Customer Focus
Back in 2006 Reflex Semiconductor was a medium sized electronics business with Sales Revenue around $200 million and a respectable Net Profit of around $5 million.
The company had several hundred customers and a diverse and mixed product range.
Unsatisfied with performace the Board decided to appoint a new President of Marketing.
This guy was called Max Cutter (I kid you not) and he summed up his philosophy in his joining speech.
” Guys, I want to re-focus on our core business. 80% of our profits come from 20% of our customers but 80% of our efforts are in supplying the lowest contributing 20%” (He was obviously familiar with the Pareto rule)
“I want to re-focus our business (hang on Max, how long have you been here) by eliminating the lowest earning 20% and refocussing our efforts on the highest grossing 20% and watch this business GROW!!!”
When the clapping and cheering had subsided Max set about his business. Gathering together a multifunctional team of career oriented individuals from all levels of the organization (well, engineer level up anyway)
Pursuing a mantra of ‘All Change is Good’ they set about trimming the companies customer database, removing anyone who contributed less than 0.5% of Total Sales.
This carried on for several months.
The Quaterly results were due to be published when Max announced he was leaving the Company for a better position. Despite much persuassion and the offer of a 30% increase in salary Max left anyway. He did get a nice leaving present of a Rolex watch presented by the CEO.
The Quaterly results indicated that Sales were down to $140 million (-30%) and Profit was now a loss of $1.2 million.
Naturally, a Consultant was brought in to assess the situation and, after one weeks analysis, She reported that NO ONE CUSTOMER REPRESENTED MORE THAN 0.7% OF SALES.
The companies customer base was so diverse and its product range so varied the Good Old Pareto Rule didn’t apply in this case and Max and the team had successfully exterminated 30% of a perfectly good business.
Unfortunately Reflex Semiconductor never recovered and went bust a year later.
Max went on to get a job in investment banking and invented something called the “Credit Default Swap”….
chris@projectsguru.co.uk
www.projectsguru.co.uk
Whilst the football may not have lived up to the hype so far we have still seen a couple of excellent team performances. So what is it that makes for a 
Directing from the bunker……
Saturday, July 17th, 2010Have you seen “Undercover Bosses” on Channel 4 ? (9pm Thursdays)
In the series a number of company Executives go “undercover” to see how their business really works.
Last week it was David Clarke’s turn. David is the C.E.O of Hotel chain “Best Western” which doesn’t actually own any hotels but acts as an “umbrella brand” and booking agent.
David explained to his rather bemused board that he was going undercover for 5 days and would report his findings on his return.
David grew a beard and assumed an alternate identity.
He needn’t have bothered really because, despite a 1 million pounds marketing campaign, none of the staff had any clue what Best Western did or who they were.
David met a number of staff most of whom were extremely dedicated despite having to work extra hours unpaid and generally receiving just above minimum wage.
The funniest was the maintenance guy who clearly didn’t give a sh*t !
“Aren’t we going to fix that properly” asked David. “Nahh we’ll just move it to another room” – so that when the Best Western Inspector returned and checked the same room the offending item would be elsewhere and replaced by one from another room. Other shenanigans involved changing the room numbers on the Inspector’s report to confuse him on his return.
David, quite understandably, was not amused.
David returned to the boardroom to announce his findings – The Marketing Director was visibly shocked to hear that the advertising campaign had been particularly ineffective.
At the end of the show David anounced (in Secret Millionaire style) his true identify to the staff he had met during the show.
One Lady had worked for Best Western for 20 years. She earned around 6 pound per hour as a Cleaning Team Leader and regularly worked well over her standard shift for no extra recompense. During the show it transpired that her Son had spent some considerable time in Great Ormond Street Childrens hospital. Consequently David, in best philanthropist style, got out his chequebook. The Cleaner’s lip trembled and a loose tear rolled down her face as he wrote out a cheque for…….two and a half thousand pounds.
Best Western is part of the Interchange & Consort Hotels Group Ltd which is a private limited company and as such its accounts are not readily available in the public sphere in the same way that a PLC’s are. It is however one of the largest hotel chains in the Western world. One would have thought that a more generous donation would have been in order from such a “prestigious” organization rather than this rather tawdry sum.
The program highlighted a number of issues prevalent in many companies today:-
There is an old Management technique called “Management by walking around” which is exactly what it says on the tin.
Executives need to extract their heads from their own orifices and get out there on the shop floor and find out what the hell’s going on in their own organizations. Get out there and talk but more importantly listen to your own workers.
chris@projectsguru.co.uk
www.projectsguru.co.uk
Tags: #pmot, business, leadership, social commentary, teams
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