By Philip Letts, CEO blur Group
More than a decade into the world of digital business and following a deep global economic recession, organisations are discovering new ways of operating that challenge many long-held assumptions. We are witnessing the rise of slimmer, smarter businesses that operate in new cost cutting ways, taking advantage of new collaborative technologies and a globally available resource base. These organisations are ‘just big enough’, highly focused on delivering value, and use data to drive insights and innovation. Some of these businesses were start-ups not that long ago and some are long-established, but all share a new mind set and belief that growth does not mean the number of people you have in your organisation, but the value you create. We call these organisations, Size Zero Enterprises.
Size Zero means operating at maximum efficiency by focusing on where value is created, and being ruthless in removing waste. Doing more, with less if you like. Minimising cost is critical to this theory and key to ensuring the highest level of value. Here are five ways to reduce business costs and point your organisation in the right direction to achieve a Size Zero:
- ZERO “PASSENGERS”
Work out who in your company creates value, who supports them and who is just part of the machinery. This is not just about revenue generation but goodwill generation and customer success – all of which add value to your business. Take a long hard look at those who achieve none of these things. Aim for Zero overhead staffing. In other words, everyone should create value not simply be a passenger. A series of “what-if” exercises will soon tell whether you have the balance right.
- ZERO “BAGGAGE”
Redraw your organisation chart, but this time look at the way your suppliers and other non-payroll resources fit in. What shape is your chart? Fat in the middle or the top? Could your suppliers take on more or do you have too many? Outsource everything except your soul,’ the management guru Tom Peters once exhorted. As well as the savings on statutory payments associated with employment like national insurance, an outsourced workforce can be tuned up or down to reflect the peaks and troughs of demand. Do some calculations based on removing a whole department and sourcing skills from outside. Do you need your current list of retained agencies and supplier rostas? Aim for Zero additions to payroll over next 12 months.
- ZERO PROPERTY COSTS
Seriously consider moving. Look at comparative costs in less popular neighbourhoods. Office costs in London’s West End are the most expensive in the world at $272 psf, so why not consider a move to Midtown Manhattan where it’s just $135 or Dallas which is as low as $17.27 (Loopnet, TX market trends). Look at properties half the size. Who could work remotely? Who could desk share? Aim to lose a Zero on your rent bill.
- ZERO UNPROFITABLE CUSTOMERS
Dont be distracted by customers who take up you time and resources but contribute little in revenue. The customer is king but so is cash. How well do you truly know your key customers and how distracted are you from focussing on your most valuable customers by the least valuable yet ‘noisy’ minority? How good are you at analysing your per customer profitability?
- ZERO BUDGETS
Consider Zero-based budgeting where budgets are not based on previous years, but start afresh from zero. Typically, a business will produce a budget based on the previous year’s spending and add and subtract a percentage. This is the lazy way to reproduce a budget and can lead to throwing good money after bad. Start from scratch every year and you will soon find savings.
Size Zero is a way of looking at enterprises, it is not simply about saving money, and rather it is about doing business in a way that maximises value. Cutting unnecessary costs and minimising waste can take time, but is critical to achieving a Size Zero and creating a more valuable company.
Effective financial planning will secure businesses a certain future
By Simon Bittlestone, CEO of financial analytics company Metapraxis
2020 has been an unpredictable year, bringing further volatility to already uncertain markets and exacerbating difficulties that businesses were already facing. Many businesses are feeling the strain on their cashflow and are hastily trying to organise their finances effectively to ensure survival and the ability to deal with any future challenges. Yet, with more uncertainty still to come, it’s key that business leaders know how to deal effectively with the challenges that lie ahead in order to remain profitable.
Recognising the challenges
Accurate financial planning, and particularly the management of cashflow, is essential to futureproofing and planning. The logical place to start when defining a longer-term plan is by setting realistic targets that align with the overall business strategy. In order to ensure targets are achievable, which is critical, historical and market performance data should be used to build a model of the current business.
Building a model that allows the board to see the performance trends across products and services in the context of the market performance allows businesses to determine their starting point for the year ahead and set realistic expectations. It also gives a better understanding of the nuances of the business, including how changes in things such as supplier and customer payments affect cash flow and how products and services vary across different regions, giving the business an understanding of how to optimise their assets.
The next challenge involves putting a plan in place that delivers on the business objectives. This means that businesses need to reconcile the goals being set from the top and the plan of action being implemented from the bottom. However, a lack of collaboration often means that a business’ strategy has to go through several iterations before it matches management’s goals. Communication and clarity on desired outcomes are essential, especially in larger businesses that stretch across multiple departments and sometimes have a global reach.
