A Machine is Coming to Steal Your Business

Posted on May 31, 2015 by John F. Dini

We accept, almost without question, the idea that technology can make us more efficient. No small business owner would dream of replacing his or her PC, email and copier with a room full of typists. How enthusiastic will we be when a machine can not only add task-based efficiencies, but can actually replace our entire business?

“The question of whether Machines can Think … is about as relevant as the question of whether Submarines can Swim.” When programming pioneer Edskar Dijkstra wrote that in 1984, he was criticizing what he believed was a futile quest for the “Philosopher’s Stone” of Artificial Intelligence (AI). Yet various recognized forward thinkers including Elon Musk, Stephen Hawking and Bill Gates warn that we are approaching a point where we may regret developing computers that can think, or at least approximate the process of decision making.

Robot at keyboardEconomists know that the shrinking of the middle class has been driven by technology, not by some mysterious ability of the rich to steal an unfair slice of the economic pie. The Economist magazine notes that the personal computer has had the impact on white collar employment that the steam engine had on blue collar labor. Not only typists, but salesmen, file clerks and research assistants number far fewer than a few decades ago.

Capitalism and competition in general cause us to seek the most cost-effective way to do business. How much does a McDonalds counterperson have to earn before it is less expensive to turn the touch screens around and let customers enter their own orders? Supermarkets are doing it with groceries, which are far more complicated than the menu at a fast-food restaurant.

Microsoft has demonstrated an instant language translation feature for Skype. It will be great for small businesses who want to sell internationally. It won’t be as good for translators.

Google is testing self-driving cars. How much of a leap is it to self-driving trucks that aren’t constrained by regulations on the number of hours they can operate each day, or can transport goods all night when roads are less congested?

Wages in lower-skilled jobs have stagnated under the pressure of replacement by technology, but computers are now moving up the skills ladder. We encourage children to focus on Science, Technology, Engineering and Math (STEM) learning in the belief that those areas will be safe from replacement. That may not be true.

An architect reads the requirements for a building into his computer. It needs to include a certain amount of square footage, house a number of employees and optimize the office space and construction costs. Via the Internet, the computer has access to the entire database of work flow, ergonomic and social interaction research. It produces a plan that optimizes the space, placing every piece of furniture, plumbing fixture and electrical outlet ideally and according to the applicable building code. It then transmits the plans to bidding contractors, with take-offs for each subcontractor already calculated.

How many skilled CAD operators, interior space designers, mechanical engineers and estimators did it replace? The arrival of such a system doesn’t even require major advances in Artificial Intelligence, just a (seemingly inevitable) increase in the computing power available at a reasonable price.

H.G. Wells postulated a world populated by Morlocks and Eloi; those who performed the dirtiest physical tasks, and those who lived in perpetual leisure because they didn’t have to work at all. Somehow, I don’t think it will work out quite like that.

In this column and elsewhere we talk about how small business success depends on our ability to lead and manage employees. That’s only true for as long as we have people doing the work.

Posted in Entrepreneurship, Leadership, Management, Thoughts and Opinions | Tagged , , , , , , , , , , | 4 Comments

4 Responses to A Machine is Coming to Steal Your Business

  1. Ken Nangle says:
    May 31, 2015 at 10:56 am

    Good primer on the topic. While raising the issue and educating those around you is good. How far off are intelligent machines? Watch…

    Reply
  2. John F. Dini says:
    May 31, 2015 at 12:04 pm

    Here’s another article on a road test of self-driving trucks from reader Harry Levy IV.
    http://www.truckinginfo.com/channel/drivers/article/story/2015/05/hands-off-on-the-highway.aspx

    Reply
  3. Lawrence Stovall says:
    June 2, 2015 at 3:55 pm

    I love technology but what you wrote is scary stuff when you think about it.

    Reply
  4. Stephen James says:
    June 2, 2015 at 9:59 pm

    Perhaps another and more immediate threat is that technology is enabling global labour sourcing. For example, the development of cloud based accounting packages is promoting New Zealand accounting practices to look to India for routine number processing. Fewer jobs for NZ accountants.

