Business Maxims

I wrote about maxims a few weeks ago. As a refresher, "maxims are a series of short statements expressing the shared future focus of a business in actionable business terms." Actionality is the key concept here. It's not enough to say, "Our business will be cost effective and profitable." How will it achieve this? A full maxim might be, "Our business will be cost effective and profitable by hiring workers with the minimum required skills and passing lower labour costs to our customers."

I was working with a corporation the other day that was really struggling with its "Sales funnel." A sales funnel is the concept of reaching out to a large number of potential clients in the hopes that some of these contacts will turn into prospective clients that with more sales effort and focus will convert to contracted sales. Just like a funnel, a wide net of initial contacts are harvested to determine which are the likely candidates worthy of additional follow-up and pursuit.

This company was struggling to regain profitability. I asked, "What is your core business and why?" The Executive Director had a hard time answering. His answer was a variation of, "We give our customers what they want."

Now, if he indeed give his customers what they wanted, and provided competition wasn't so fierce that they drove each other into the ground, then profitability shouldn't be a problem. So there are a number of possible problems that prevent him from really meeting his customers' needs:

  1. He can't give them what they want after all (perhaps because he doesn't have the appropriately skilled labour or a product line to meet their needs).
  2. He can't give them what they want for the price they want.
  3. He doesn't really know what they want.

How can maxim's help?

First, I would ask him to turn his statement into a maxim by finishing it: "I give my customers what they want by..." I'm not really concerned with the ending but that there is an actionable ending to this statement. For example, "I give my customers what they want by..."

  1. Supplying their needs and requests at the lowest price among my competitors.
  2. Supplying their needs faster than my competitors.
  3. Customizing my solutions to meet their specific workflows and office practices.

Each of these three enabler-clauses will result in a very different business culture and business plan. One thing is clear: it is almost impossible for a business to simply give customers what they want. Some customers will want a low price; others will want fast service; others yet will want personalized service. Customized service doesn't usually come cheap or fast. Cheap doesn't usually come fast or with a lot of flexibility. Fast service can't involve a lot of labour to finalize the result and it doesn't usually happen at a low price point.

Of course the next step would be to validate the maxim. How many of our customers fit into each of the maxim options? How much product and service can we sell to each type of customer? How much can we mark up our costs for each type of business model?

Business maxims usually fall into one of six categories:

  • Cost Focus: providing products and service at lower cost or driving economies of scale to reduce expenses.
  • Value Differentiation: Meeting customer expectations for quality, selection, support, or service as seamlessly and reliably as possible.
  • Flexibility and Agility: Providing product and service innovation by developing or modifying new products rapidly
  • Growth: Aggressively marketing or expanding into under-serviced markets and demographics or by targeting niche markets with few competitors.
  • Human Resources: Creating an environment which attracts premium people who can maximize the productivity and innovation of the business.
  • Management Orientation: Deciding on key aspects of the corporate culture such as valuing independence among business units, rewarding individual accomplishment, sharing resources, promoting internal entrepreneurship, or forcing the entire organization to follow a standardized set of procedures or policies.

Maxims are important steps in bringing business strategy down to earth. Without actionable terms, a strategy sounds great and everyone can agree to it; but it doesn't give us anything to work with. Turning a strategy into a maxim might cause some debate and tension (for example, some managers might believe that a low cost option is the way to go; others argue for a customized value-added business model), but there are clear directions to pursue. Without them, it's not easy to know how to steer an enterprise to success.