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Monthly Archive for February, 2009

Top Tips For Generating Ideas

Published by Business Link on 17 February, 2009 in Top Tips • 0 Comments

Pick your favourites from our varied collection of tips, then go forth to generate good, bad, weird or world-changing ideas.

If you have your own tip for ideas generation, please email us and we’ll publish your comments.

What goes in…

Research suggests an exposure to diverse inputs and experiences increases and enriches creative output. From the music we hear to the books we read to the work we do, everything goes in and influences our creative potential. Part one therefore isn’t about ideas, it’s about providing your mind with the information and experiences needed to evoke them.

Seek diversity. Diversity and creativity are connected, even if the links may not always be obvious. Be on the look out for and be open to diverse new inputs.

Listen. Even to people with opposing views. Talk. Get together, discuss, and debate. Talk to colleagues, suppliers, customers, business advisers and experts. Network. Get together with like-minded business people from within or outside your own industry.

Read. Pick up a newspaper, read online news and research, or find a good book. Also keep up to date with the media news and information in your industry. Look beyond your own industry. Look into new business approaches, trends or ideas from other industries and environments. Follow trends. Follow statistics or trends relating to your industry over time. Trends may highlight previously unseen gaps or opportunities.

Learn something. Widen your knowledge and perspective to spur more diverse and fresh thinking. Do something you wouldn’t normally do. Take a bath instead of a shower. Go to the ballet instead of the cinema.

Understand. Process inputs to try and establish a deeper understanding of the people, things and thoughts around you. Also consider conducting primary research to further enrich your understanding.

Be on the look out. The preceding tips are practical ways to inject new and diverse experiences into your thinking. There are many more such approaches. Be on the lookout for them, because the more that goes in the more can come out.

… Must come out

Ultimately ideas need to find their way out, so you should find practical steps that focus the mind and allow ideas to easily flow. Everyone is different, so experiment to find the approaches that suit you.

Stay loose. In the book “The Idea Machine: How ideas can be produced industrially”, the authors write that of the business decision makers surveyed, “hardly any of them relied on a structured process: almost all of them rely on their own powers of inspiration, or the powers of inspiration of other people.” Process can be applied to ideas generation, but also be aware that ideas emerge sporadically. Stay loose, and don’t be too obsessive about searching for new ideas.

Carry a notebook. Whenever and wherever ideas come, make sure you have a way to note them down.

Question things. Part one was about learning, experiences, discussion and understanding. Now question things; why do we think like that? Why do we do it this way? Is there a better way? As Albert Einstein once said: “The important thing is to never stop questioning.” Test assumptions. We tend to make automatic assumptions that things are the way they are because there is no better way or no better idea. Identify and test such assumptions. Analogise. Look for analogies between what you are doing and seemingly unrelated experiences, products, services or ideas.

Look for problems and issues. Define and describe specific issues, problems or objectives. Focus thinking on these issues.

Define your brief. Before you sit down to generate ideas, define a quick brief which outlines areas for focus. “Today we are going to focus on”. Narrow down. Avoid the bigger picture. Drill down inside an objective or idea and tackle things step by step.

Work alone. Research suggests lone-working is effective at generating on average higher quality ideas than group working. Work in groups. Research also suggests that group working is effective at generating both very good and very bad ideas. The process is thus less efficient than lone-working, but it could have greater potential for coming up with the very best, most innovative ideas. Try group brainstorming sessions, informal working groups or ongoing team-based sessions.

Open up. Forget the “invented here” policy, and welcome ideas from business partners, collaborators, students, or anyone else you might bump into. Motivate. Research suggests employees are the biggest source of innovative ideas in most organisations. Encourage colleagues to get involved in generating ideas alone, or together in groups.

Put someone else on. Imagine you are someone else; a customer, supplier, or alien. Look at your business and its products or services from a different perspective.

Do something else. Put down the blank canvas and do something else. Whether working alone or in groups, try different approaches. Clean up your office, go for a walk. Discuss ideas as you go. Change your scenery. Get out of your usual environment, go to the canteen, the park, or use break out areas. Break out areas are rooms or spaces that are well-suited to quiet thinking or group brainstorming. YouGov research found that “only six per cent of the companies surveyed had any sort of ‘break out’ area, despite a growing number of (particularly younger) employees believing these to be important.”. Go on holiday. If you must take work on holiday with you, take the sole objective of coming up with some great new ideas. The change of pace and  scenery may spur your creativity. It might also be more fun than doing your accounts.

