S1E11 Business Success with Ross Magee

Business Success relies on a systematic approach that underpins the execution of a clear business plan that is built upon well constructed, always current strategy.  

In this episode, Ross Magee, a highly successful CEO and Senior Executive of major organisations including Hager, IBM, PWC, NEC, Ajilon, and Kaz, shares his key aspects that he focuses on to lead outstanding business success.

For more information relating to the podcast and how you can gain access to advisory services to assist you with your business, see www.lseconsulting.net.au

Transcript

CEO Thinking Episode 11

Business Success with Ross Magee

3rd May 2024

Transcript

Philip

Welcome to the CEO Thinking podcast. I'm Philip Belcher, a successful CEO, and CEO mentor, advisor, and business consultant. 

On this podcast, I provide insights to inspire ideas for CEOs, directors, and senior managers to use as they lead their businesses to achieve outstanding results. I've applied these ideas to start, grow, turn around, and successfully exit businesses as well as to mentor my clients that have achieved great results. I regularly host eminent special guests who share their experiences and ideas to inspire CEO thinking. 

If my guests and I can use these ideas successfully, you can use them too.  

In this edition of CEO Thinking, I am talking to Ross McGee, who is a highly successful CEO and senior executive of global organisations. 

Welcome to CEO Thinking Russ, thanks for joining me. I really appreciate the fact that you take the time because I know you're a. Busy man. This series of business interviews that I do is with people who I know have been highly successful in what they do, and I couldn't think of anyone better to talk to than Ross because of the success that he's had and the time that I've worked with him, and I've experienced that he is a high energy individual who makes things happen. 

Ross is a widely successful experienced business leader that specialises in growing and transforming technology, service, software, and outsourcing businesses. He started his career with IBM where he led significant growth in high technology sales globally, focusing on the USA, Japan and Australia. Since moving on from IBM, Ross has transformed and lead extraordinary business growth for several multinational companies, including NEC, Price Waterhouse Coopers, commonly known as PWC, Ajilon, Kaz, AMS, and most recently, Hager, where he reversed 20 years of cumulative losses and grew revenues 285% in his six-year tenure. Ross is an inspirational leader with enormous energy and drive, who brings rigour and focus to the organisations that he leads. He's both a strategist and a pragmatist. He loves a challenge, but his true passion is in working with individuals and teams to help them achieve their potential. That's a small amount on Ross, we could go further, but let's just hold it there. 

So Ross, this success that you've had, I asked you to boil that down into a few areas and I know that that's very difficult to do. Can you share it with me and the listeners in particular some key areas there that they might be able to leverage in the sorts of things that they're doing.

Ross

Yeah, Phil, look personally, it's about energy cause that's the choreography of the game. You've got to bring energy to the game and it's about learning, being obsessive on you're learning, and relentless on that education. The success at the business level has really been built around High performance organisations and to my learning and my experience I think they excel on three dimensions. 

·       Talent, your people and your capabilities, 

·       The customer; who's at the centre of everything. 

·       And you're offer; your products, your solutions. 

They're the three dimensions.

Philip

That's interesting. So in the wide area of successes that you've had, you can identify in each one of those, those three areas of talent, customer and the offer that you're taking to market.  Have I got that correct?

Ross

Yeah. They're the levers you have to pay with in that order.

Philip

OK.

Ross

You've got to get your people first, then your customer and then your offer. The offer is there and you're constantly refining it. But I think it's that sequence. Your people, your customer, and then the offer that drives constant improvement and constant growth.

Philip

Interesting. So in the talent area, or your people area there, how do you go about identifying the right people in your organisation? Do you work to develop the people that are there, or do you bring people in, or is it a combination of both of those?

Ross

Yeah, a lot of people talk about the high performance, about how can I mobilise and the answer to that is a finite answer. The real solution is how do you liberate because the answer to liberation is infinite. So, back to your question though, specifically on talent, I'm a big fan of Jim Collins and “having the right people on the bus and the wrong people off the bus”. And as we talk, I'll probably talk about my most recent experience because, as you evolve, you're bringing those learnings with you and that most recent, while it wasn't technology it was industrial, it was a phenomenal achievement by the team and the and the customer set, which virtually almost tripled the business, doubled the profit ratio, and as you said, it had not been profitable. It outgrew competition market share, 65 consecutive months of growth over the prior years. 

So on the talent, when I started, I asked the management team how many of you have ever done any management training and the majority had never, and we'll talk later about sales, it’s similar. So, I had to do some work around giving them a toolkit and coaching, but on the broader mass, yeah, I said. Well, let me introduce you to Jim Collins and ‘The Bus’ and hands up, how many ‘C’ players you have, and a lot of people didn't want to talk about them, but the real game is you've got ‘A’ players which are great, but the majority are ‘B’ players. So how do we make the ‘B’ players function and possibly become ‘A’s and with the ‘C's pay some attention. Let's get them out of the C classification to a B quickly or if not, OK, get them off the bus. 

