Discover Your X Factor
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What’s the bottleneck in your business or industry? What if you could gain control of that bottleneck? Discovering your X Factor can provide a multi-fold advantage over your competitors. In this deck, Kevin will explore the ideas developed by Verne Harnish in his Fortune Magazine article on Seven Strata of Strategy
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Discover Your X Factor
- 1. What’s the bottleneck in your business or industry? What if you could gain control of that bottleneck? Discovering your X Factor can provide a multi- fold advantage over your competitors. In this deck, Kevin will explore the ideas developed by Verne Harnish in his Fortune Magazine article on Seven Strata of Strategy. There is a link at the end of this deck to the associated blog and webinar recording.
- 2. Kevin Brent
- 3. 4 PILLARS OF SCALING UP SUCCESSFULLY STRATEGY PEOPLE EXECUTION CASH
- 5. Competitive Position • Offer • Cost Sustainable Profit Growth MarketAttractiveness
- 6. Competitive Position • Offer • Cost Sustainable Profit Growth MarketAttractiveness Attractive Not Attractive AdvantagedDisadvantaged
- 7. Competitive Position • Offer • Cost Competitive Advantage – X Factor
- 8. “Using your company’s unique skills and resources to implement strategies that competitors cannot implement as effectively”
- 12. Finding our X Factor 1. What are we really passionate about/ what is our ‘why’? 2. What can we be the best at? 3. What does the market/ customer really want and is prepared to pay for/ what is their ‘Pain’?
- 13. 1. What is the one thing that I hate most about my industry? 2. What is driving me nuts?! 3. What is the bottle neck constraining the business? • It could be a massive time or cost factor
- 16. Competitive Position • Offer • Cost Competitive Advantage – X Factor
- 17. BizSmart aims to help business owners of small and medium sized businesses to create value and scale their businesses through sound practical business support by providing insight, Clarity combined with a real determination to help you succeed. You can access webinars and presentations like this and more besides through our SmartRoom service here You can read the associated blog and listen to a live recording of this presentation by clicking here You can read Kevin’s profile here
- 18. •Need a sounding board for your ideas? •Need to know what to prioritise? •Want someone to challenge your assumptions?
- 19. BizSmart – Where Smart people go to surround themselves with other Smart people, to gain business success.
Editor's Notes
- For this webinar/ blog we are going to go back to Strategy – remember the 4 pillars of any business wishing to scale up successfully are: Having the right strategy Finding, attracting, hiring and retaining the right people Getting the right people to Execute the right Strategy in the right way Managing the Cash
- Of the millions of businesses that start up each year (e.g. 600k in the UK), 40% will die before their 5th birthday Of those that survive, 96% will remain as ‘micro’ – less than 10 employees Strategy is a vital component to survival let alone thriving. One of the key elements of strategy is your ‘X-Factor’ – a term used by Verne Harnish of the Gazelles. This is effectively your competitive edge – which includes your differentiation
- Let’s see if I can explain what I mean: If we are planning on being in business for a decent amount of time we need to be able to build revenue and more importantly profit growth that are sustainable In order to create sustainable profitable growth you need to either compete in attractive markets (where the average company makes superior profits) and/ or be competitively advantaged compared with your competitors.
- In an attractive market you may be able to afford to be relatively average for a while and grow along with the market in a challenging market you cannot! So two key elements of strategy are what markets or segments we play in and how we create a competitive advantage.
- Competitive advantage is driven by your OFFER position (how good customers perceive your OFFER to be compared with your competition) and your COST position (how cost efficiently you can deliver your OFFER compared with your competition). Your Offer position is effectively how well you are differentiated in the eyes of the customer, your cost position is more of an internal differentiation – the combination of the two make up your competitive advantage or ‘edge’. You can survive in business in an attractive market without a competitive edge. But if you want to survive let alone thrive in a challenging market then you will need a competitive edge – or X-Factor
- The X Factor is a strategy which must be discovered, defined, and acted upon to create a significant value and ultimately significant valuations within a business. It could be in your Offer position, it could be in your Cost Position or it could be a combination of the two. Discovering your X Factor can provide a significant (maybe 10 fold) advantage over your competitors.