Enliven your senses. Sit in silence. Listen to music through headphones. Take off your shoes. Go to a busy place. Lie down on the floor. Watch the world go by. Either stimulate your senses to gain inspiration, or silence them to gain focus. Use your hands. Research has made links between creativity and hand movement. Pick up a pencil and paper, gesticulate, or even get out the play dough. Use visual stimuli. Take pictures representing the opportunity, problem or objective. Or use a whiteboard to visually represent problems or ideas. Sometimes visual cues can stimulate thinking. Use mind maps. Record thoughts using mind maps or use similar visual aids which allow you to cross link ideas and look at things more interactively than lists.

Form a circle. Do the round robin. Get together, sit in a circle, define an issue, objective or problem, and quickly canvass one idea from each person in turn. Focus on speed and quantity over quality. Sooner or later you may stumble across an idea that’ll immediately stand out. Role play. Get together and act out a scenario such as a customer negotiation or visit to your offices. Analyse the interaction and look for new ideas to develop each attribute.

Evaluate later. Keep judgement until later. New ideas are often not immediately logical, especially if they test assumptions or contradict old ways of doing things. Focus solely on coming up with ideas, then evaluate later. Judging someone’s idea harshly may also demotivate them from coming up with more. Purge, then review.

Relax. Try to foster a fun or relaxed environment, don’t take things too seriously and encourage all ideas, not just good ones. Manage your dosage. Sometimes we need to break focus to find that eureka moment. Don’t overdo ideas generation. If your productivity wanes quickly, devote small but frequent doses of time to focussed ideas generation. Welcome failure. Failure is almost a prerequisite for success when generating ideas. For every great idea there can be a hundred bad ones. Don’t let them demotivate or dissuade.

Think laterally. Edward de Bono, a leading commentator on creativity and ideas generation, has developed various techniques for thinking laterally, a process which is claimed to spur logical creative thinking. For example, his “Six Thinking Hats System” suggests putting on different hypothetical hats during creative thought; White Hat includes facts, figures, and hard tangible data, Black Hat reflects judgement and caution, Yellow Hat represents reasoning, and so on. The idea being that putting on diverse thinking ‘hats’ will encourage more lateral thinking.

Find your muse. Everyone has different creative triggers; the shower, the gym, the morning walk, listening to music, group working. At these times we are at our most creative and imaginative. Try to find your muse, and when you find it, do it lots.

Redundancy, and the alternatives

Published by Business Link on 17 February, 2009 in HR & People Development and Strategy & Operations • 0 Comments

We explore the intricacies of redundancy, and consider the alternatives.

Redundancy

Redundancy is a form of dismissal from a job role which is no longer needed by an organisation.

Such a situation may result from a new technology, system or process which has made a job role unnecessary. Or, due to changing business circumstances, a job role may no longer be required or financially sustainable. Redundancy may also result from one or all of a business’s premises closing down.

Employers can recruit additional employees whilst making others redundant, but new workers must not directly replace the roles of redundant employees.

Consultation with employees must take place during redundancy, otherwise the process could be deemed automatically unfair, potentially leading to legal action by redundant employees. When making 20 or more employees redundant at the same time, additional consultation responsibilities apply.

Several problems may occur following redundancy, including a plea of unfair dismissal by an employee resulting from several reasons, such as the failure to offer suitable alternative work, or the use of unfair selection criteria. Redundancies should therefore be undertaken with a full understanding of the law and be supported by appropriate documentation.

Redundant employees usually have the right to statutory redundancy pay. An individual must be an employee with at least two years’ continuous service. This payment must be calculated based on statutory guidelines, and a written statement setting out the redundancy calculation must be provided.

Redundancy is complex, costly, and carries risk if not handled effectively. For these reasons, businesses should avoid redundancy where practicably possible, select candidates for redundancy fairly, properly consult with affected employees, and follow the law closely to ensure redundant employees are treated and compensated appropriately. In addition, employers should hold documentation which might be required if subsequent legal action occurs. If you are not certain of your specific responsibilities and obligations, it is advisable to seek professional advice tailored to your situation.