So we did a lot on the A-B-C management and leadership coaching. The other thing was they had high, like many companies, high attrition, and there's a break-even when you have about 20% attrition or higher, you're going backwards because your cylinders aren't firing, you're constantly trying to replenish. So I worked out we had like 8% management attrition, you're talking maybe one for the year. Within three years, we've gone to more than 50% management attrition and overall attrition had dropped from 20% to less than 10. Now that came from that little analogy of Jim Collins, and that focus on ABC and fixing the coaching. So within two years, half the team that we had weren't there when I started, and that wasn't about kicking people out, but it was about getting the right team, the right capabilities to go forward and energising that team.  But I remember we hired a very good person. After three months, he said, “Look, this is not for me, you guys are going so fast” and it was like a startup. 

So that's the piece on talent. Commit to coaching, focusing ABC's and liberate that culture.

Philip

OK, that word liberation, Ross, that's not a word that I hear spoken about very often, even in management texts. Can you tell me a little bit more about liberation and what that means for you? I guess this relates to the talent, is that correct? 

Ross

Yeah, look. It's a bit like manager versus leader, Phil. I think a lot of people think about controls and not having risk and all that's going to do is choke the organisation. You do have to worry about risk management, but there's a great lesson I learned years ago on risk management. If you're planning for failure, guess what? You'll probably get failure. But if you plan for success, if you plan for what has to go right, those key dependency triggers, guess what? It will go right. So put your focus on what success is as opposed to the misery and the controls, as always, about let's just eliminate all risk because you can't. So liberation is the glass half full approach, I guess. But change management or programme management, it's really working out what are the success criteria for each stakeholder and really being diligent of one of those key levers you need to pull, and then execute against that. The lesson is you will get success, if you plan for success, you'll get it. But risk management can just lead you down the path of controls and misery and being a worry wart. And our culture is very good that in Australia. We always said we'd stuff up the Olympics, everything's going to not work, the sky’s going to fail, but it doesn't.

Philip

There you go. So what I'm hearing there is, is that you've taken an attitude with your talent, coaching them, providing them… You mentioned there you asked the question of your management team how much management educational training have you had and there wasn't a lot there, so you've gone through a process of providing some of that for them?

Ross

Yes, so when we talk about talent, I see three things. So you're on the second one. The first one is what is the raw talent capability. The second one is training. The third, we'll talk about culture. 

So on training, you're right,  I asked a question, I did a gap analysis on the sales side, but what I saw was the company had been a joint with, the most recent one and the one you worked with NEC, there was always a pass, a joint venture, product had failed, yesterday's news. 

So we had to get back to the centre of the attention being the customer. So customer centricity was what we had to do. And the training had to be around business ownership, because if you're not making money... The only success in business is growth, but profitable growth, so we had to do some business ownership education. But on training we had to get good and be better than the rest in the market. 

So I did the assessment and one of the things was the sales skills weren't there, it's a big discounting culture. So I embarked on some sales training and building a sales tool kit from negotiation and communication, but really about putting yourself in the customer shoes. And out of some quick hits of increasing prices, we were able to fund training of five professional training days a year. And, the problem with training is 90% is forgotten in 30 days so you’ve got to put a culture of coaching around it and really reinforce it or it’s forgotten. 

And the first year that people came in like learning another language and said, “Oh my God, this is so hard”. By the third attempt, that we ran it every six months, so three days at the end of the year, two days midyear, they're saying “Can we go a bit longer today? Can we work back till six?” They suddenly got passionate and drive along with the reps they'd get out their little planning tools, right, like “What's the customers interest? What options have we got? Here's what I thought.” Here’s the last call”. It really became a religion. They really adored it.

Philip

Interesting. So this training Ross that you were running, was this specifically only for the salespeople or was this for people across the organisation?

Ross

No. So there'll be sales and marketing. We then did, so then the leadership that had three days of coaching leadership training a year, some high-level concepts like we did a number of workouts on Jim Collins books: Good to Great, Built to last. Great by Choice. But then your management tools like active listening. There's a great set of methods called ‘Leader as Coach’. We use a lot of those tools. I've sort of listening, but moving, we did a lot of research on influencing that telling people what to do; or showing the logic what to do - all sounds good, but influence is the most effective way to do it. So how do you influence people? And so the majority of the company were all getting that training. At the broader set, when you get down to warehouse or customer service, we then do workshops total company wide. 

But there is a passion for that learning in the management team and they would then, through their toolkit, pass it on to coaching which is training. But look you'd say it was expensive, but it was - we're talking half a percent of revenue on training. It's not a big investment. When you do it on a big scale of 30 plus people, you can leverage some very good training and we got some great trainers. It's really important to get trainers who are there to cause permanent change and we built a team up that I’d had experience with before and were globally well renowned and flew in from overseas. But no, that training made a big, big change of customer centricity and market share growth.

