Wednesday, June 9, 2010

Competitive Performance - Use knowledge & Innovate

Competitive Performance
The term competition refers to a situation where two or more parties fight it out in the market for better share and gain. To get the better of the other, a business has to be proactive, dynamic and nimble. To out think, to act and adapt faster a business must acquire and harness its knowledge resources. When knowledge answers, businesses often innovate. Innovation well supported by knowledge help companies raise the bar and be competitive. Hence it is imperative, for companies that aspire to grow their businesses, to embrace knowledge and innovation.
Let’s dwell a bit on achieving competitiveness in an established market. We all know that a company can gain an edge over its competitors by achieving one or more of the follow viz., superior quality and service, Cost advantage, Ease of use and Aesthetic design. The following mind map captures various requirements for achieving each of these aspects of competitiveness.

Take a closer look at each of the requirements in the above map and try to figure out the role of knowledge in achieving them. A company that is aware of its knowledge repository and makes full use of it would keep delivering on all fronts and continue to grow.


Knowledge has its roots in learning. It is through learning that one builds up and strengthens his or her knowledge base. An encounter with a customer in an airport can open up a new way to serve and expand business. A business should identify all the available channels and points of learning to tap and convert that learning into a knowledge resource. Some can be accidental but many can be by design.
A company accumulates knowledge through its people, who learn and gather knowledge through various sources, in various ways and for various purposes. Knowledge thus gained should help a company to sharpen its competitive edge by improving processes, technology and the overall business performance. However not all willingly share knowledge for the greater benefit of an organisation. Two big challenges of knowledge management are making people share and use knowledge.
People, behind technology, beside machinery, in the cubicles, and those in the field make things happen in this highly competitive world. The knowledge they accumulate is vital for a company to grow. They learn and accumulate knowledge by doing, observing, questioning, reading, listening and brainstorming. The onus is on a company to make the best use of its knowledge assets.
A knowledge focused organization
* Knows that knowledge acquired for business does not automatically translate into knowledge used in business. Like a plant, knowledge requires a conducive environment to thrive.
* Knows what it knows, tracks & builds its knowledge repository
* Puts in place a system that acts as a breeding ground for knowledge
* Rewards and more importantly recognizes people for their contribution and making use of knowledge
Knowledge Management System
Any effort towards knowledge management must keep the major stakeholders (employees) of knowledge into consideration. A mere installation of knowledge management software won’t suffice.
Men distinguish themselves from the rest with the knowledge they possess. Asking them to share that knowledge with others to the common benefit requires greater commitment and a genuine system. Even after that it will be a tough task. The following question can stop one on his tracks. Who is responsible for the outcome, if I use other’s knowledge? This is where a comprehensive and well communicated KM system comes in handy for a company.
The following are imperatives for a successful knowledge management system.
  • Well articulated knowledge strategy
  • Firm commitment by the top and middle management
  • Clearly defined roles and responsibilities with regard to KM system
  • Strong and committed knowledge management team
  • Clear reward and recognition system
  • Comprehensive knowledge capture, transfer, storage, channelling and usage system
  • Open work culture that encourages knowledge sharing and usage
  • Facility for people to track and know the fate of their knowledge contribution
  • Last but not the least, absence of blame culture and a clear accountability structure


Innovation is an act of starting something for the first time; introducing something new. By innovating we bring something new to the environment. This is how innovation is defined in dictionaries. In business, innovation often is associated with new products and services. However it can also be associated with new processes, practices, methods etc. that improve core operational parameters viz., cost, quality and time.