The wider effects of redundancies on an organisation should also be carefully considered before and throughout redundancy; specifically the impact on morale and motivation of surviving employees, and the operational impact of losing capacity and capability. Redundancy is a significant change for an organisation which should be managed closely before, during and after it takes place.

As Brian Steel, Business Adviser at Business Link, points out: “Getting through the process is not the end. Those who survive the cut can, and often do, feel very vulnerable; productivity can dip sharply and there can be a general malaise throughout the business. To reduce the effects, surviving employees should not only be reassured but included in developing the operational aspects of the recovery plan. The more involved they are the more they are likely to take ownership of any changes that take place and the quicker productivity can be restored”.

More info – Making an employee redundant

Tool – Handling potential redundancies

Tool – Calculate redundancy pay

The alternatives

Redundancies cost time, money, face and morale. According to the Chartered Institute of Personnel and Development (CIPD), an average redundancy costs £10,000. In addition to this real cost is the time and resource required to pursue a redundancy, the resulting impact on operations and staff morale, and the potential cost of re-recruiting should the business situation improve.

Gerwin Davies, of the CIPD, says that redundancies should remain a “last resort”, and that businesses should “use other measures such as cutting hours, pay freezes or recruitment freezes rather than making redundancies”.

Brian Steel, Business Adviser at Business Link comments: “Emotionally it’s never easy to make employees redundant and it should never be taken lightly. Redundancy is the last resort and as Gerwin Davies says above there are alternatives and it is essential to carefully review each one. If, ultimately, redundancy is the only answer employers can be sure they will be asked if they have considered other ways of resolving the situation.”

So what are the alternatives to redundancy?

Recruitment freeze

A recruitment freeze forces business functions to re-train and re-recruit existing employees into new job roles. This approach could be impractical for some skilled roles and is likely to require significant training. Even so a recruitment freeze could serve to limit financial difficulties.

Capping overtime

Capping overtime expenditure is a simple measure which could minimise labour costs but also limit productivity.

Pay cuts or freezes

Pay cuts may be sensitive to manage but could nevertheless be less damaging than redundancy.

Natural wastage

Effective when reductions are needed across workforce over a prolonged period. Such an approach takes time and areas of wastage may not match areas of redundancy, leading to a requirement to re-train employees into new roles.

Sabbaticals

Unpaid sabbaticals could save money in the short to mid term and offer willing employees the chance to take a career break. The complexities of covering a departing employee will depend on the job role.

Secondments

The process of ‘loaning’ an employee to a different part of an organisation, or a completely different organisation, for a period of time usually up to 12 months. If handled strategically such an approach could coincide with cross-training to help fill organisational or individual skills gaps.

Seeking volunteers

Some employees may be looking to move on, and thus react positively to an invitation to take voluntary redundancy. This could also help to minimise the negative effects of compulsory redundancy.

Create new roles

Identifying alternative job roles which could add value and revenue to a business could help to re-task potentially redundant employees into new roles of higher strategic worth to the business.

Relocate employees

If you operate across multiple locations a potentially redundant employee could be asked to move to a location which is understaffed.

Offer early retirement

Employees could be invited to take early retirement. Caution must be exercised to ensure compliance with discrimination laws.

Reshuffle

Just as the Prime Minister shuffles his cabinet, so too could employees transfer into different job roles. This could enable businesses to refocus people from redundant roles into areas lacking talent. Petra Wilton from the Chartered Management Institute describes this approach as “a good development route” which in many organisations is seen as “a way of retaining top talent”.

Flexible working

Revised working arrangements, such as a shorter working day or 3-day week, could offer flexibility to employees in suitable job roles and help to trim costs across salaries.

Job share

Though not suitable for all individuals or job roles, those looking for a significant cut in hours could agree to share a job role.

Dismiss casual or contract workers

Depending on employment terms, some casual or contract workers may become candidates for dismissal before redundancies are considered.