Philip

OK. So what I'm hearing is that, you are a high energy individual so I have no doubt that you were passionate and demonstrated to these people that a way forward, because you talked about focusing on what you could do and the positive aspects as opposed to focusing on the risks. So it sounds to me like what you were doing there was: A) demonstrating by the way that you act and your attitude towards education and training and learning and the talent in the organisation. It sounds to me then B) you were working with your managers through to making it part of the culture of the organisation to become a learning. Organisation. Does that sound about right?

Ross

Yeah. I mean another way is you know, use of Austin Powers, but this, that company and every company I've been in, has a mojo problem. You’ve got to get their mojo back. And it may not be. It's often mostly not the past. It's a new mojo, but they've just got to have a spring in their step. In fact I remember one Rep. I remember her first year or two with us and she would always have her head down walking around. And by year three she was kicking heels in the air. She just transformed and the results went through the roof. So that's an example of Mojo. How do you get the mojo in the organisation? And you got back to the energy discussion earlier. You bring that every day, you’ve got to find out “What are those levers? How do I how do I show this isn't short term? I'm. serious about this!” 

Philip

There you go. So the people, and I have talked about this in previous episodes, the people follow what you do, not what you say. So where you exhibit that you've got the energy and the passion and that you believe in a positive way forward, you can then build a lot underneath that that your people will catch on to. And as you mentioned Jim Collins; and for the listeners Ross and I share a similar passion for the books and the learning that Jim Collins has published. Jim Collins wrote a book called Good to Great and then several others which Ross just mentioned and I would encourage anyone listening to this broadcast, get a copy of that and read it, but don't just read it, think about how you could apply those things to your organisation, because Ross, from what I'm hearing, you applied a lot of that, but the difference is you used your artistic skills to implement it and your leadership.

Ross

Yeah. Collins talks about discipline, people discipline, thought, disciplined action. Yeah. So you do that. And just to your referral, yeah, the easiest book to read is a little booklet he came out with a few years ago called ‘The Flywheel’ and that sort of summarises - because as he’s evolved, some things he’s dropped out. Some things improved on. But the flywheel is an incredible book, very quick reading like half an hour, a booklet, and I've been using a lot of that, so it's free intellectual capital. We've got methodology in there which is great. 

But Phil you're also… Back to just finish on the talent. So 3 aspects of talent were the people, the training and then as you refer to them, this culture. 

So the job is to activate the organisation. And from Collins’ metaphor, take it from ‘good to great’, ‘build it to last’, and make it ‘great by choice’. They're the order of his books. How do you activate it? And how do you hardwire that high performance organisation? So he talks about this flywheel. So this big, heavy flywheel, bit like James Watt’s steam machine, and you give a little nudge, a little bit, a bit more nudge and eventually you get to go one full turn. OK, but you’ve got to get it two turns, then four then. 8 and 36 yeah, 72, a thousand and eventually momentum takes over. You constantly add to it till the momentum takes over and it becomes unstoppable. So that's really important. 

The second piece, and it applies in the other areas, talk about customer and offer, is this power of 1% and we've seen that a lot in sport. The great example of the British Cycling team where they never won Tour de France, never won the Olympics, and he dissected that team and found 1% improvement from their pillow to their seat to the clothes they wear, and they just blitzed everything. And we've seen in sport, how do you find that 1% improvement in everything you do? 

So some of the things obviously is, motivational plan, but communications: Thank you. Positivity. Regular recognition. When I started, they had a once-a-year recognition. There was sort of a lottery where everyone put a nomination in. I said, well, why don't we just do it every quarter? So every quarter quarter of the company every year would get $1000 and an extra day off. But you know every month we tried to make sure there was a positive engagement with our people. So they're the sort of things you do to activate the organisation. And find those 1% improvements on that talent axis. You’ve got to absolutely do it on customer offer as well. But the 1%, the flywheel is part of that culture. You've just got to constantly improve. And then, and that gets you out of bed every morning: “What's the 1% today I'm going to get done?”.

Philip

So that flywheel, which is momentum, after a while becomes… He talks about, and we've all felt it. You mentioned before the organisation where there was this feeling of it didn't have any mojo and it’s languid. And when you move into turnaround situations generally that's what you feel. You can't put your finger on it, but you walk through the door and it just feels a little bit down. 

So the question is, how do you actually get that going? So then you've just got to keep pushing, pushing as you say. You get this momentum starting to roll, it becomes self-perpetuating, then the people, as you mentioned with your person that have been there after two years, she was walking around the place, clicking her heels and high fiving, so the momentum gets going. And then as the leader, it sounds like what you were doing there was just keeping it spinning.

Ross

Yeah. You you've. Yeah, there are times you have to go for a walk, grab a coffee - time out.

Philip

We've all had those.

Ross

And then come back on the game field and start again. Let's just keep going. Yeah.