    Reply

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Invisible Discounts

Posted on May 24, 2015 by John F. Dini

In the words of the late, great Father Guido Sarducci of Saturday Night Live fame; “I canna teach you everything you need to know about business inna fiva minutes. You buya something, and thena you sell it for more.”

A business owner was relating to his peers how difficult it was to increase his margins. He rebuffed suggestion after suggestion.

Raise prices? He was already the most expensive provider available in his market. Increase efficiencies? He would get up before dawn to move equipment from one job site to another so it was never idle. Schedule better? He was already solidly booked for the next 16 weeks.

Finally they asked him to walk through his quoting process. He showed them how he calculated the difficulty of the job, the number of labor hours required, materials and overhead. He said “Then, when it is all totaled, I take off between five hundred and a thousand dollars, and give the customer the final number.”

The group asked about the last minute reduction. “I’m already the highest priced operator in town,” he said, “I just want people to feel that they are getting a good deal.”

Hidden discountWhen queried further, he admitted that he didn’t show the discount on the quote, nor did he tell the customer that he was reducing his profits. The group made him promise that for the next 30 days he would quote each job exactly as estimated. In that month, 100% of his prospects accepted the pricing without question. In the next year, he almost tripled what he took home from his company.

This is a blatant (but true) story about invisible discounts. It’s easy to read it and say “How foolish!” about the business owner’s quoting process, but I see similar invisible discounts occurring every day in many businesses.

Some companies price based on the hours expected to do a project, but job after job gets additional hours without examination of either the estimating process or the execution. Increases in material costs are absorbed because the price sheet was just distributed last month. Features are added to a product without announcement or price adjustment,

The only reason to grant a discount is because the customer asked for it, and justified the request. We all want to treat our customers well, but if they are getting a better deal than they bargained for, they at least have to know about it.

Posted in Entrepreneurship, Marketing and Sales | Tagged , , , , , , , , , | 3 Comments

3 Responses to Invisible Discounts

  1. Stephen Davies says:
    May 25, 2015 at 4:46 pm

    Good article, and I agree completely.

    A discount is an incredibly expensive give away as it comes straight out of your bottom line. Every penny is additional profit you could be making, and to give away anything you don’t need simply amounts to charity. This is even more damaging when it is what I call a Post-Sale Discount – one you voluntarily offer after the customer has already agreed to buy.

    I saw this in all its destructive glory with a client of mine who owned an upscale optical store. He was always complaining about the pressure on his margins and never made the kind of profits he should. We analyzed his problem up and down, but it wasn’t until I bought a pair of glasses from him that I saw the root cause of the problem.

    I picked out what I wanted from his inventory and knew the price for both the frames and the lenses before I was measured up. I was happy with the price, but when the time came to pay, he suddenly took 10% off . This took place without any prompting on my part, and I probed into his sales process in a way that I hadn’t thought about before.

    It wasn’t just because of our relationship, and it turned out that he did this on virtually every sale. He couldn’t really explain why he did it and while he root causes might lie in a general lack of business confidence, it had simply become a habit that had been integrated into his sales process. His other salespeople followed his lead and the practice was costing him substantial lost profits.

    In my case, the sale was $1,000. His gross margin of about 50%, which after overhead probably would have generated a net profit of about 10%. After the discount, his gross margin fell to 40% but his net profit on the transaction after fixed overhead actually disappears, making the transaction a break-even!

    Reply
  2. cathy locke says:
    May 25, 2015 at 5:23 pm

    I find this interesting. I am finally at a point where I can honestly give a quote, but I always need time to figure all areas for the final proposal and then I make sure I record all parts of the quote so I don’t end up giving added materials for free. I am a small business, so with experience and time, I will probably have to learn the hard way at times.
    Thanks for the blogs!
    Cathy

    Reply
  3. Cathy Locke says:
    May 26, 2015 at 8:04 am

    I agree and I am going to meet with my Mentor today to make some adjustments, I know I am giving discounts and for a small business , I cannot do that. Thanks, great reply.

    Reply

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Effective vs. Efficient: A Tale of Two Cities

Posted on May 17, 2015 by John F. Dini

Some organizations are effective. Some are efficient. From the customer’s perspective the two may look very much the same, but the difference to your bottom line can be substantial.

