Divorce From Theory and Practice, Part I

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Background

Theory is like knowing, and practice is like doing. There is always a big gap between knowing and doing, and it is always easier said than done. Everyone can develop unlimited number of ideas but not everyone can turn them into actions. In the business world, action speaks louder than words. Nobody cares about theory, but everyone wants practical method to handle real-life problems.

Application Review

Excel is bundled as part of Microsoft Office, and Microsoft Office is basically a must-have to almost every enterprise. The reason is two-fold. First, Microsoft Office has reached critical mass, and has become the “common language.” Enterprise using different application may encounter compatibility issue, and the conversion cost may not be justified. More importantly, the most basic version of Microsoft Office, or the standard version, already allows the user to write using Word, calculate using Excel and communicate using PowerPoint. At around US$400 per copy, Microsoft Office is definitely value for money as it helps everyone manage work and run business.

SPSS is a computer program for statistical analysis in social science, and is priced at around US$1,600 per copy. Although its functions are more powerful than Excel, most enterprise would not invest 4 times the cost of Microsoft Office for just some statistical analyses. It is not everyone’s job to perform analyses, but it is everyone’s job to make sure that the enterprise is creating value to the market. This does not mean that analyses are not at all important. Without the ability to analyze, it is almost impossible to identify where the problems are, and thus very difficult to solve problems. Analyses can help provide insights, but those insights may not necessarily be able to provide actions which bring both short-term or long-term improvement. Analyzing for the sake of analyzing is not effective. Even worse, it is a waste of resources.

Business is about numbers management. The important number in business is the bottom line, or profit. Profit is all that matters in the measure of success, and it is the unforgiving yardstick used to measure success. Businessperson would value and use the tool that allows him or her to achieve success within the shortest time possible. Tools that lead them nowhere are not welcome. Besides Microsoft Office, the most basic yet effective application adopted by more than 90% enterprise around the globe, Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and other acronyms, which claim to help enterprise solve business problems, seem to be the obvious choice.

See Part II.

5 COMMENTS

  1. Daryl

    Profit is an accounting opinion, not a fact. And measuring it depends upon the accounting jurisdiction you are in, as Daimler found out to its cost when it registered on the NYSE.

    Far better to use cashflow or one of its many derivatives than profit.

    And as other discussions on, e.g. NPS, have shown, there is no single number that is useful for providing a picture of the health of an organisation.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  2. Graham

    As written in my previous blog “The Death of Relationship,” Ram Charan writes in his book “What the CEO Wants You to Know” that successful business leaders never lose sight of the basics. What are the basics? Cash generation, return on assets (a combination of margin and velocity), and growth.

    John Pope II says in his 1991 encyclical Centesimus Annus that “when a firm makes a profit, this means that productive factors have been properly employed and corresponding human needs have been duly satisfied. But profitability is not the only indicator of a firm’s condition. It is possible for the financial accounts to be in order, and yet for the people – who make up the firm’s most valuable asset – to be humiliated and their dignity offended. Besides being morally inadmissible, this will eventually have negative repercussions on the firm’s economic efficiency. In fact, the purpose of a business firm is not simply to make a profit, but is to be found in its very existence as a community of persons who in various ways are endeavoring to satisfy their basic needs, and who form a particular group at the service of the whole of society. Profit is a regulator of the life of a business, but it is not the only one; other human and moral factors must also be considered which, in the long term, are at least equally important for the life of a business.”

    Profit may not be the number, but it is at least an indication.

    Daryl Choy, the founder of Touchpoint eXperience Management, helps firms make a difference at every touchpoint. Choy can be reached at wisdomboom.blogspot.com.

  3. Daryl

    The late-Pope is talking abouth ‘the business of business’, not business profiatability per se. His words echo those of bona fide business advisors like McKinsey’s Ian Davis and the British economist John Kay, both of who discuss this tricky question in more detail.

    To repeat my earlier point. Profit is an accounting opinion. It is not a fact. We should be using fact-based management rather than the wooly alternatives to drive business forward. Cash is king.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  4. Graham

    The captioned is the same as an article written by Jack & Suzy Welch in their book Winning: The Answers.

    They say “there are three key indicators that really work: employee engagement, customer satisfaction, and cash flow.”

    Without profit, there’s no cash. Without cash, there’s no profit. It’s only a matter of chicken or egg.

    Daryl Choy, the founder of Touchpoint eXperience Management, helps firms make a difference at every touchpoint. Choy can be reached at wisdomboom.blogspot.com.

  5. Graham – perhaps Darryls point isn’t about after tax balance sheet profitability, but operating margins. Considering all of the investments in sales and marketing do, in fact, roll up to SG&A, its is perfectly reasonable that cost control should be a part of any CRM program. It’s not about just about attracting and keeping customers, it’s about doing that profitabably.

    Daryl – Graham’s points is correct however. I agree with your premise that “business is about numbers management”, however numbers mean different things to different people. If you are going to be successful creating a dashboard for executives to objectively review their business, it’s critically important to correct terms. “Profit” does mean something very specific to CEO’s and CFO’s. Those of us in the CRM profession will lose credibility and our seat at the adult table if we don’t speak in their language. As a Catholic myself, I guess I have to agree with Papal infallibility here, but I wouldn’t use his Holiness as my source if I were working on a metric dashboard for a CFO of a publicly traded company.

    I think these discussions are very healthy. There are many different metrics in the mosaic of running a company and what those metrics, what they mean, and which group is responsible for managing to that number is different. The Holy Grail, to continue the religious analogy, is to create a dashboard where all of these metrics are coordinated and rationalized, leverage the same data, and can be aggregated or broken down depending on the person who needs that information.

    I realize you are trying to say a lot more in your series, but I think it might be helpful for those of us in the business to start talking about numbers, metrics, and what they really mean.

    Scott Santucci

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