Lay-offs, Short-time working

A lay-off occurs when you are unable to provide paid work for a temporary period. Short-time working is where an employee’s working week, and corresponding pay, is reduced. Read about lay-offs and short-time working on the Acas website

Refinance

If redundancy is solely a financial consideration, and such a move could harm the operational capacity of your business, the most viable alternative to redundancy could be to raise finance to keep employees. If you can demonstrate how keeping an employee will provide a greater return than losing one, lenders may reconsider financing.

Bootstrapping

Published by Business Link on 17 February, 2009 in Creative and Strategy & Operations • 0 Comments

‘Bootstrapping’ and ‘bootlegging’ are both approaches which involve the development of new initiatives or projects with little or no access to external resources. Bootstrapping – an entrepreneurial approach synonymous with business start-ups – reflects a new business built with no outside financing. Bootlegging commonly refers to projects undertaken within an organisation by individuals or groups with limited reach into company resources; one example being schemes that offer employees a percentage of their working week to pursue pet projects which have no formal funding or support.

Both approaches are about starting something from nothing. They reflect the notion that, despite financial limitation and adversity, cost-effective new initiatives or projects can succeed. Moreover, they demonstrate that such bootstrapped approaches can actually produce more successful outcomes than projects born from extravagance.

The benefits are numerous. Most obviously, limiting resource limits risk, so if a bootstrapped project fails it does not significantly dilute a company’s overall resources. Bootstrapped initiatives are said to spur ingenuity and creativity, by forcing members of a project to be clever and think rather than spend their way through a project. And added emphasis is placed on proving a concept and measuring its real-world effectiveness, rather than investing in a mere forecast of success. Finally, such a prudent approach helps create more self-sustainable, efficient and profitable projects in the long-term. In general, bootstrapping approaches emphasise the virtues of creativity, commitment, prudence and self-sustainable value-creation.

Such a cautious approach is not appropriate for all projects. If for example a project is highly viable or business critical, starving resources could be detrimental to both the project’s success and speed of implementation. Bootstrapping is therefore best suited to non-critical, high risk, or less clearly viable initiatives.

Sow seeds

Either time or money is needed to get a new idea or project off the ground. But that does not mean lots of time or money is always required to deliver results. Dell began with $1,000 in self-funding, Google Mail was the product of letting an employee spend a day a week working on his own personal idea.

Bootstrapping must therefore provide minimal ’seed’ time or money upfront. How much time or cash is provided may be determined by what spare capacity is available, or through making a judgement based on the project’s likely viability and potential long-term resource requirements. Either way, bootstrapping by definition is about keeping things as tight as practicably possible, until a project has proven its worth.

Keep ‘em lean

To achieve a simple and lean approach, there should be an intrinsic focus on gate-keeping resource expenditure and minimising points of waste. Doing this ensures that all cost and time spent delivers maximum business or customer value.

Keeping things lean and free from waste also allows you to channel what remaining resources are available into value-rich activities.

Think different

Limited time and money might drive the need to bootstrap, but the approach argues that such adversity is turned on its head and made into an opportunity to be creative, ingenious and innovative.

This might demand that staff rethink how each function of an initiative is run, looking for innovative, cost-effective or different approaches to strategy, operations or marketing. For example, using cost-effective marketing approaches such as word of mouth or viral marketing instead of expensive tv/radio promotion; or using a placement student to help develop a new process or idea.

Of course, limitation could serve to demotivate and frustrate. It is important therefore not to limit a project to the point that it cripples its ability to grow. If a balanced approach to resourcing, and a creatively-minded culture can come together, a lot can be achieved from little.

Prove the concept

If a new project shows signs of success, it is likely to demand more respect and thus more resource. This means that those pursuing bootstrapped projects must closely measure success and identify where customer or business value is created. Such measures are the project’s lifeline to additional resource, so proving the concept should naturally be a fundamental priority.

It is also important to highlight areas where value-creation might have occurred or been increased had their been additional resource. Bootstrapped projects aim to limit upfront risk and resource, but should also be conscious of when it is a good time to spend more.

Spend more, more wisely

Once a bootstrapped project demonstrates success and defines its own contribution to value creation, it has in large part proved its worth. Whether or not that means additional time or resource is invested is still matter for decision makers, but such a prospect must be a possibility. Bootstrapping is a kind of carrot and stick approach, so if the carrot turns red-herring it could quickly deflate a project.

