you can supplement your skills with a little more study, you have the tools and you have the clients. It seems to me you add all of this up and you get “wonderful opportunity” to deliver real value, get paid for it and differentiate your firm. We’ll be talking a lot more about this at our Annual Conference in Las Vegas this year. Don’t miss it.

There are two ways to view an expense. One is to consider it as a cost and the other is to see it as an investment in a resource that contributes directly or indirectly to the revenue your business generates.

The cost perspective tends to invite us to think “reduction” whereas the investment perspective invites us to immediately ask the following questions: What is the return I’m getting for this resource – that is, how does it contribute to revenue directly or indirectly? What can I do to get better value from this resource? Should I be considering increasing my investment here? Is this a long term investment or can I expect to see a return in the short term? How is the effectiveness of our other resources impacted by this one? It is important to think of cost control not simply as cost reduction, but as resource utilization management.

No business can cut itself to greatness. Typically when people look at cost reduction as a basis for profit improvement, they quickly discover that there are relatively few things they can do other than look to deal with a lower cost supplier. The saying “you get what you pay for” is true and unless alternative vendors can match the total service you now receive, switching needs to be considered with caution.

One of the main reasons cost-cutting exercises rarely achieve the desired results over the long term is that the wrong criteria are used to determine what costs to cut. If you look at each line item on a P&L you should be able to classify each expense as “discretionary” or “non-discretionary”. Discretionary expenses are those that you can actually eliminate or reduce by means of a management decision in the short term. Non-discretionary expenses are those that you are contractually tied to or which simply can’t be reduced unless you closed your doors.

If you take a closer look at these expenses you’ll find that the non-discretionary expenses are the ones you must incur to produce this year’s revenue whereas the non-discretionary expenses are the ones you need to grow your business, that is, produce next year’s revenue.

When you cut expenses, more often than not you are limiting your future. To put that another way, a focus on cost cutting is going to keep you where you are and over time you’ll find you’re left behind by your competitors. The key is not to cut costs but to continuously perform a return on expense analysis (ROEA) and to implement process improvement initiatives to ensure that the get the most out of the resources your expenses are giving you.

This type of analysis, by the way, is an invaluable service you can provide for your clients.

The biggest cost of all. This is related to the above comments on cutting costs. The cost of the lost opportunity is by far the biggest cost incurred by most businesses, and because it is rarely associated with a transaction its impact is never known.

For example, the value to the firm of a client who left because a phone call wasn’t returned, the prospective client who never signed on because your firm did not appear to be any different to the rest of the pack, the team member who left because the firm didn’t listen to a grievance. You won’t find the cost of these sitting neatly on your P&L Statement. They will be hidden in the revenue that was never earned, in the write-offs that you have suffered and in lower levels of resource productivity across the board.