- The X Factor concept is as old as John D Rockefeller. John Davison Rockefeller Sr. (July 8, 1839 – May 23, 1937) was an American oil industry business magnate and philanthropist. Widely considered the wealthiest American of all time[4][5] and the richest person in modern history. Discovering his X Factor was an initiative that allowed Rockefeller to control the oil industry. The key to winning in the oil business at that time was gaining an advantage in transportation costs – mainly by railroad. His decision to produce his own oak barrels, rather than using green timber like his competitors, having the oak sawed in the woods, then kiln dried, reduced the weight and sliced Rockefeller’s transportation costs in half. This produced a 10x advantage over his oil competitors. So there’s an example of big business and an X-Factor around the cost position/ creating a cost advantage.
- So there’s an example of big business and an X-Factor around the cost position/ creating a cost advantage. Looking to a smaller business – at least it was to start with!: Now, imagine you have a lawn that needs a little trimming. However, you lack the time to do it yourself. You need somebody to do it for you. You could google a company that offers this particular service. You could browse their site and if you like what you see, send them an email. The company would then contact you to make an appointment for one of their people to measure up your lawn. After some work with a spreadsheet they might send you their quote by e-mail. You would look at their offer – compare it to others – and you could chose to use their services. Or not. Typically this process takes a few days – in fact the average is 3 weeks. Barrett Ersek – founder of Happy Lawn of America – is in the lawn mowing business. His company keeps your lawn green and free of weeds – much like the competition. His rates are roughly the same as his competition. Yet, he managed to grow his business from $0 to $10 million in revenue in four years time. How?
- In 2001, Barrett was frustrated. His lawn care business had plateaued at $2M 3 years in a row. He tried everything to drive sales, but nothing seemed to work. He knew something in the sales process was broken. It cost $300 and 3-4 weeks to acquire a customer that would spend $400 annually with Barrett’s company, and since the company’s gross profit was around 50%, it took 6 quarters (18 months) to cover the acquisition costs. He was wrestling with the challenge when he bumped into a guy who mentioned aerial photography maps which later became the basis of Google Earth. No one knew about it at the time. The aerial photos made it possible to measure lawn size and see significant landscaping issues (like swimming pools) any place in the country without having to send a representative to the property. The concept revolutionized Barrett’s sales process. He could now give a prospect an estimate right over the phone in 3 minutes when it used to take 3-4 weeks Effectively he has reduced his sales cycle by a factor 10.000. So this is an example of an offer advantage and a cost advantage – Barrett found a way to reduce his sales costs whilst also creating a better experience for the customer.
- So how do you find your X-Factor? Start with all the good stuff we have discussed before – around core purpose, core values and your ‘hedgehog’ – which gets you the answers to: What are we really passionate about? What can we be the best at, or if not the best then really really good at What does the market/ customer really want and is prepared to pay for/ what is the pain? So this partly addresses the focus element – getting us to focus on a niche or a segment that we can ‘own’ and is aligned with our core purpose
- It might give us some clues about what we can do differently but try asking yourself and your team these three questions: What is the one thing that I hate most about my industry? What is driving me nuts?! What is the bottle neck constraining the business? It could be a massive time or cost factor The challenge is that we’re often too close to our business and our industry to see the issues that have become accepted as the norm. So if we think about the Happy Lawns example, Barrett identified the bottle neck constraining his business to be the time taken to quote and set himself the challenge of not just tweaking it but transforming it to make a 10 fold difference (he ended up doing even better) In the oil example it was the transport costs that were the bottle neck or the thing that was driving JD Rockefeller nuts – in your business it might be staff turnover/ retention, it might be dealing with peaks and troughs in demand, perhaps seasonality – or it might be combining something with your product or service that hits the spot and creates a unique differentiation, it might be the way you train your staff, the way you reach your customers and so on.
- If you find your X-Factor then keep it secret and act on it. Keep it close to your chest until you can fully exploit it!
- Of course, even huge advantages don’t last forever. If you are able to make profits well above industry norms then someone is going to find a way to copy you or find a different way. So you should never stop looking for ways to keep competitors in your wake. You don't want to be caught unprepared.
- Fortunately, there are unlimited ways to find a competitive edge. The key is to pull yourself away from day-to-day operations long enough to think more broadly about your business from an outsiders perspective. Brainstorm with your team, bring in people from outside your business/ sector – perhaps other business owners. But there is an X Factor inside you! At BizSmart we sometimes talk about releasing our inner eagle – so go release yours!