Finding the REAL sub-goals of a company.

Like Indiana Jones, we are left to dig up our own conclusions as to the real sub-goals of the company.  There are often plenty of resources to discover these little treasures.  Here are just a few:

•       Annual Reports.  Publically traded companies are required by law to publish an annual report to all shareholders.  Look under “investor relations” on the company's main website to find a quick link.  Just recall that annual reports are the purest form of biased public relations a company produces.  I once had a professor at Harvard Business School exclaim that the goal of the company was to tell the best possible story of the operating results and the goal of the outside analyst was to find all the hidden lies.

•       10-K.  This is a Security and Exchange Commission (SEC) required filing.  The “K” designates that this is the summary annual filing.  This is a gold mine.  It is not a public relations document at all.  In fact, it is produced in one of the most unfriendly and marketing agnostic formats you will ever see.  It looks like (probably because it is) a legal document.  No pretty pictures here – just the facts.  They disclose EVERYTHING the company has to disclose by law without the ability to dress it up for the window shoppers that peruse the annual report. 

•       10-Q.  This is the quarterly filing version of the 10-K.  While not in as much detail as the 10-K it is still a gold mine for quarterly performance.

•       Analysts Reports.  All the enormous firms on Wall Street employ thousands of the best and brightest minds available to decipher what companies are reporting to the public.  You would think these would be unbiased and of great value.  The problem lies in the natural conflict between these large Wall Street firms’ banking operations and their analysts.  Bankers want the stock price (and thus all the analysis) to be positive.  Analysts want to tell the truth – but are paid by the bankers.  Guess who wins that standoff?  While there are plenty of provisions for barriers within each firm to ensure this banker-analyst conflict does not occur, you would be foolish to believe there is any real separation of influence.  So read analysts reports with a grain of salt – some of it might be really good – particularly if their banking operations have absolutely no connection at all to the company they are analyzing.

•       Google.  Crazy, but Google is another great source.  Simply Google the company name, board member names, senior management names, etc. and you will find all sorts of information on what they have told the press about the company’s goals and the progress they are making in achieving them.  Here you have to keep in mind that you get what you pay for.  If the information is free, you have to remain skeptical without real verification. 

•       Company’s website.  A company will often release vast amounts of information on their own PR website.  Just remember the author (the company) has a real vested interest in telling you the story they think puts them in the best light.  No way are they going to voluntarily send out a press release saying they have been dumping toxic waste into the local rivers without some sort of outside mandate.

Company Goals - Where Do I Find This Information?

Whether you're in a company or the company is a client, it is shockingly common to discover that very few people actually know the goals of their company/client!

How could this be?  I am not suggesting that no one at the automobile manufacturer understands that the goal is to sell more vehicles at greater profit.  But this is what I refer to as pushing a boat with a rope.  Obviously, no matter how much you “push” on a rope tied to a boat (unless it’s physically in contact with the vessel) you are not going to move it!  So goals such as the below are not inconceivable to the casual observer/employee:

·      Sell more cars

·      Sell more trucks

·      Reduce the cost of building a car by 10%

·      Reduce the cost of people used in building the cars

But what do any of the above mean?  I call the above “directly unachievable goals.”  They cannot simply be mandated.  You must apply the formula we discussed earlier of Y = f (x) in order to focus efforts and measure the results of those efforts on what makes selling more cars or reducing costs possible.

Since it is not uncommon to have no idea what your company/client achievable goals are, you have to discover what they are independently.  We'll discuss that in tomorrow's blog.

Let me interject here that senior management is not stupid.  It’s not as if they are ignorant of the Y = f (x) relationship!  They are just generally very ineffective or lousy communicators of these sub-goals to the rest of the company.  The irony is that they are often surprised at how little people are “on board” with their vision or plan when they have never really aligned and communicated what they are trying to accomplish!

THE basic formula for all business

Let’s now quickly summarize the goals of most management teams using our basic formula for businesses:

Profits  =  Revenue  –  Costs

Goal #1 – Maximize Profits – often stated as a goal, this is really just the equation result of increasing revenue or reducing costs.  But given that perception is reality, we can interpret it as a goal in relation to marketing in order not to confuse the convention in some businesses.

•       This is what marketing does in reality – we just need to communicate it correctly so it’s understood.

