A business to survive has to have results. Typically these results are measured by the ultimate measurement: cash. The difficulty for any business in understanding this measurement is if it is a direct relation to activity or something other. Most businesses will have the belief that cash is generated solely by activity. Therefore many sales plans, business plans, and marketing plans are created around activity and not around value.
“People love chopping wood. In this activity one immediately sees results.” – Albert Einstein
Activity Is Up, But What About Profits?
At first glance any businessperson worth their salt would deride the above paragraph as being nonsense. To generate cash you have to have activity. That activity can be in the form of a sale, signature on a contract, or traffic to a particular website. The businessperson who thinks this is correct. The closing of the sale, the signing of a contract, and the decision to visit a website are all activities. The problem for the businessperson is really distinguishing if these activities are of value to the customer. Typically this is not the case when it comes to many businesses.
Let’s take, for example, the founder of Mint.com. This individual competes against Microsoft Money and Intuit’s Quicken. Both of those software platforms are major movers in the marketplace of personal finance. So what makes a web-based application like Mint.com different? Well for one, mint.com is focused around giving you “the user” quick information about your financial status. It is also designed to give you the information you need to make sound decisions for your financial future. It is as a program providing value. The competition to Mint.com are more focused around how long you spend on particular windows or other GUIs in their programs. The competitors to Mint.com are focused on activity and not real value to you to the consumer.
The good news is at least it’s activity driven. The bad news is there is no value to anyone.
Still not convinced there is a difference? Well, let’s take a look at social media. In another blog post by Amber Naslund, she uses a quote from Albert Einstein. This quote states, “People love chopping wood. In this activity one immediately sees results.” The same is true when a business embraces social media. The belief of the business is that social media is activity driven platform. They tweet and get followers. They build a fan page and get fans. The more active you are the greater results your are going to get. This is a fallacy. Why? Well what is one of the chief complaints when it comes to social media? That people are blabbing on about their nonsensical lives. That right there is activity with no value to the consumer of the information. So if you are a business and you are going to spout out nonsensical information about your business, you are just as guilty as those individuals who comment about what their cats are doing. The good news is at least it’s activity driven. The bad news is there is no value to anyone.
So how can you as a businessperson make sure that you do not get caught and in the activity trap?
First, make sure that any metrics being measured against the plan are value driven. This is easier said than done. Any plan, whether it is for business, sales, or marketing has to have metrics to measure its progress. Yet, a value driven metric is one that returns an exponential response from the customer. For example, take a look at Domino’s pizza in Chicago. They have a social media plan to communicate deals, promotions, and answer complaints. The metrics behind this plan is to foster a strong relationship between the franchises and their customers. The value behind the activity is a strong communication from Domino’s and a demonstration that they listen to their customers. The results are continued purchases and a strengthened relationship.
Second, avoid the temptation to award only activity. Many plans measure the activity of teams and/or individuals. For sales, it can be the number of calls a salesperson makes on customers. For marketing, it can be the number of impressions and/or responses to “calls to action” from campaigns. Both of these are important, but they are not the end goal of any business. The end goal is profits. The reward should be given to the salesperson that generates the largest margin of profit for an organization. It should be an award to the marketing team that drives business with the least amount of cost. These are viable propositions for any business. A salesperson who can generate millions of dollars of business with one or two sales calls is more valuable than a salesperson who generates 100,000 dollars worth of business from 100 sales calls. If you measure activity then the second salesperson would be awarded over the more valuable salesperson. Award the value not the activity.
It is difficult to balance activity and value. The temptation of many companies is to double down on their activity. They feel it will generate a ton of results. The reality is that it generates more activity with more costs. When companies get caught in this trap value becomes an afterthought. The result is a lower profit margin and a loss of highly valued customers.
How Do Make Sure You Avoid The Activity Trap?
About the author:
Erroin A. Martin is a Business Advocate with the Von Gehr Consulting Group, LLC, a business coaching and consultancy provider for business owners, executives, and entrepreneurs. He has fifteen years experience working within the pharmaceutical, manufacturing, natural resources, medical devices, software, technology, business services, and agriculture industries in various levels of leadership across six continents. He has led diverse teams in sales, marketing, planning, and in the Army. He currently coaches business leaders and physicians in the tools needed to plan for their success. Learn more about the Von Gehr Consulting Group, LLC at www.vongehrconsulting.com or call +1 203 433 8079. You can follow him on Twitter at @Erroin
The Von Gehr Consulting Group, LLC, was founded by Erroin A. Martin to provide business coaching, business consulting, and other services to companies both large and small. The primary goal is to have his clients be passionate about their business and reach the unachievable.
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