At the start of the year, everybody ought to have a BHAG. For the uninitiated, that’s a Big, Hairy, Audacious Goal or bee-hag. And why does everyone need a BHAG? Well, if you’re one of those rare businesses that blew the doors off last year and all you want to do is let the good times continue to roll, maybe you don’t need a BHAG. But if you’re like most of us and want something better than last year, you can’t just keep doing what you’re doing. As the saying goes, “If you just keep doing what you’re doing, you’re gonna get what you got.” So if you want a different outcome than the one you got last year, you need to do something different. That’s where the BHAG comes in. But here’s the problem: the survivors of the recent Great Recession have gotten a little more risk averse than they used to be, and their bankers (or more precisely, the bank regulators) have made investing in BHAGs significantly more difficult than it was pre-recession. So how do you carry out a legitimate BHAG with minimal risk and investment? That’s a tough assignment, but for a few thoughts on how to do it, please read below.
What’s your New Year’s BHAG?
So called “organic growth” is generally considered to be a relatively safe strategy. That is, you fundamentally continue to do what you’ve always done, tweeking operational efficiencies here and there while picking up a few new customers along the way. It’s the slow-but-sure, don’t rock the boat strategy. It’s certainly not a strategy that would embrace a BHAG. Of course, there is a risk that a more nimble, aggressive competitor will take market share from you, but still, compared to a “let’s put the pedal to the metal and go for broke” strategy, organic growth is fairly low risk. It can also be fairly boring.
Let’s be clear. We can’t eliminate risk from business. Business is risk. The real question is, can we mitigate that risk to an acceptable level while still introducing the fun and excitement of a legitimate BHAG? I believe we can. Here’s how.
In general, most businesses have under-performing or under-utilized resources . . . people (knowledge, experience, unique talents), equipment and technology, intellectual property (patents, copyrights, etc.), inventory, office space, cash . . . all of it. I’m not suggesting you look for simple cost-cutting opportunities, although that could be part of it. I’m talking about looking at every resource available to your business and figuring out creative ways to use those resources more efficiently and effectively.
Consider some examples:
• With the help of a “lean manufacturing” expert, a machine tool company eliminates over 30% of its Cost of Goods Sold. To be sure, part of that is cost-cutting, but most of it is creatively thinking about different, more effective ways to utilize the people, equipment, and material on the manufacturing floor. Does reducing your Cost of Goods Sold by 30% constitute a BHAG? You bet, and without a lot of risk or a big investment.
• With the creative help of a professional space planner, a company is able to give their offices a more open, spacious feel, and yet reduce their space by 20%. They sublet that saved space thereby changing a cost center into a revenue center. Worthy of BHAG status? Absolutely!
• A distributor of auto parts completed a long overdue upgrade to its inventory control system. The system works so well that the distributor now offers inventory management services to its customers, again transforming a cost center into a revenue center.
• A CPA firm had max’d out the billable hours of its professional staff, but was balking at putting another expensive accountant onto its already large payroll. Instead, it did a detailed analysis of the work being done by its professional staff, looking for work that could really be done by others at lower levels. As a result, they were able to free up enough billable time to delay adding another staff accountant for at least a year.
For a company that manages its resources well, think about Southwest Airlines. They know that next to their people, their #1 resource is their fleet of airplanes. Those planes only make money when they’re in the air, not a dime when they’re sitting on the ground. So everything Southwest does . . . from the way they get people and luggage on and off an airplane to the way they prep that plane for its next flight . . . is aimed at getting an arriving flight turned around and back in the air as a departing flight just as quickly as they can. And they do it better than anyone in the industry.
Most small business owners don’t pay as much attention as they should to maximizing the value of their critical resources . . . it’s backroom, low profile, not-very-sexy stuff. They would much rather focus on top line sales growth because, after all, that’s where the real action and excitement is. But the smart operators know, all the BHAGs aren’t in sales . . . they’re in resource management too. And the better they are at the unsexy business of resource management, the more of those very sexy top line sales dollars will make it all the way to the bottom line.