1. What is your Business Model?
Great companies describe the essence of what makes them unique in a simple and compelling manner. For Walmart, it is lowest price. Walmart revolutionized retailing by focusing upon operational excellence. The firm does a better job of supply chain management than any company in its space. As a consequence, they are able to ruthlessly drive down costs and offer lower prices. Four Seasons differentiates itself through the quality of service. Isadore Sharp explained how Four Seasons can charge twice the room rate of Hilton or Westin by saying: "It is because we do common things uncommonly well."
The level of response of great leaders in defining the Business Model is transformational. The intent is not to compete with the existing players, but to make them irrelevant.
Your performance measures in developing your Business Model are business viability, shareholder wealth and return on capital. The timeframe is 10 years or more.
Traditionally, financial advisory firms measure success based upon commission earned and assets under management (AUM). The real measure is profitability or earnings before interest, taxes, depreciation and amortization (EBITDA).
Keep in mind that strategy is the alignment of the outputs or objectives you want to achieve, the systems and capabilities you have to realize your objectives and the opportunities and challenges the environment provides. Your challenge as a leader is to figure out the strategy required to maximize shareholder value and return on your capital and time invested.
2. What are your products, services, markets and ideas?
One of the ways in which you can positively impact EBITDA is through product and service mix. As we have discussed, there is significant potential for increased profitability of the client relationship through the sale of insurance products, the offering of fee based planning in the areas of financial, estate, tax and business succession planning and a focus on the whole family wealth continuum.
This requires a balancing of integration and return on capital. Rather than measure success based upon commissions or asset management fees, the key is to measure the overall profitability of each client relationship lifetime. The opportunity and challenge is to build clients for life.
3. What are your systems and processes?
Great businesses are built upon replicable processes. A process is a pattern or methodology that is repeatable, distinguishable and transferable.
A typical Starbucks location generates ten times more revenue than an owner operated cafe across the street. The difference in revenue is a bi-product of the effectiveness and efficiency of the systems and processes Starbucks instills in each of its operations. It is not about the people who work in Starbucks versus the employees of the owner operated business; it is about the systems and processes.
One of your challenges is to implement systems and processes that are repeatable, distinguishable and transferable. Training can help you develop, expand and enhance the system capabilities of your firm.
4. How do you assure quality and continuous improvement?
Great leaders instill in those around them the belief that everyone has a stake in the business getting better. Apple is a classic example of the relentless focus upon improving every aspect of the product and the user experience. Effectiveness is doing the right things. Efficiency is doing things right. Your systems and processes ensure that people are doing the right things. Supervision and management ensures that people do things right.
5. What is Service Excellence?
The paradox of Service Excellence is that the answer begins with your answers to each of the first four questions. Satisfaction is the ratio of experience to expectation. Doing common things uncommonly well requires a commitment to excellence on the part of every employee. It also involves the recognition that what is value added today will be expected tomorrow.
Continuous improvement is a fundamental underpinning of excellence. The principle of creative destruction does apply. As a leader, you are constantly confronting the sense of entitlement that comes with success. Entitlement is an illusion. Yet, it is a natural bi-product of success.
We believe that we have earned the right to client loyalty and to high fees. People are grateful, but only for a short time. Then, they want to know what we are going to do for them going forward.
Great leaders continuously challenge people to be better at what they do, to continuously learn and grow. As a result, they bring out the best in people who are committed to grow and make it uncomfortable for people who do not share the values of excellence.
Great leaders also elevate the level of the conversation. They educate those around them with regard to the firm's business model, products, services, markets and ideas, the systems and processes that differentiate the way in which they do business and the relentless focus upon quality and continuous improvement. These are the elements that lead to Service Excellence. Leadership training facilitates a culture of ongoing feedback that informs everyone with regard to the standards of service excellence and their contribution.
In answering the above questions, start by describing your Business Model i.e. how you will assure the viability of your business, the return on your time and capital invested and the creation of shareholder wealth. This will naturally lead to an exploration of the products and services you offer, the markets you serve and the ideas that differentiate your business. It will require you to think about the systems and processes required to serve your clients and attract new clients. Ultimately, you will evolve a picture of Service Excellence and what is required to be effective and efficient in delivering this level of service to your clients. The Covenant Group is here to help in establishing effective systems and processes, call us today to learn more 1.877.903.3878.