To innovate one needs to think and capable of thinking differently. It’s a combination of attitude and knowledge that breeds innovation. Innovation needs right climate and support. It cannot happen in a choked environment.
I will post later on supporting innovation in a business environment

Tuesday, June 1, 2010

Catch your receivables young

A sale is complete only after the customer pays. Yet in client places I have come across people in sales function act as if their sale is complete with the purchase order from the customer. This is a familiar situation in many companies. Many may think that it's got to do with the attitude, and they may be right. But it is also a fact that performance assessment systems and definition of roles have contributed to it. If you ask sales guys on how their incentive system is structured, chances that 9 out of 10 would say it is 'sales volume' is highly likely. Collections are always an afterthought in assessing a sales person's performance.
Jobs performed, either directly or indirectly, generate revenue or focus on cost control. Revenue is generated only when your banker ticks up your bank balance and not when your customer signs the purchase order.
Pillars of Receivables management
It is important to assess sales performance in a balanced manner but receivables management is much more than that.
Seamless and smooth sales order processing (SOP)
SOP is initiated at the receipt of Customer purchase order and ends with the delivery of product or service to the customer. Every activity along the line must support speedy processing of work along with the required quality. Any activity that holds up the process even for a brief period must be thoroughly examined and its purpose validated. I have come across businesses where the quality of a order is checked by people in production function. This kind of activity is often referred to as a control activity, to ensure that the interests of the business do not suffer. But in reality these types of activities often hurt customer interests and cause resentment among sales ranks, which in turn affect business interests.
It is the job of salesmen/women to ensure that the order they bring in matches with the quality expected by the business and its policies. The buck stops with them. Any order that they accept and receive must be processed without any hiccup or delay concerning the quality of the order. The interest of the business can be protected by making sure that the performance of the sales managers is evaluated based on the quality of orders that they bring in and not just by the volume of orders.
Quality of an order
Evaluate the quality of an order based on the volume of the order, the price, payment promise and the terms of the order.
* There was an occasion when a company accepted a big order (around 150 pump sets) at Rs.1140 / unit. I was working on an assignment there and advised them against it since I had every reason and data to prove that it was not even covering their variable costs. It some how did not register in their minds and eventually they did sell at that price and recovered the payment after more than 3 months. It was a struggling company and execution of this order only added to their woes.
*  Payment promise is another aspect of a quality order. It refers to both the track record and the current expectation. It is difficult to validate it pre-sale, however a company must evolve a system whereby payment track record of customers is captured and linked to performance of respective sales people.
*  Terms of sale refers to other things including delivery and any other offers and concessions. A sale that results in lesser net revenue for the company must get lesser performance rating compared to other normal sales.
Assess the performance of sales managers and sales men based on the quality of orders they bring in. As long as their performance meets with the expectation on all the fronts, allow them a free hand in accepting orders of all quality. If the performance is not desirable then constrain them from accepting lower quality orders. Also link the incentive system to this performance rating. Rest assured your business interests would not be hurt by your sales men. No one would like their wings (freedom to accept orders) to be cut and not especially when their colleagues merrily flap around. Secondly incentives structured around proper sales performance would make them think twice before accepting an order.
Timely and quality customer service
It's a well known aspect of receivables management. If you service bad, you would not get your payment in time. Don't mess up with any customer and definitely not with your regular customers. Give them what you promise and Promise what you can give. See related article keeping your customers.
Payment follow-up and collection intelligence system
Your sales order processing is excellent, and your customer service is impeccable yet your receivables may get delayed because of customer financial troubles, bureaucratic customers and customers who want to delay for their own benefit. Develop a system and automate it to help speedier collection.
  1. Draw a matrix with age and size of receivables on the two axis
  2. Develop 4 or 6 pools of receivables based on the age and size of receivables
  3. Devise follow-up system that changes in tact and  approach with the movement of the receivable through various receivable pools
  4. Increase the intensity and level of executives involved for various receivable pools
  5.  With the help of technology capture information generated by the system (like customer feedbacks, dodgings, remarks and intelligence of people following up etc.). They help in understanding different customers, their ways and in evolving the follow-up system. In the long run patterns emerge and give better understanding of various things that delay collection and how to over come them.
Customer rating system
It is always important to know how profitable a customer is to a business and where he costs and where he benefits it. Comprehensive customer rating systems would help a company avoid and if necessary qualify customers at Pre-sale and treat them accordingly. By improving the quality of customers, a company can easily control the age of its receivables. More importantly link them all, SOP, Customer service, PFCIS, and Customer rating system.


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