•       This is marketing’s great mission – whether its to increase recognition or to raise brand awareness and brand value – it all translates to maximizing profits.

Goal #2 – Maximize Revenue.  There are two main ways to maximize revenue:

A.     Maintain and/or Grow Earnings

•       This is often considered “table-stakes” for most senior managers, meaning this is expected as part of the job.  If you’re not growing, you’re contracting.  Most companies must grow, grow, grow.

•       However, this is a very difficult task as its ease in achieving is inversely related to company revenue sixe.  So as you get bigger, it’s more and more difficult to maintain growth.  When you’re still a small company it’s not a particularly difficult task to double sales in many cases!

B.     Maximize Market Share

•       Marketing is a main enabler of this goal as many mature businesses exist in a zero sum market share environment.  The only way to increase your company’s market share is at the expense of a competitor’s share.  The “pie” is only so big for a saturated market and growing the pie is exceedingly difficult without disruptive or highly innovative new product or service introductions.  Often, market share is taken from a competitor either through aggressive sales efforts or great branding campaigns that change the consumer or customer behavior.

Goal #3 – Minimize/control or reduce costs

•       Guess what, you’re a cost in most senior managers minds – just like toilet paper, copiers and electric bills!

•       Thus, marketing is an easy target for reductions due to lack of a basic understanding of how this critical function drives real value in the core businesses.  We will prove the direct connection between marketing and profit (via revenue).

•       We must change this focus from costs to profit (revenue) drivers via Return On Investment and Return on Objectives.

Third, marketers must communicate in English – by speaking finance, the language business people understand.

Third, communicate in English – by speaking finance, the language they understand.  We have learned the value of learning finance, and the natural progression of thinking in finance, we now turn to communicating in finance.

From our earlier discussion on the disparity of terms and goals used in marketing vs. finance, it should have become apparent that you must keep this focus at the front of your mind. 

There are several times and mediums to communicate marketing programs to senior managers.  Email, reports, presentation – even lunch dates!  

Keep this mind: you are always being interviewed in corporate America – and to a lesser extent even in smaller enterprises.  There are no casual, innocuous conversations – seemingly friendly and off-hand discussions.  Management is always assessing your demeanor, communication talent, etc.  It has been my experience that it is more prudent to lead with your finance knowledge and not your marketing expertise unless specifically asked.  Most executives and senior managers are terrified of sounding unknowledgeable (or “stupid”) by asking what you mean by marketing centric terms and how they related to sales.

Developing a mindset of communicating in finance takes time and patience.  It’s not something you learn from a book or blog.  You won’t see the “routes” up the rock face until you’ve tried climbing a few times. 

Second, learn to think in "English" – or Finance, the language of business.

Second, learn to think in English – Finance, the language of business.  So it is one thing to learn to speak finance, it is another step to learn to think in finance.  While this may seems like semantics to some, it is truly an evolutionary step in your approach to all things business.

What do I mean when I say to “think in finance?”  Simply stated, you will perceive your business world from a new perspective that is always through the lenses of senior managers.  Let me use an analogy.

When I was at West Point, I was a member of the mountaineering and rock climbing club.  After you learn the basics of rock climbing you are capable of climbing defined routes without the fear you may have initially perceived.  During your training, you will become familiar with “looking ahead” at the route – trying to figure out not what THE NEXT MOVE IS, but rather, what THE NEXT THREE OR FOUR MOVES ARE!

The reason for this is readily apparent.  If  you choose the single easiest move for the next move, you may have inadvertently made the subsequent move a very, very difficult effort.  The combination of the next three to four moves in totality is really the best route to reach the top of the climb. 

Soon you start looking at all rock walls you drive by on the highway for a possible route.  How would you attack that wall?  What are the most obvious and protected climbing holds?  Without really thinking about it, when other people see a rock wall that was cut from the hill/mountain for the road to continue at an acceptable grade, you’re seeing patterns and holds and ultimately routes to climb it.

What this means for the marketer.  The same is true with the language of finance.  When you learn finance, you start seeing the world through the lenses of a senior manager that is always trying to identify dangers in the current route and how to improve the chances of success by defining and limiting danger!  Instead of seeing “signage” at a ball park, you start looking for kiosk locations to promote your product  that you can measure and turn into sales!  You are now THINKING in finance.