Philip

Very good. So Ross, let's then move on. So that's your talent where you've talked about liberating them. I suspect a little bit of that was cutting them a bit of slack and letting them be creative in their own right so that they felt they were in control of their own destiny. Did that come into it?

Ross

Yeah, Phil when I started, there were a lot of controls. This most recent was a French German company, but you saw in NEC, I've seen it in every big company. When they've gone through change and layoffs and losses, they put controls in, but they just perpetuate. They never get freed up so liberation is important.

Philip

That's the negative flywheel.

Ross

Correct. Well, and it is. And then and it's like in in the flywheel it's all about friction and momentum. So how do you, it doesn't matter which you do, 1% less friction.

Philip

Ross, you and I could probably come up with the flywheel versus the downward spiral. And one of the things that happens is just like talking about the momentum and the getting the flywheel going, you allow enough of that negativity to perpetrate itself and you do end up in a downward spiral.

Ross

Yeah. So just, I don’t want to spend all the time on the flywheel, but doesn't matter if you're focusing on momentum or friction on the flywheel because they're opposite effects, right? So 1% less friction helps the fly wheel go faster as does 1% momentum. So it's a balancing act to work out, well, where are those impediments, where are those opportunities, and we did a lot of workshops as a team. I taught them how to develop a flywheel and we kept refining it. 

But the flywheel interprets differently in every part of the organisation. I remember the warehouse manager coming back and grabbing the warehouse team. You know some big, big, I think they're just warehouse people, and he's got them around a little whiteboard, flip chart and back to his office over 2 days developing the warehouse flywheel. It became infectious. He was a sporting guy as well. But he did. They just really looked at, right, what's our, how do we help the flywheel here and in the warehouse a lot of it's friction: not shipping on time, not finding stocks. So yeah. Friction and momentum are both your levers you’ve got to look at.

Philip

Fantastic. OK. Well, that's the talent side of things. Can we now move on to the customer side of things that you operated on to create these successes?

Ross

Right. So when you talk to customers, you're people engage with them so that's why we started with the people. So on the customer side, we looked at the customer dialogue. We looked at the product positioning, the ranging and we looked at account planning, which I know is a favourite topic of yours. And so, but let's talk about the customer dialogue. If you want to go for a new customer, you've seen the research, but I'll put a number out there, it's five to seven times more expensive to get a new customer than an existing customer, and that doesn't mean you don't go for new customers, but you've got to have a customer engagement plan. And an account plan. 

So what we did, I got out with the customers, talked to them, challenged them, we did customer SAT surveys but not so much remote, but in person. People can hide or not online surveys, so let's go and see them, set the expectation, see how we were performing and check in every six months. Then I also put in ‘Thank you’s’ for the customers we had thank you for our people, so every six months, my top customers, I'd write a personal ‘thank you’ card to. Now after a while we got up to 200 of those and my handwriting is not that good. So have to be take time, so I made my people do that. But also give them a bottle of wine, now within limits of their contract, but just a small ‘Thank you’ gift or some good tea if they weren't a drinker. But every six months, just saying thank you. And I remember my biggest distributor being $3 billion company, he had my thank you card on his whiteboard and I went and saw him and said “Why?” He said “I haven't had one for 30 years” and he said “That is so good I've put that up”. I said, “Do you tell my competitors?” he said “No, they just look at it and say, “What's that?” He said “A Thank you Card, they don’t know it’s from you”. But that's customer centricity. 

Customer dialogue is where it starts. The metaphor I have is ‘put yourself in your customers shoes and know their problems better than they know’. So you do your research. When I'm doing a large customer call I'm almost obsessed for the day before trying to get ready for it, the material ready for it by putting myself in their shoes. What are they thinking? What do they want? Because the majority of times they don't know. So you’ve got to work out those silent needs. And that's what we got to teach our people. And that's what I did in the training. Tried to teach people how to do that. 

So customer dialogue’s, the first piece. Your next piece is… The most recent job, we had a number of products, large volume business and I had to get the product in that premium end of good, better, best. But that talked about core ranging. so we were one of 10 suppliers in many categories. I wanted to be in the top two, so the dialogue the first year or two, and our people went through me, was how do we get in the top two without discounting? So we did a lot of work on that and we'll talk when we talk about offer about pricing and you know positioning there, but discounting disappeared, they suddenly saw that we had differentiated offers, but there was a struggle because you may as well range everyone and any study of good, better, best is there's always a decoy. There's really only the premium and the cheap. So we did not want to be the cheap because the losses from the years and not being it… 

Now that was not quick. That took two to three years to get all the major distributors on board and then also a lot of work on the training for the end customer to get them to see the difference in our offer. But more and more, face-time, more and more positioning of that offer. And then the last one, which you know well, was account planning and segmentation. So we did a lot of work on account planning, but the segmentation is, I know you've had an earlier talk about Pareto theory, which is 20% of the customers give 80% of results. So we focused on the high value customers and the high potential customers. And my target was the high value customer should grow double our growth rate and our growth rate averaged 16% every year or higher. So we had to get a 40% growth of our high value customers, the biggest, but the high potential you know in two years we were getting 300% return.