In addition to communication challenges, it is also important that the planning process is not a drain on time and resources, which can often be the case when using the wrong tools. Excel, while a worthy tool, is not sophisticated enough for the type of analysis and information needed to inform complex decisions. Businesses must take advantage of the technology at their disposal, running ‘what if’ top-down scenarios to understand the impacts and outcomes of various factors.
Securing your future
The colossal impact of the Covid-19 crisis, alongside political and socio-economic factors, and the speed of today’s digitally enabled world, makes markets uncertain and difficult to predict. But CFOs don’t have to resign themselves to being unable to plan for them. By adapting an agile approach to financial planning, they can help to safeguard business performance.
It’s no longer sensible to run a one-off annual planning process; the ability to successfully achieve goals in today’s
landscape increasingly depends on the ability to identify future uncertainties, risks and changes, and react to them. Doing so means implementing a rolling budget and flexible plan.
Fortunately, financial analytics technology can make this a reality. It allows all the key drivers of business performance to be mapped out over time, so that the finance teams can see how each of these drivers were affected by internal or external past events. In turn, this allows the board to analyse how various future scenarios might pan out and the impact these may have on the business. Management can then use this information to make better strategic decisions.
Having this technology in place also consolidates data from across the business, making it easily accessible and improving communication between management and financial accounting ensuring all areas of the business are streamlined. Should there be any changes in leadership, trends and insights can be easily accessed, limiting the impact on performance. Keeping these models updated is vital to ensure the company can act on the most relevant information.
Taking it one step further
There are other practical steps management teams can follow to help safeguard the business. Optimisation strategies, for example, whereby businesses determine how best to split their capital across different strategies, projects, products or services across various regions, are a key area of focus especially right now.
Choosing to back the most profitable service lines in a time of financial uncertainty is clearly beneficial, however it is not always easy to get right. This comes back to businesses needing to utilise financial analytics technology to assess all factors and situations and determine the best options in the long-term for the business.
CFOs and leadership teams should always keep the cash flow at the heart of any decision. Having full transparency means they can increase the emphasis on products and services with more positive cash flows, making the business more profitable and able to deal with fluctuations.
The purpose of financial planning is to set out the business goals for the year ahead in order to work towards achieving the overall strategic objectives. This used to be a very insular process – there was no need for management to take anything other than its own internal factors into account – and planning according to the business’ own financial year was very much the ‘norm’.
Now, with the landscape more uncertain than ever before, the ability to adapt to fluctuations is hugely important when it comes to successful financial planning. Scenario modelling and financial analytics allow for rolling plans and CFOs to be more agile in their approach. This, along with more prudent base planning assumptions, will allow the board to prepare the business to weather most storms.
Adoption of tech in private markets lags behind industry trends
- Nine out of ten financial institutions have accelerated their digitisation strategy as a result of Covid-19.
- Yet just 26% of financial institutions say that technology currently plays a core role in delivering private markets services.
- Firms say that private markets technology will have the greatest impact on operational efficiency, regulatory governance and client experience.
Wealth managers must urgently increase their use of technology in offering private market investments or they risk being left behind by their competitors in less than five years.
The latest research report, ‘Digitising Private Markets’, from leading fintech firm Delio, shows that financial institutions’ adoption of digital tools across their operations has increased substantially as a result of Covid-19 this year. But many firms have been slow to accelerate their use of technology to deliver private markets services, despite recognising the improvements it could make to back-office organisation and regulatory compliance, not to mention enhancing client services. Delaying adoption of a digital strategy could leave firms trailing behind competitors within five years, according to Delio CEO and co-founder Gareth Lewis.
Gareth Lewis said: “Any firm that is serious about providing a complete wealth management service to their clients, needs to deliver a holistic private markets solution. Technology will be fundamental to the delivery of these services and needs to be implemented across the board sooner rather than later. Firms that fail to act quickly face losing ground and potential new clients to more tech-savvy competitors.
“While I understand that client relationships are still vital in this area, companies can’t become complacent. We live in a more instantly-connected world and customers – especially new clients who are more likely to have been entrepreneurial as they generated their wealth – want more digital access to their finances than ever before. It’s time to take an omnichannel approach that combines the best elements of technology and personal advice; this will deliver a market-leading approach.”
Providing clients with access to private markets has been a challenge for many financial institutions, due to the difficulties in scaling a part of their business that is operationally complex to deliver, requires strict regulatory governance and has traditionally been driven by personal relationships between client and adviser. It is one of the reasons many institutions only started to develop a private markets solution in the last 12-18 months.
However, better use of technology can help firms to deal with each of these hurdles more efficiently, providing access to a market that has consistently outperformed publicly listed investments over the last decade. McKinsey’s most recent Private Markets Review highlighted that the value of private assets under management had grown by $4tn or 170% in the last ten years, compared to 100% growth in global public assets over the same period.