The option to invest more resource must therefore exist from the beginning. Of course, if a project has truly ‘graduated’ into something which offers clear and demonstrated results, this prospect of further investment may be easier to bear. At such a point you can confidently spend more, more wisely.

From seeds

Some might say that bootstrapping is rudimentary, common-sense stuff – that no project should be devoted vast resources without first proving its worth. And in many ways this critique is fair. But right now, as we depart an era in which for many resource was more accessible than it is now, we might be forgiven for thinking we need more than we actually do. Bootstrapping is really just an amiable and memorable term, which reflects the fact that we can often survive and succeed on less than we realise – if we show some clever thinking and commitment.

Critics might also argue that such approaches could stifle development of projects that would otherwise have been stronger, or that starting too many half-hearted projects will dilute them all. Too many failed customer-facing initiatives could also confuse or irritate the customer. All such criticisms carry merit, and emphasise the fact that bootstrapping is not advisable in every situation. But in other contexts, bootstrapping is about breathing life into projects that may never have begun otherwise; the outside bets, the things you can’t quite afford, the pet projects that need a bit of imagination to make them stand out.

In some ways bootstrapping is more of an attitude than an approach. It demands a cultural shift that fosters an attitude of creativity and prudence over trigger-happy spending. During this time of recession, in which most employees are aware of the restrictions and limitations on many businesses, such an approach might be more accepted, leading to a greater cultural motivation to succeed over adversity. Moreover, many now-multinational businesses started on bootstrapped budgets, some even began and prospered during recession. Indeed, research suggests that recession can be an optimum time to begin new initiatives that are – as a result of adversity – more cost-effective, sustainable and profitable.

Fundamentally, bootstrapping is about pursuing development and growth despite limitations. It is, if you like, the process of pulling oneself up by the bootstraps and simply getting on with it, with a bit of creativity and determination. This is the essence of bootstrapping, and this essence could be just what we need right now.

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Guide on – The challanges of growing a busines

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Online retail

Published by Business Link on 17 February, 2009 in IT & eBusiness • 0 Comments

A growing marketplace…

Figures from the festive shopping season suggest the online retail marketplace is strong, and represents an appealing proposition for cost-conscious consumers.

The IMRG Capgemini UK e-Retail Sales Index estimates that consumers spent £4.67 billion online in December ‘08, representing a 14 per cent increase over the previous December. 37 per cent of consumers carried out over half their festive shopping online, with 44 per cent going online specifically to shop around for the best deals.

In a press release entitled “Worst December in Survey’s History”, the British Retail Consortium acknowledged that despite retail woes, “non-food non-store sales in December were 30% higher than a year ago”. In other words, online retail continues to grow, from within an otherwise beleaguered retail industry.

…of bargain hunters

The current driver of growth in online retail appears to be a changing consumer need. As the head of retail consulting at Capgemini UK comments: “Our research provides further evidence that consumers are turning to the internet as the most efficient way to save money in the downturn”.

The economic climate is forcing more consumers to shop around for better deals. Consumers are going online to do this, and as a result are becoming more comfortable and accustomed with online shopping.

According to Google UK, searches for the term “discount vouchers” rose 94 per cent between November and December. Google’s retail leader Peter Fitzgerald believes this represents a growing trend where consumers are researching their purchases more thoroughly; “In the past 90 days we have seen changing behaviour as consumers look for discounts, voucher sites and price comparison sites”.

At first sight a cost-conscious consumer base is not good news for retailers. Online retail costs may typically be lower than bricks and mortar retailing, but such a bargain hungry audience could ultimately dilute margins. Regardless of this threat, the fact is that consumers are going online, and online is where they are finding the best deals.

It is likely that special offers, discounts and vouchers are being used as competitive tactics. As well as fulfilling an obvious and compelling consumer need (for cost savings), such a tactic also serves to win market share from the high street. If online retailers can back up good deals with good products and satisfactory service, they could retain loyal customers throughout and beyond the recession.

For bricks and mortar retailers, these trends are an obvious threat. Whether now is the time to establish an online retail presence remains a question for individual business leaders, but it is clear such a consideration should at least be made. Retailers may also need to review pricing and discount strategies, or consider how the distinct high-street value proposition could be better reflected in marketing messages.