Philip

Interesting.

Ross

Now I wanted 10 times the growth rate, 30 times was fantastic, but we were getting more than 10 times the growth rate. Now the reps from covering. 50 customers equally, I got upset with and just said I'm not saying ignore every customer, obviously return the calls, but these customers have the value and potential that we've got to focus on. So with our account planning, with our sales training, with our listening skills, spend more time with them and that really gave us the growth and the profit we needed. So we didn't have a lot of resources. But we used the few we had because our competitors were 10 times bigger, but we outgrew them two to three fold every year because we focused and we focused on the A customers all the time.

Philip

Interesting. And you had a combination there. So on the one hand you were focusing and looking at the high value high potential customers, you also got your people to understand that it is much more effective and efficient to grow your existing customers if possible whilst not forgetting new customers. But you also have the perspective in the business of saying we will understand the customers better. And therefore, when we go and talk to those customers, we'll be talking to them about things that they might not even realise are issues for them. So in a way, you became an educator and almost a consultant to those customers. Would that be accurate?

Ross

Yeah, Phil, there's a lot of work on new products. Customers don’t really want to talk to every supplier other than something new, they might give a bit of attention, but you don't always have new products. Industrial:  You don't really have them that often at all. So you've got to talk about the customer needs and you try to get him to shift. And that's hard without something sexy, something new. But listening, active listening, and really being prepared and showing a difference makes a difference. And look, if you serve your good customers well, word of mouth gets out and that's where new customers come from. So, remember who pays the bill and pay attention to it, but back to Pareto and the ABC segmentation. That's not to say we don't talk to any customer. We do. But you put more time in those As. That's where your focus is. And when you have a small sales team compared to big gorillas in the market, that's how you outgrow their market.

Philip

There you go. Wonderful. I did a session in a previous episode on Goodwill and I made it very clear there were two definitions of goodwill. One was the goodwill that's the accounting term, which is the difference that someone will pay you over and above the assets in the business. But I focused on the goodwill that is between various aspects of the organisation, and in particular goodwill with your customers and, as you just said there, if you've got goodwill with customers, would you agree with me that then you will get word of mouth because you've built goodwill with them and they want to be friendly and positive towards you and your offering?

Ross

Yeah, it's all about trust. How do you get trust? That's about integrity. That's under promising over delivering. That's always delivering on your what you said you do. It's making notes so you don't forget. It's preparing more: prior planning prevents piss-poor performance. That's physical performance. It's more you prepare the less anxiety and the greater the outcome.

Philip

There you go. So in terms of the customer, you've segmented your customers, you've made conscious decisions as to who you will focus on, and who you won't ignore but who will choose not to put too much effort into. Then you've said, what is it that we're going to offer them? And you made a conscious decision to make sure that you are matching they're offering to fit their need.

Ross

Their business problem? Yep.

Philip

To fit their needs, interesting. So anything else on the customer though that you did or that you do, Ross, because we're talking about this a little bit in retrospect, but. That's not the way it is. This is what you do and having that future orientation says, well, it worked here, doesn't necessarily guarantee to work again, but when you start to build that momentum towards where you're going, these are the things that you've seen work correct.

Ross

Phil, COVID was aweful. Remember being in the office during COVID, everyone in the office. It was so good to have you here all the time, I think. And no, it's not, because the market moves, and while everyone is working on email and Zoom calls, there's no substitute to knee – to - knee selling and the nuance of body language and the nuance of… and the interpersonal being there and then turning up going to customer site, not making them come to you is so important and Covid was so hard and so stressful because you're trying to think 10 times harder because you're not there in person. So customer is just vital and old 10 calls a day or depending on the size of the opportunity but you’ve got to have a lot of your time out in the market because 70% of customers’ needs are not stated, you know. So how do you find out about them? And you’ve got to be out there and just find them.

Philip

It's one of the things that I've found on a potted career that I've had is that ask 10 times more questions than statements that you make, but before you ask those questions, make sure you've done your research that you're asking valuable questions, not idle chitchat.

Ross

I know I've had, used coaching my people, a lot and had some coaches over the years, and I’ve always said to my coaches. “Just tell me the questions to ask!”, you know? That's a great question. Let me write that one down. I need to learn more questions, you know? So in that question that really is opens up a Pandora's box of opportunity or is the key to learning?

Philip

I love it when you ask a customer a question and they look at you. They pause for a second and say “I hadn't really considered that. Hmm”. Then you end up in a discussion about it. Then you know that you've moved from being in a “I've got a box, and I'm going to sell it to you” to “We're really discussing something of importance here” and then at the end of that conversation you have quite often changed the perspective of why you were even there.