A few years ago my wife and I toured Vienna, and then hopped a train over the Dolomite mountains to Venice. Both cities were wonderful. For two places that are not much farther apart than San Antonio and Dallas, however, the cultural differences were extreme.

Upon landing in Austria, I set my watch by one of the many large clocks hanging in the Vienna airport. For the next five days, my watch agreed exactly with every clock we saw. The alarm clock on the bed stand, the clocks in the subway and the big clock on the city hall all showed the same time to the minute. In Austria, when it is 8:00 o’clock, it is 8:00 o’clock everywhere.

venice bell towersThen there was Venice. That city has 115 Catholic churches, not counting those on the lagoon islands. It seems that about half of those have carillons (bell towers) that chime the hour. You can hear them start at about ten minutes before the hour, and the last ones finish about ten after. According to the Venetian churches, when it is 8:00 o’clock it is somewhere between 7:50 (or so) and 8:10 (or thereabouts.)

Vienna is efficient. Venice is effective. In Vienna, the time is a precise measurement. You can set your watch by any clock in town. In Venice, the churches are certainly effective in letting you know the hour is arriving (or has recently arrived.) They just aren’t so good at pinning it down exactly.

We could attribute this to the differences between Germanic and Latin cultures and leave it at that, but I think it is also a metaphor for company cultures.

Some companies are effective. They get the job done. They revel in their ability to accomplish the mission despite hiccups and near-misses. They have mottos like “Whatever it takes,” or “Git ‘er done.” They talk about how their terrific employees regularly go above and beyond the call of duty to meet a deadline or make a delivery.

Other companies are efficient. They don’t talk much about employees going the extra mile, because they rarely have to. They know when an order comes in or a customer arrives it will be handled the right way, and the same way every time.

Efficient companies depend on their people to execute proven and tested systems. Effective companies depend on their people to figure it out as they go. Efficient companies prize teamwork and process. Effective companies value individual heroics.

Is your organization efficient or effective? Building an efficient organization takes more work up front, but pays off bigger in the long run. Running an effective organization also gets the job done, but being efficient delivers predictable results and consistent profits. Merely being effective means that you have to regularly “go the extra mile;” and extra miles cost money.

Posted in Entrepreneurship, Thoughts and Opinions | Tagged , , , , , , , , , , | 4 Comments

4 Responses to Effective vs. Efficient: A Tale of Two Cities

  1. David Cunningham says:
    May 17, 2015 at 2:37 pm

    This essay is a nice illustration of a key business dynamic. (Perhaps I can write off my next vacation by studying the Effective/Efficient syndrome from Paris, Athens, and Reykjavik, to Singapore.) It is important to be able to recognize this characteristic when advising companies. Owners of either type are likely to be proud of their organization and its culture. This essay may be a gentle way of introducing the issue. But anytime you focus on a problem you have to be prepared with a solution. In this case it may be the introduction of business intelligence in the form of work flow analysis and dashboard performance illustration. Thanks John.

    Reply
  2. David Basri says:
    May 17, 2015 at 2:44 pm

    I do not think that “effective” and “efficient” are mutually exclusive. Being efficient is largely a product of good processes, procedures and training. It is possible to develop those kind of procedures that also have a healthy dose of effective individuality baked in. Efficient processes should take care of most day-to-day requirements. When customer or company circumstances are outside the procedural box, employees can and should be encouraged to take initiative to be creative and effective.

    For example, PEI is a software development company. Employees (including myself) are first expected to be creative. However, strict naming conventions, coding standards, long term maintainability and testing are enforced. While we are more on the “effective” side of the gradient with a healthy dose of “efficient”, there just needs to be some kind of balance.

    Reply
  3. John Hyman says:
    May 17, 2015 at 3:56 pm

    Great perspective and a lot to think about. Having spent a lot of time in Europe, I cannot get off the story. I wonder if the tale of two cities might involve a technology gap? Keeping centuries old clock towers and those mechanical time keeping movements in sync seems daunting at best. Transforming from effectiveness to efficiency seems more attainable…

    Reply
  4. Frank Arnold says:
    May 18, 2015 at 6:09 am

    David’s comment on not mutually exclusive is reality. An organization with a solid base of efficiency certainly relies less on effective individuality, but I believe both are essential.
    But this thought provoking discussion also leads me to want to get on a plane and head for Europe to continue my education. Thanks.