For the online retailer these trends represent opportunities. For as long as the recession lasts, and for as long as they can provide bargains and remain profitable, online retailers have the potential to further increase market share. The real question is whether this new customer base will stay online once their spending power returns.

Strategic imperative

If online retailers can create effective and adaptable strategies that inject more into the value proposition than just price, consumers are likely to stay online far beyond recession. Strategy is therefore imperative to fully capitalising on the current opportunity over the longer term.

“Price alone is not enough”, says Retail week, which also quotes HMV online head Justin Moodle: “Competitive pricing is a given really – customers expect it… Ease of use has to be the key thing: make it responsive to customers’ needs and also make it fun, engaging and straightforward to use. Get that right and the response will hopefully be there.”

So despite a growing customer base, and in addition to competitive pricing and offers, a wider retail strategy must focus on the fundamentals; ease of use, responsiveness to customer need, and straightforward functionality. Such factors are driven by the technology employed, but also in back-end business functions ranging from sales and customer service to distribution and marketing.

In addition to these fundamentals, the rapidly changing online marketplace also underlines the importance of a flexible and adaptive strategy. With continuous innovations in web 2.0 technologies, social and viral marketing, search engine optimisation, pay per click advertising, and even mobile and location based computing, the online retailer must remain aware and dynamic.

Such a strategic imperative may sound daunting, but all of these factors represent opportunities to become more competitive. The recession may be driving customer acquisition, but it is the intelligent online retailer that will ultimately retain loyal customers.

Technology, technology, technology

If pricing and strategy are two key imperatives, technology is a close third.

Technology is fundamental to online retail websites for at least three reasons. It influences the usability and user-friendliness of a site. It determines the security of a site – a factor fundamental to maintaining credibility as an online retailer. And it sets the scope for growth and scalability of an online retail website; something which is crucial to growing with industry trends and adopting new technologies in the future.

Arguably the most fundamental element of technology is security. According to Retail Week, “Retail IT departments are getting the basics right when it comes to IT security, despite less board-level support than their peers in other industries.” This suggests that despite retail IT security not being a board-level priority, most e-retailers are getting it right. The same report also found that 35 per cent of retailers have reported a security breach. This picture shows that although online security is improving, a security breach is still a real possibility that e-retailers must be prepared for. Data encryption over wireless networks, encrypted website payments, use of anti-virus and anti-spyware, and backing up data are all vital steps cited by Retail Week.

The second aspect of technology is design and usability, which determines how inviting a site appears to the eye, and how functional it is through key customer journeys from product learning to payment, order processing and tracking. And finally, the functionality and expandability of an online retail website is often determined by its underlying technology. Web 2.0 technologies are beginning to emerge in the retail space, and numerous tools to expand functionality of an existing website or provide mobile services, for example, are demanding websites capable of growing with the marketplace.

Three key points

This article highlights three key points:

  • The online marketplace is growing, buoyed by current economic conditions which are forcing more customers online to find better deals.
  • Price may be what is driving consumers online, but it is an effective online retail strategy that will keep them there. Online retail strategies must be smart, dynamic and forward thinking. They must be mindful of changes in consumer behaviour, and develop to fulfil customer need. Moreover, they must be tuned into the fast-paced development of online retail technologies and marketing trends. There are many threads to online retail strategy, and all are imperative.
  • Technology underpins almost every aspect of an online retail presence, determining what a retail website can do and how effectively, and how responsive it is to changing customer needs and demands. Security is also a significant challenge, even if the industry is getting better at it. Developments in web 2.0, location-based and mobile computing are also important factors.

Years ago, online retail evangelists confidently proclaimed the phenomenon would crush the high-street dinosaurs of retailing. That prophecy did not come true, and is not likely to happen anytime soon; bricks and mortar stores will always appeal to consumers for different reasons, whether or not they are looking for bargains.

But one thing is true: online retail has proven effective at adopting robust, user-friendly systems, and strategies have proven adaptive and reactive to consumer need. They have responded to the climate’s pressures and have so far won customers from the high-street.

Online retailers must be on top of their game in the months and years to come, in order to fully capitalise on the opportunities that have fallen upon them. Price is a given; beyond that exists the need for effective strategies and technologies. Get these fundamentals right and online retailers will have a bright future.