Ross

And those calls can be an hour to two hours. So to earn the right to be able to get that time of the customer is really hard and you’ve got to know those questions because to get that successful sales calls, the customer talks more than 80% of the time. So you don't just talk about yourself and brag. You want them to give you insight and you give them insight. But it's a two-way street.

Philip

Can I take away from what you're saying here, Ross, is that the amount of preparation that you do before you go and see your customer is really what feeds into those valuable questions that you will then pose to the customer to uncover what their real needs are, those 70% of unstated needs? Is that preparation?

Ross

Correct. Phil, I'm somewhat spontaneous, so I've got to have this mental mind map and knowledge of the customer. To feel the room, feel the mood and let it go. So the more preparation every time the better the outcome. Think there's no way that can be done. I tell you, I love hearing. No. Of course I want to make it. Yes. But how do you do it? Well, it's a lot of preparation and that's what we had to teach our team on those A customers. Let's go through different scenarios. Here's a customer will never say yes. How would you make him? He always says no. How do you make him say yes? So let's do role plays on that. Let's work out how we prepare for that. What would you do?

Philip

And of course underneath that when you say get them to say yes, that's after you've ascertained that what you're offering them is of value to them and does address the issues that they’ve got.

Ross

A good sales call, Phil, will always lead to more work so you're both your customer and you find out. “Ohh here's another path to go to”. So you got to go do that work. But I remember coming back and my assistant would say “how was the call” I said “ More work”. “Oh, that's not good”. I. Said “No, that's great. That's that's good, that's good!”.

Philip

So let's move on then to the offer because you said talent and we've talked about that, you've talked about the customer and there's some real rich gems in there that people need to internalise and translate into their situation, no matter wherever they are. And I do have to say here that we do talk to people who are in profit and not-for-profit organisations. It really doesn't matter whether you're in a profit or not-for-profit organisation, you are providing solutions or providing a service to end users. Now they may not be called customers, but a lot of what's being discussed here is highly applicable to not-for-profit.

Ross

Ohh yeah, Jim Collins has a whole book on not-for- profit, and his flywheel examples of equal non-profit examples, education being one and social justice as he does for a profitable companies, so it's got the same application. You wouldn't think so, but he wrote a whole book on the not-for-profit sector, but the flywheel booklet even talks about that.

Philip

Yeah, I spent 12 years on the board of a major TAFE in Victoria and it really opened my eyes, particularly in the earliest parts of it. Really opened my eyes to the fact that it's running a business in a different manner. 

Thanks for those customer insights on your success, Ross. OK, so let's move on to the offer side of things, Ross, what were the gems that you used.

Ross

First thing, an old term. “What's on the truck? I don't care. Just get rid of it”. But clearly focus on the differentiated solutions and let me talk about differentiation. When I worked in Group strategy in IBM, there's some work from a venture capital advising firm and it's been used quite a lot by some big corporates. They talked about a differentiated value proposition, something someone else hasn't got and the value proposition. The more the better. So the numbers, which looked at a few times over the years, still stand. If you've got one differentiated value proposition, more than the competition, you have a 16% win Chance, 2 differentiated value propositions, a 36% win chance, three, Wow, you’ve got 3 three things better than the others, 50% win chance well, but four, 75 to 80%. So, got to refine that offer, but you will have offers there that if you learn to articulate them, learn the customer to understand it, we'll have four or more differentiated value propositions and that's what I focus on. That's why I know you focus on. Where have we got difference, but not one you need four or more differences over the market to excel and you have to communicate that, but you’ve got to find that. 

So what's on the truck? Is “Yeah, get rid of what's on the truck”, but start focusing on those differentiated offerings, because that's where your win chances will go up. I talked about the cost of acquiring new customers, but the cost of being not the market dominant provider means you're a bit of a “me too”, there's a crowded field, so you got to work out where you can outshine. So, differentiation is really important. So first of all is that differentiated value proposition is what I call ‘What’s on the truck’.

Philip

Can I ask the question there, Ross, just on that one, you chose to focus on particular customers for particular reasons. Did you find that with what you had on the truck and looking for the differentiation of what that was, did you find that by looking at the customers and their needs through doing your research before you talk to them and asking the right questions, did you find that you were then able to, in what you had on the truck, find certain things that differentiated those products so that the differentiation in the product wasn't just the product or in the product itself, it was how you married what that product did for those customers that you were focusing on? Did you find that?