    Reply

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Marketing for Trust

Posted on May 10, 2015 by John F. Dini

Why are car dealer commercials so crappy? I’m not talking about the manufacturers’ ads. Those cost millions and have big-name professional spokespeople. The regional marketing association ads aren’t quite as flashy, but Ford Truck Month or End of Year sales for the Area Chevy Dealers are at least competent depictions of the product.

Cal WorthingtonI’m talking about local dealer ads. They all come from the same mold. Element 1:The owner or manager squinting into the sun in front of a lot full of cars. Element 2: A claim of “We are the biggest” or “We have the lowest prices.” or both. Element 3: Lousy production values — lock-down static shots and whatever the on-camera guy wore that day.

This week I had the chance to watch a couple videos of pitches by tech startups to investors. These weren’t rank amateurs. At the very least they had beaten out a few thousand applicants just to be in the room. They had worked for months with mentors to hone in their business models and refine their presentations. Some had several successful tech startups to their credit already.

Tech presenterYet they still looked like amateurs. They were uniformly in T-shirts or unpressed sport shirts worn untucked. Their presentations were often too technical for even their experienced audience, and they frequently mumbled long strings of acronyms. Yet they were hoping to, and many did, walk away with commitments for millions or dollars.

Clearly, both groups are doing it intentionally. I searched the literature on car dealer commercials, and the industry publications claim it is a cost savings measure. That’s a crock. Maybe a small town dealer is knocking out cheap commercials, but the billionaire owners (yes, billionaires) with scores of stores and multi-million dollar ad budgets do the exact same thing.

The objective is to gain the trust of the customer by saying “I’m just like you. I am a normal guy trying to make a living. This is the real me. You can trust me because I clearly don’t even make enough profit on my cars to even produce a decent commercial.”

The tech hopefuls are doing the same thing. I jokingly asked one of the mentors what would happen if a start-up CEO came on stage with his shirt tucked in. He said “Oh, they would throw him out immediately.” Tech industry investment is driven by stereotypes and legends. The next tech billionaire is working in a garage, dorm room or loft somewhere, just like the founders of Hewlett Packard, Dell or Facebook. He (or rarely, she) is too busy being a genius to bother with suits.

Both the auto dealers and the tech start-ups are practicing the same marketing technique. They establish trust with their buyers by doing what is expected. By starting out with the accepted stereotype, they don’t waste precious minutes either on the air or on the stage explaining why they look different.

What do your customers expect from you? Many small businesses try to differentiate by saying “We aren’t what you expect. We don’t look or behave like our competitors.” In most cases, they then have to waste time explaining why.

Take an objective look at your marketing. You might be better off, and establish trust more quickly with your prospects, by simply doing what everyone else does.

 

Posted in Marketing and Sales | Tagged , , , , , , , , , | 3 Comments

3 Responses to Marketing for Trust

  1. jim marshall says:
    May 10, 2015 at 1:25 pm

    There may be merit to what you claim as to earning trust by doing what everyone else does. But I believe you might also be passed over….similar to a billboard that is there everyday but becomes so much a part of the landscape it isn’t noticed. Being different can at least get you noticed…then it is up to you and your message to earn trust.

    Reply
  2. Stephen Davies says:
    May 10, 2015 at 9:26 pm

    All true, but this is mediocrity. Maybe there is another way as video has become so much more accessible. https://www.youtube.com/watch?v=ZUG9qYTJMsI

    Reply
  3. John Hyman says:
    May 11, 2015 at 6:18 am

    The goal of marketing is to establishing top of mind awareness- the kind of awareness where the target audience thinks of your brand before they open their browser. So if the target audience cannot tell the chaff from the wheat because everything looks and feels the same, the marketer is placing the fate of his/her marketing budget on search engine results. Or playing a huge timing game.