Bricks and mortar retailers must also react, either by establishing their own online presences, or by establishing bases for competition and value within factors other than price.

More info

Planning for e-commerce

Common e-commerce pitfalls

Waste not

Published by Business Link on 17 February, 2009 in Strategy & Operations • 0 Comments

Last month we defined six key dimensions within which business value can be created: financial, customer, internal, competitive, creative, and environmental. Our assertion was that identifying such value dimensions and subsequently directing resources into them are strategic imperatives for business success.

With this in mind, now consider the definition of waste; to “use or expend carelessly, extravagantly, or to no purpose”. Waste is a failure to make good use of resources, such as energy, goods, money, time or opportunities. So by definition, waste provides no value and serves only to detract from value creation.

This places value and waste in direct correlation; the more waste that exists, the less value creation can occur. A business’s ratio of waste to value is therefore a key indicator of business health and performance. It follows then that if value creation is a key business objective, so too should be the process of proactively minimising waste.

Know value, know waste

As discussed last month, value can be created across multiple different dimensions, and it is sometimes hard to identify. Value could be tangible and obvious but also intangible and illusive. Knowing value is therefore a combination of process and judgement; process to measure performance and track tangible returns, and judgement to understand the hidden value something offers.

Once you begin to know value you can more effectively divert resources onto the right areas, and as a consequence, away from more wasteful activities.

In addition to this natural process, an appreciation of value allows you to pro-actively pick out areas where value is absent. Such areas can then be meticulously managed in order to minimise waste.

Clever cost cutting

Cost cutting has negative connotations because often businesses do it at the expense of business value. For example, in recessions businesses often cut marketing budgets only to lose market share to more visible competitors.

Waste reduction is an intelligent form of cost cutting. Because it connects with value, and thus seeks only to cut costs where value is lacking, it represents a more effective and prudent approach.

Waste reduction activities could be undertaken broadly, across areas deemed the most wasteful, or pursued line-by-line across every individual budget area. Every individual cost has its own waste to value ratio, and so each could be analysed in this way. Such a ‘waste audit’ could be run once to identify candidates for cost cutting, or run regularly to track and manage waste over time.

Such cost cutting activity should free up valuable resources without impacting value. Freed up resources then become opportunities to expend resource on more valuable activities. Seeing cost cutting in this way makes the endeavour about creating new opportunities – as opposed to simply cutting costs – and therefore may also help foster a more positive cultural attitude towards the task.

A cultural change

Nobody likes a scrooge, which is why cost cutting initiatives often have negative effects on company culture. The difference with a waste reduction approach is that cost cutting is not the only priority; the process also aims to increase spending on value creation. It is essentially about scrimping when value is absent, so that you can spend when value is apparent.

This distinction provides an opportunity to foster a positive waste reduction culture within an organisation. If employees understand the relationship between value and waste, they may be more inclined to both waste less and proactively define areas where resource could be re-positioned to create more value.

One good example of where such a culture exists is Google. The entire company is near-obsessive about identifying and cutting points of waste throughout their business and supply chains. But Google has fostered a culture in which waste minimisation is not solely about being frugal with money. Despite its meticulous focus on minimising waste, the company finds resource to do seemingly frivolous things like offer free breakfast, lunch and dinner to its employees; at first sight wasteful but in fact a valued staff benefit which nourishes and motivates employees, and likely boosts their productivity too. Had it not been for their ‘waste not’ culture, the company may never have been able to offer such valuable benefits.

When presented with a choice between creating value or waste, most people would choose the former. So culturally, the challenge is simply about providing the intelligence to make such informed choices.

Waste not, want not

The adage “waste not, want not” has been a favourite through two world wars, the world’s current environmental crisis, and countless other periods of difficulty where prudence over extravagance offers a solution for survival. Today we are facing two such crises, both environmental and financial.

These crises are two good reasons to think deeply about minimising waste in all of its forms – from the waste of our planet’s natural resources, to the money and time we inject into our businesses.

Looking beyond crises, the phrase also reminds us that waste just makes us want for more. Whatever the environmental or financial climate, the eradication of waste should be a priority, because ultimately: waste not equals win win.

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