Don’t Turn on Sales without Operational Capability
Several years ago, a marketing firm contacted me to work with one of their clients. The client was complaining that the successful marketing campaign was killing his business. They were right. The marketing firm was able to double the business’s sales volume. Unfortunately, the business didn’t know that it wasn’t capable of handling double the sales. The company didn’t have the business systems and capacity, the business capability, to meet customer demand. Initially, the company went from having $3.5 million in annual sales to getting orders more than $7 million.
The business failed to fill orders. They missed order deadlines/. Product quality declined. Customer invoices and shipping information were incorrect, and a hundred other things went wrong. The business went from $3.5 million down to less than $2 million after the successful marketing and sales campaign. Why? The company was incapable. They couldn’t fill all the orders for long-term loyal customers and new customers. They lost nearly 50% of their existing customer base.
They not only lost sales but their profit margin on the sales they made also declined. They went from a 10 – 15% average net profit to operating at a 2 – 3 % loss. Costs went up significantly as they scrambled to fill orders.
The postmortem on the growth attempt revealed that the existing business capacity was could only support $5 million in sales. To grow beyond $5 million in sales, required significant investment in business capability.
Like the business in this real-world example, too many firms discover turning on the sales machine isn’t a good idea unless you can deliver.
For the short-term sales increased, but profits didn’t necessarily follow. Businesses often found themselves in worse shape after getting a significant increase in customer orders.
The problem these organizations encountered is an operational inability to handle more business. Their existing business systems had some idle capacity, but it wasn’t enough to meet the new demand.
Assess Capability Before Growth
Before turning on a sales and marketing campaign, you need to assess their existing operations to determine your capability. One key aspect of capability is capacity. Capacity is the ability to meet the demand for goods and services. In other words, it is your ability to keep your promises to deliver what you sell:
- Full quantities,
- Expected quality, and
- After-sales support and communication (back office).
How to Build Capability Before You Launch a Marketing and
Success Begins with a Vision and Goals
“Where there is no vision, the people cast off restraint. . .” Proverbs 29:18a ASV
Without a clarity of vision your organization lacks direction. Every aspect of your business needs to be focused on a shared vision and clear goals that come from that vision. Vision and goals are the starting point for your strategic plan and marketing campaigns. A key aspect of setting your organizational goals is understanding your business capability including operational and financial capacity to support growth goals. It is great to set an aggressive revenue and profit goals, but they mean nothing if you don’t have the resources and systems to achieve those goals. Your business capability is your organizational constraint.
The Overlooked Three P’s of Business Capability
As the real-world example demonstrates, marketing and sales that aren’t backed by strong operational capacity are bad for business. Executing the four P’s of marketing successfully without the operational 3 P’s (priorities, processes, and people) can damage your business. Genuine success comes when you have the operational and financial capacity to deliver on the promises made in your sales and marketing efforts. The example business couldn’t double sales successfully. They weren’t structured and aligned for $7+ million in sales.
Let’s examine each of the operational P’s. Priorities are foundational. Without setting clear priorities that align with specific organizational goals, you will be much like Alice in Wonderland.
“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where—” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“—so long as I get somewhere,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.” —Chapter 6, Pig and Pepper
Without organizational priorities, your team will be in Wanderland, just wandering around without a destination. Priorities evolve from a clear vision for your business. The vision enables you to set SMART goals and translate those goals into priorities. Priorities equip your team to know what to work on first, what matters most. Your organization needs to deploy your limited resources to your priorities.
We’ve established that you need to focus on specific priorities related to your goal. How do you do that? It begins with a plan. I hear you. “It takes too much time to write a business plan. I don’t have that kind of time.” Or this one, “I’ll just stick it in the drawer, so why write a plan?”
The second “P” process includes planning and execution. Process is all about how you do business based on your vision and goals. So the planning process is a journey worth taking because it enables you to analyze your operations and your options.
The process of planning is more critical that a perfectly written plan. Creating a strategic financial and operational plan provides the means to set goals, translate those goals into financial targets, identify performance metrics, and ensure that priorities are clear. It also enables you to allocate your scarce resources to the activities that matter – those that will produce capability in your organization.
Your planning process is just one of several processes critical to organizational success. The other processes include financial reporting, purchasing, management controls (ability to take action and make decisions), and performance tracking.
So many times I have seen businesses struggle because they don’t have the right people in the right roles. In some cases, the businesses hired great people, but put them in the wrong roles or artificially constrained them from using their experience and skills. For instance, they get fantastic managers capable on all levels to lead their areas. However, they aren’t given the authority to act.
In other businesses, I have watched them hire people they “liked” and were “comfortable with.” Unfortunately, those hires lacked the skills, experience, and talents to do the jobs. Wrong people cost the organization time and money. They also constrain the organizations ability to execute damaging capability and credibility.
I’ll write more about this in future articles. For now, I want to emphasize that the three P’s of capability – priorities, processes, and people – are often the things that constrain organizational results.
Unleash Your Potential
If you want to see your business grow to the size you envision, then you need to:
1. Develop a clear vision of your business
a. This year
b. Next two-three years
c. Five years
d. Ten years
2. Translate your vision into specific, measurable, actionable goals.
3. Establish metrics, milestones, and timelines.
4. Set clear organizational priorities.
5. Create an operational and financial plan (budget).
6. Align your resources (people and money) toward those priorities.
7. Establish performance metrics for all levels of the organization.
8. Evaluate your processes and people to determine your constraints.
9. Invest in removing the constraints:
a. Reassign people,
b. Rewrite policies and procedures,
c. Improve processes,
d. Invest in new tools and systems,
e. Invest in training and skill development,
f. Evaluate and provide feedback on performance, and
g. Delegate decision-making authority to the lowest logical level.
10. Monitor performance.
11. Make adjustments based on real results.
12. Clarify your Vision, Goals, and Priorities based on new information.