    The real reason automotive dealerships (as only one of many examples) fall into the same tired marketing rut is because it’s human nature to stick with what you’ve always done. They continually rely on marketing agencies with a specialty in their space, instead of seeking out an agency with a fresh point of view; it’s comfortable, and seemingly low risk because, well, they are rich and it’s gotten them to this point, hasn’t it?

    Besides pioneering something new is risky… and change is scary. (Insert Einstein’s most famous quite here).

    Reply

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Are You Proudly Out of Control?

Posted on May 3, 2015 by John F. Dini

I have a favorite New Yorker cartoon. A fellow in a suit is standing behind a desk, one hand holding a phone to his ear, and the other with a finger on his calendar. The caption is “How about never? Is never good for you?”

A professional arrives at a business for an appointment. He is informed that the owner, whom he is meeting, just left to take care of an important issue and would probably return in less than an hour. Unable to wait, the professional reschedules.

On arriving for his second appointment, he is informed that the owner is on the telephone, but is aware that he is waiting. Forty minutes later the owner comes out and informs the visitor that he has a lot to do, and the scheduled hour-long meeting will have to be compressed to 15 minutes. When the visitor offers to again reschedule, the owner becomes agitated. “You obviously don’t understand,” he exclaims. “I am a business owner. I can’t just schedule things like other people. I’m far too busy.”

human tornadoWe are all busy. Most of us are too busy. People send emails and then call fifteen minutes later to ask why you haven’t answered their email. Some think that having your mobile number absolves them from speaking to the employees whom you pay to handle day to day operations. Others text you with expectations of instant response.

Employees need to talk to you “right away.” They lie in wait outside your office to pounce between phone calls with “Do you have a minute?” If there is anything you can be sure of, the conversation isn’t just going to take a minute.

Personal time management is the burden of every business owner. Effective time management is the skill of an executive. I typically see the proudly out of control syndrome in less experienced owners. They are still enjoying the ego rush of “I own this place. These people all work for me.” They like the fact that employees have to adjust on the fly to accommodate their schedules. They expect salespeople and suppliers to do the same. In some cases, it grows into a full-time habit, and they expect everyone else, including family, colleagues and customers, to work around whatever occupies them at the moment.

Truly successful owners have grown beyond that. They’ve learned that personal organization and self-discipline are critical components to running a successful organization. They return phone calls, or cause them to be returned. They meet deadlines, or make certain that someone in their organization does. They behave as if everyone else’s time is just as valuable as their own.

Owner-centricity is a trap. No one grows really wealthy in a one-person organization, and no large organization can be effective if it is tied to the activities of one person.

I’ve worked with hundreds of owners. Some are in control from the outset. Some learn it along the way. Those who build successful companies have all figured it out. If you want to own a business that really gives you the flexibility to do what you choose, a good first step is to stop being proud of the fact that you can do whatever you choose.

Posted in Entrepreneurship, Leadership, Management | Tagged , , , , , , , , | 4 Comments

4 Responses to Are You Proudly Out of Control?

  1. Frank Benzoni P.E. Retired says:
    May 3, 2015 at 5:48 pm

    John

    “On the mark”- being considerate of others –

    Frank

    Reply
  2. Rodney fischer says:
    May 3, 2015 at 7:33 pm

    Guilty! Needed to hear this. Although, for me it is not so much that I believe my time is more important than others. Rather, I just get so busy that if the call or visit is not a high priority, it gets pushed down in the stack, even though I intend to follow through…………eventually!

    Reply
  3. John Hyman says:
    May 4, 2015 at 7:55 am

    Are you in control of your business, or is your business in control of you? Recognizing that “stuff” happens that can wreck your schedule, we should strive to make those times the exception. That is where a good team and a sound process-based approach makes all the difference, Great post.

    Reply
    • cathy locke says:
      May 25, 2015 at 5:12 pm

      To Rodney,
      I am also very guilty! I am getting a little better in checking my calendar,my business mentor on certain futuristic situations, doing like my Dad use to do”sleep on it” important decisions. Learning to delegate slowly with assistants.
      Thanks, great blog.
      Cathy

      Reply

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