5 Points to Business Success (and How Microsoft Dynamics ERP Fits In)

Current Success Doesn’t Necessarily Mean You’re Doing the Right Things 

One of the many thoughtless things one heard during the dot.com era was individuals “almost bragging” about their burn-rate. One CEO might say to the other “our burn-rate is $50,000 / month” while the other CEO would note that their “burn-rate was $100,000 per month”. As if a larger burn-rate indicated that you had a more important project, a better organization, or bigger potential.

   Quote regarding burn rate in dot.com era.

As many entrepreneurs learn, innovation is hardly correlated with risk (or investment for that matter). Boo.com had a similar phenomenon and is one of the most infamous examples of failures when they correlated high levels of funding and their momentum with success. Boo.com was “destined” to be one of the leading fashion retailers of their time.

With $150 million invested in the organization their fashion site was full of 3D animation and fancy JavaScript that made their e-commerce site look the price of their investment. Employees and investors had high expectations. In the end, amoung the many mistakes they made here are few:

  • Boo.com couldn’t attract the critical fashion retailers it needed to make the site a success
  • They designed a high-end e-commerce site that users of that day with dial-up connections couldn’t navigate
  • They forgot that clarity trumps persuasion

While they might have had short term “success” on the investment side and much momentum, short term success didn’t guarantee they had the right strategy. Years later, e-tailer Fashionmall paid approximately $250,000 for the site. Boo.com was just one example of the dot.com hysteria:

  • In 1998 alone, $26 billion dollars of venture capital was invested
  • Many IPOs in the early years experienced a 7% ROI on the day they went public
  • This later increased to close to a 65% ROI for IPOs on the day they went public

While these times provided many stories of short term success, it by no means meant they were executing the the right long term strategy.

 

“Failure in Business” Doesn’t Necessarily Mean You’re Doing the Wrong Things 

“Failure in business” often means you’re not being as successful as the other parties around you. Success and failure is primarily measured against a relative arbitrary standard, actuals versus budgets, or competitors.

The Canadian mortgage economy might have been seen as a failure when compared to the high flying US economy before the mortgage meltdown.

Much of the US ability to grow at such a fast pace was due the fact they abandoned the Glass-Steagall act of 1999 which allowed for more deregulation. Regulations around mortgages might have stifled the Canadian banking industry such as:

  • How interest rates are calculated
  • Not allowing for interest deductions on homes
  • Allowing for lender recourse when home owners defaulted

When Canada was slow when compared to the rest of the world one might have considered the slower growth of the economy a failure.

Or consider Warren Buffett, who was considered a failure by many by refusing to invest in the dot.com run. He was often noted as saying “I don’t understand it (technology) and therefore can’t invest it” (in hindsight, did we ever really understand it).

We know how both those stories end. When something you’re doing it looks like a failure it can correlate to the fact you are taking the wrong strategy – or it might not.  It’s hardly a sure thing to count on the wisdom of the crowds. 

 

Success Can Be More Dangerous Then Failure in the Long Term 

There is a Chinese proverb that says “one disease, long life, no disease, short life”. The point of the proverb is that if you know you have one disease you’ll take care of yourself, if you are the under the impression you have no disease you’ll have a short life – because you’ll likely neglect yourself.

Success is similar in that way  – success can be more dangerous than failure from a long term perspective because it brings the impression that you’re doing everything right.

  • Success can bring overconfidence
  • Success can bring us a feeling of entitlement which can make us abusive, angry and unhappy
  • Success make us start believing we deserve what we desire
  • Success can hamper our ability to adapt and change as we’re less introspective and our ego’s get larger

On the flip-side, failure instead brings introspection. Failure can often bring humility. The reality is “success” or “failure” in business are not always clear indications that you’re doing the right things or the wrong things from a long term perspective.

That bring us to, if you’re doing well – how do you know you couldn’t do better? If things aren’t going well – how do we know what we need to change?

 

Determining if You Are On the Right Track 

If we boil it down to principals and tactics; there are timeless principals of business that shouldn’t be violated. Bragging about burn-rates seems to be one that stands out subtly stupid. How do we then determine if we’re on the right track if “success and failure” aren’t always clear indications of whether we have the right track?

One way is to lead with introspection while remaining aware of the comparisons and competition. Leading with introspection only comes by having accurate data that shows us where we can improve.

As in a previous story we featured (the hidden ROI from ERP) Trail Appliances didn’t know what they didn’t know – until they implemented an ERP.

It doesn’t matter that they thought they were doing well – they didn’t realize they were losing hundreds of thousands of dollars – because they didn’t know the areas to focus on.

Like many times in project management, it’s typically not the known unknowns that will kill you (the things you already know you don’t know) but it’s the unknown unknowns – the items that you never know you should even know about. And really, how are you supposed to know this if you don’t have the information?

 

Tools Like Microsoft Dynamics Business Analyzer Help with the Unknowns 

Tools like Microsoft Dynamics BI tools help take the edge off those unknowns but only if you’ve taken the time to clarify the unknowns in your business. There are a few keys.

  • Real time data is key because it brings transparency which drives accountability which lifts efficiency
  • Reliable data is key to setting strategy (and strategy always dwarfs tactics)

Strategy is so key because strategy becomes the compass that guides us. If the compass is skewed a few degrees off – a slight miscalculation could land you on a different continent.

Microsoft Dynamics GP Business Analyzer Screenshot

If Comparative “Success of Failure Were Irrelevant” – Would You Know What to Do Next

  • Are you assuming you know what you don’t know?
  • If things are going well – how do you know they are going as well as they could?
  • If they aren’t going well – how are you going to correct them?
  • How do you know what things could be better?
  • Do you have the ability to steer correctly?

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