Ross

Yes, I mean, look good product companies develop products with customers to be easy to install, greater productivity returns, easy to use. So let's assume you've got some good product designers, but there's some duds. There are a lot of duds, great ideas that just didn't work out. So you look at that and then for the customer, in our case, we had maybe 1200 wholesalers with stock that went to electricians in the most recent job, but the company is similar, but how do you do the ranging so they go from having too many to having a few and know the power of profit in retailing that that premium offer like the examples of premium beer,  you have a cheap beer, middle beer and the premium beer, no matter what you do on the price, people keep buying premium beer. That for me, I was trying to sell the premium beer. But what I wanted was trying to educate them is: don't have too many, because they all go the middle ground and you won't make any money or they'll go the cheapest. So that was very successful. So back to the customer insight it was all about profit for them and growth. And for me, I had to differentiate an offer and I could show them how they could reduce their ranging and make more money.

Philip

Great. OK. So a combination of marrying the needs of the customer to the products that you had and then focusing on premium products, you were able to get the profitability increased but also increase your revenues. 

Ross

Correct. The second bit of offer is around marketing and when you've got a smaller sales force than your competition, how do you get a bigger representation out there and that's marketing or in this most recent case around promotions, they always had promotions. 

The industry had promotions and often was just free stock and just sit there six months later and there was no science, no analytics. Part of my strategy background was looking after a $7 billion business that looked after retail and Consumer Packaged Goods. So to hell with that, we're going to have science and analytics says, Ross, and we did and it became 10% of our business. For every dollar spent on promotion, there was a 300% return. There was no impact in the following month sales, but it expanded the sales force by 30 fold and we did some work on different concepts of coupons, win some prizes. I won't give away all the secrets, but all the competition tried to copy it. And they never got it. 

Of course. We kept doing more and more on the science of it. So the marketing is really important. And in this case, promotions for me was one of the key marketing pieces, because it gave us more product awareness and reinforce that ranging and quick sell out. 

OK, so we study the best in retail and how to do it, but we evolve this constantly and to get it to look at the best promotions in the world is the happy meal from McDonald's and guess what percentage of McDonald's revenue it is 10% and every child you take McDonald's, what do you want? I want a Happy Meal so. We sort of played around with what the Happy Meal would be, what the little prize would be, but it became a great inspiration for us to try on our marketing side to what to do. So marketing is important, but I've used promotions because that is more recent, but when we look at offer, it's the messaging and trying to get the presence out there. 

But the third piece, Phil, so we talk about what's the differentiator, we’ve got some marketing, is this profit first culture, and you and I have been around a lot, that things there's some things you can't do in some companies it's just end of life cycle, company gets bored, and technology overnight there's model changes. The lesson I've learned from that it comes from a very famous management scientist, only died a few years ago, called Clayton Christensen, who wrote all about innovation and entrepreneurship, and he had a saying. I went to a couple of courses on and he said “Be patient on the revenue and impatient on the profit”. That's what you learn from entrepreneurs. Be patient on the revenue, impatient on profit, and guess where companies go wrong? “Oh bugger the profit. Let's just go for it”, you know. No, no, no, no, no. Because I don't want to lay off another thousand staff. I'm burnt.

Philip

Yep, sorry Ross. Could you repeat the name of that management consultant?

Ross

Clayton Christensen and he’s got a lot of books around innovation and his research was all about entrepreneurship and change.

Philip

OK, so folks get on to that because that sounds like a gem that you need to get onto, “Patient on revenue, impatient on profit”.

Ross

Yeah. So I had to - have you’ve seen it with me before - but we had to bring about an awareness of business ownership around that offering that it wasn't a giveaway. There was a lot of free samples, there was a lot of discount and we had to show people how you run a business and why we weren't getting your product or why we weren't getting more people. You got to earn the right. I'd say “earn the right”. 

So business ownership, culture and training was very important. Now one of my first moves when you do transformation you’ve got to get quick wins or you don't get buy in to make it happen. So one of the first things I did was put the price up and everyone said the sky will fall. And I remember marching them out of the room and showed them the sky was up there and it's been there since I was born and my parents were born and their parents were born. It's not falling today. So we put the prices up and we taught them... There's some great studies by McKinsey, but a guy called Rafi Mohammed wrote a book about the power of 1%. And the research, it changes, it got better, is that 1% increase or decrease the price for the top 1000 companies in the world has an 11% impact on the bottom line, straight to the bottom line. But the company I was working at, we found out was 300%. It was so bad, the economics. And youve got to look at each business different so that 1% increase made a massive difference, so I put prices up 6%. “Ohh, the sky’s going to fall” they say Ross. Well, no, it didn't and our volumes went up and that came about from the training and the positioning and the marketing and everything else. But the power of 1% is important, which comes back to the flywheel. There's another 1% every year prices up.

Philip

Isn't that Interesting.?

Ross

And you want to be the best? Well, price the best. Stop making the cheapest cause they'll think it's the cheapest. You put your prices down its very hard to get it back up. The last couple of years everyone's been putting prices up because COVID has caused supply chain issues. But this is before COVID. We had a, I think it was, 19% price increase over the four years before COVID, so the power of 1% straight to the bottom line as I said, top 1000 companies according to McKinsey 11% impact, the business ownership and every part of the business back to patient revenue impatient profit. 