The difficulties presented by the international lockdowns associated with Covid-19 has meant that 86% of firms report that they have accelerated their digital adoption this year, with 70% making quicker decisions on technology projects specifically.
Yet, a significant minority of organisations believe that digitisation will not necessarily play a prominent role as we begin to adapt to the ‘next normal’. More than a third of firms (35%) believe that they will still rely on traditional client engagement strategies in the short to medium term.
Having developed private markets solutions for more than 70 international institutions over the last five years, Delio firmly believes that technology can add significant value at both an organisational and client level.
Gareth Lewis added: “Client relationships will still be at the forefront of any wealth management proposition, there is no question about that. However, I also believe that technology can enhance how advisers build relationships with their clients. If I had an investment opportunity that I wanted to pitch to 50 clients, why wouldn’t I want to share that information digitally beforehand to gauge their appetite? Failing to accept that busy clients want to be able to access data at any time, no matter where they are, is a potentially damaging mistake that could cost slow-moving companies dearly.”
Covid-19 disruption drives five new retail supply chain trends
The business disruption caused by COVID-19 has resulted in four out of five (82%) retailers changing their approach to stock management and is driving five retail supply chain trends.
This is according to a new report from logistics company Advanced Supply Chain Group (ASCG), which shows how the pandemic has caused stock management issues for 92% of retailers. The impact of this is leading to an evolution of the long-practiced lean management process Just in Time (JIT) and 42% of retailers planning to grow sales by selling through more channels.
The report, Retail Supply Chains in the ‘New Normal’, is based on the findings from interviews with 200 senior retail professionals involved in buying, stock inventory management and supply chain management. It reveals five retail supply chain trends including:
1) Time for Change
To address delays caused by COVID-19, retailers have adapted timings at the beginning and end of their supply chains. Of the retailers which have made changes to supply chain strategies, 41% have allowed longer leads times on stock ordered, while four in ten (40%) have extended delivery times provided to customers.
2) Localising Stock
COVID-19 disruption led to two thirds (66%) of retailers receiving stock late, whilst a similar number (63%) experienced shortages in the availability of goods. This is seeing retailers prioritise investment in stock availability (57%), which includes building more localised levels of stock to minimise the risk of out of stock scenarios.
This shift in behaviour has the potential to completely change Just in Time (JIT). Only a quarter (25%) of retailers believe JIT has some form of feasibility while the pandemic remains ongoing.
Claire Webb, managing director at ASCG, has more than 13 years’ experience working in retail leadership roles. She comments: “Just in Time will have to change because it’s less able to cope with increasing unpredictability – it quickly becomes ‘just out of time’. Supply chains will evolve as retailers aim to better mobilise stock, keeping it more agile to sweat its value across multiple routes to market.”
3) Real Time Visibility
The research shows retailers rank balancing stock flow versus stock piling as the biggest supply chain challenge following the pandemic. They want to avoid not being able to satisfy customer demand because of unavailable stock, but equally don’t want to tie-up too much capital in stock at risk of depreciation.
To address this challenge, 40% of retailers are investing in improving the accuracy of inventory management, whilst a third (33%) pinpointed smart, connected technology that improves the accuracy and visibility of stock as the most effective method of strengthening supply chain resilience. Changing stock inventory management to make stock movement and levels more visible was also a high-ranking priority for 37% of retailers.
4) Stock Optimisation
The ongoing economic uncertainty and unpredictable customer demand caused by COVID-19 are seeing retailers hone-in on the performance of the goods they’re selling. 41% of retailers are investing in auditing their stock to improve profitability. These pandemic-driven stock reviews have also resulted in a third (33%) of retailers diversifying the stock they sell, with the same amount also changing strategies to better focus on stocking and selling their highest margin goods.
5) Diligence Against Disruption
In response to the impact of COVID-19, a third (33%) of retailers are developing contingencies to protect against supply chain disruption. This involves tactics such as increasing the number of suppliers they source goods from, working with a larger number of logistics providers to spread risk and also increasing overall stock levels.
Claire Webb concludes: “Each of the trends emerging from the impacts of COVID-19 share a common theme of tackling margin dilution. Retailers and logistics partners have spent years optimising supply chains to remove unnecessary costs that cannibalise margins. This is now being turbo-charged as retailers aim to extract maximum value from each hard-fought sale and to build loyalty in increasingly uncertain and price-sensitive markets.
“Smart, connected technologies and bespoke supply chain software systems will be critical for retailers adapting to COVID-19. This can prove the difference in effectively managing stock movement and levels to avoid availability issues and costly stock depreciation and obsolescence.”
Click here to read more about the five trends and download the full report ‘Retail Supply Chains in the ‘New Normal’; Evolving from Disruption to Delivering Excellence’.
Full link to the report; https://www.advancedsupplychain.com/latest/white-paper-retail-supply-chains-in-the-new-normal/
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