What Is Winning for Your Business?
For small businesses—both for-profit and nonprofit—and for independent workers, winning has never been more important. And for many, it’s a question of survival.
Reliable sources, including the U.S. Chamber of Commerce and Yelp monthly surveys, estimate as many as 80,000 to 100,000 or more small businesses have shuttered since the beginning of the pandemic.
More than 50% of small businesses believe their survival will depend on the length of the public health crisis and the length and severity of the accompanying economic recession. Longer dual crises will be more lethal.
So, what is winning for your business?
One of the simplest and most straightforward definitions is (to paraphrase Peter Drucker) to create customers and keep customers by serving them better than any competitor can. Now is definitely the time to take care of your customers and hold on to as many of them as possible.
Now is also the time to make sure you have enough cash or financing to sustain your business while you secure customers and adequate sales.
A winning business strategy is a set of choices that enables a company to deliver superior value to its customers and acceptable returns to its owners on a reliable, sustainable basis. Ideally, the choices a company makes create sustainable advantage that is manifested in better performance, quality, and value for customers and better value creation for the firm.
Because what gets measured gets done, clear indicators of customer response and clear measures of the drivers of value creation are required. First and foremost, the most basic question you must ask and clearly answer:
Who is my customer?
Or, more precisely, who should be my customer?
While not a hard-and-fast rule of business, I have been struck over the course of my 50-plus years in business by how often the 80/20 rule applies. 80% of sales in many businesses come from 20% of customers. And 80% of profits and cash come from 20% of sales.
Who are your best customers? Do you have enough of these customers? Do you do enough business with these customers to generate an acceptable return on the investment you’re making in your business?
In challenging times like the ones we are in, narrowing your focus to your best current customers and your best customer prospects, and getting crystal clear about what it takes to deliver both superior customer value and sustainably sufficient returns, could very well be the difference between success and failure—and, ultimately, survival.
Second, and equally critical, maximizing profitable sales, avoiding unprofitable sales, eliminating all costs that your customers should not have to pay for, and paying close attention to every penny of cash matter now more than ever. We’ll devote a future discussion to why “cash is (still) king.”
A.G.’s Perspective: 80/20 in action
The 80/20 rule—or Pareto Principle, as it’s often known— was true for a wide range of household and personal-care brands and products at P&G. It was also true when I was a young buyer buying junior girls ready-to-wear tops or china and silver for Macy’s. I know, it’s hard to believe that a major department store retailer would entrust buying teenage girls’ clothing or fine china and silver to a young guy right out of college and the Navy. But believe me, it wasn’t that hard if you did your homework and carefully analyzed what was selling (and not selling), and if you conducted a lot of fast-cycle tests in a couple of stores before buying for all the stores in the New York City region.
About the author
A.G. Lafley is the former CEO of Procter and Gamble, who worked for decades in and with large public companies. Over the last 15 years, he has turned more of his attention, energy, and time to small businesses and nonprofit organizations. He currently serves on the boards of Omeza, Snapchat, Tulco, Hamilton College, and as the founding CEO of the Sarasota Bay Park Conservancy. A.G. is the author of two best-selling books, The Game Changer about innovation and Playing to Win about strategy, as well as numerous articles on leadership, management, and business strategy for Harvard Business Review.