Every part of the business could not be unprofitable so often they said, “Oh, it's going to come. We're getting there”. We're not. No, no, no, no. No, no, no. As I said, well, you get charged to lay off 200 people and two months later you say “Ohh, wasn’t enough got to lay off 300” and then it wasn't enough. And then the company gets sold and you do that as I did for 10 years. You learn pretty quickly. There will be no unprofitable businesses. So, or will have a stage gate that at that point we don't get to this, we tighten it or we increase the spend. 

So that profit first culture is really important around the offer because the offering you got your fixed cost and all, but that offering makes a difference on the revenue and it's all about what you do for customers, what do with your people. So you've got to get every part, I call ‘value cells’, every part of the business has to be measured as its own independent business unit. And you ‘ve got to get a P&L for that. Find a way to do it you know. No, it's not accurate. Well you can attribute costs, but make sure it's not bleeding. If you spectate loss making businesses, they'll take over and you'll be back to this what Jim Collins calls the Doom Loop. Everything's negative, negative, gets worse and worse and worse so very quickly you’ve got to have a discipline there. So that's the third piece around offer. Yeah. What's on the truck, your marketing get right, and that profit first culture - always profit first.

Philip

So whilst we're getting to the end of the discussion here, what I'm hearing all the way through is a consistency through each of those three points that you've made there. And really it's a systems approach. What I'm observing and please let me know if I've got this right. You focused on your talent and you've helped educate them in various aspects. You've then worked out which customers really your organisations should be focusing on and the ones that maybe they don't have the differentiation to approach. Maybe there's better competitors out there that you'd be better to ignore. And then you've looked at your product offering and worked out the appropriate mix of what you're going to offer. Then you've created a culture and you've created a culture in each one of those. And that this final point you've just mentioned there is to pull everything apart and make sure everybody knows that every part of the business that they're working in has to be able to demonstrate whether it's profitable.

Ross

Yeah, execution’s the discipline of getting things done. So it's not about being a micromanager, it's just we're back to success criteria. We said we have to make these things successful and that will give us the outcome. So what are we doing to get there every day? Every day! What's the 1% friction momentum we have to work on every day because that makes the flywheel unstoppable. And you know, when you start getting 12 months of growth in a row, you go for 13. When you get 18, you want 24, when you get 24, so what about 50. When you get 50, say, oh 100 looks OK, but it becomes infectious, but the way you do it is continuous improvement and the discipline, the execution, to make it happen.

Philip

And you mix into there Ross along the way that you increase the regularity of the celebration of the successes. You said in the first instance it was once a year and then you brought it down to once 1/4?

Ross

Oh yeah, if you want the seller to be consumed, well, you’ve got to celebrate success. I mean, it's not easy work. And there's a lot of the friction gets in the way and other people have other thoughts. But you stay in that positive. You stay in that focus around that flywheel, manage to success criteria, that's a pretty infectious bit of juice there and that gets results.

Philip

Fantastic, Ross, loved. talking to you and there are so many rich points in there that people listening to this podcast should dive into and explore. Go and do some more research into the various areas there that Ross has told us about; the 1%, the Jim Collins texts, the work by Clayton Christiansen. Get into there and listen to them because Ross, what you've demonstrated there in all of the successes that you've had and the way you've been able to not just turn businesses around, but make them leaders in these areas, means that this being focused on the talent, then focusing on the customer, and finally making sure that you've got the appropriate offer. You've demonstrated that this works.

Ross

Phil, you’ve got to think it. You’ve got to feel it. You’ve got to want it! And those results can be yours. Feel it and want it.

Philip

There you go. Think it, feel it, and want it. That's from the leader’s point of view. Then you've made that flow down to everybody in the organisation.

Ross

You got to spread that passion, that’s your job.

Philip

There you go. The Passion 

Ross just have to say thank you so much for taking the time and sharing all this with me, but more importantly, all of the people who are listening to the podcast. There are gems in there that if people, and I can say this first hand having worked with Ross very closely, if you exhibit the passion that Ross exhibits, if you exhibit the energy and drive and relentless execution, then pay attention to these areas, of course, and others that he's mentioned on the way through, I'd be very surprised if you would not be successful wherever you go. 

So thanks, Ross, really appreciate it!.

Ross

Thanks a lot Phil, Cheers. 

Philip

Cheers.

 Thanks for joining me for this episode of the CEO Thinking Podcast. 

If you gained value from this episode, here are three actions for you to take. 

·       First click subscribe on Apple Podcast or on the app you use to listen to this podcast so you don't miss future episodes. 

·       Next, please leave me a review in your podcast app so that other listeners can learn how you gained value and 

·       Finally, to help you use the ideas to drive your business, go to www.lseconsulting.net.au for the show notes and other resources you can use. 

I'm Philip Boucher and I'll look forward to talking to you in the next episode.