A passion for business and leadership excellence

A passion for business and leadership excellence

 

TEC Group 422

TEC Group 422 comprises non-competitive CEOs and Presidents of both private and publicly traded organizations with a passion for business and leadership excellence.  Member companies are found listed in the top 250 companies on the 2015 ROB Top 1000, in the top 1/3 of 2015 Profit 500, in Deloitte’s Technology Fast 500™ and have been finalists in Ernst Young’s “Entrepreneur of The Year Awards” for 2014 and 2015.

Joining TEC has enabled the leaders of these organizations, as a team, to share their drive and commitment to enrich each other’s ability to achieve their individual business, professional and personal goals. Members act as a private board of trusted advisors with no agendas other than helping each other share best practices, solve management issues, make better decisions and improve leadership skills.

• This group represents broad industry backgrounds and experience including construction, business services, retail, manufacturing, distribution, real estate development, finance, franchising and technology.
• Member organizations have combined revenues of over $3.0 billion and more than 4,500 employees.
• Member CEOs/Presidents lead publicly traded and private companies which operate globally with sales and marketing offices, operations, clients and suppliers in Canada, US, numerous EU countries, South Africa and Middle East.
• The group holds monthly advisory board executive sessions  during which the team processes issues and opportunities involving leadership challenges, branding and marketing , new business launches, financial re-organization, global expansion, organizational development, senior level staffing and reorganization, retail strategy, manufacturing, board strategy and management.
• Eight times a year the group benefits from workshops with experts covering a wide range of issues and topics.
• Monthly 1-2-1 private sessions are held between the Chair and each member focusing on business and personal growth.
• Members have access to an online best practices library, member conferences and a network of more than 1,100 Canadian and 20,000 global business leaders.

Members comment on how “loneliness-at-the-top” has been eradicated and how “stress reducing” it is to be part of a group of liked-minded leaders with whom they can share and discuss matters that normally they would need to deal with in relative isolation. They are experiencing the quality of their decisions, strategies and overall problem solving noticeably improving. Access to fresh thinking and challenging conversations with peers is enhancing their personal effectiveness. 

T.E.C. is not a social club. It is challenging; it is personal; it is hard work!

If joining a TEC group interests you, contact me and we can discuss if it is a fit.

• Over 1,100 Canadian business leaders have joined TEC groups
• Their companies generate $50 billion in annual revenues and employ over 100,000.
• T.E.C. Canada member companies outperform other companies in terms of CAGR by a factor of more than three to one. (Dunn & Bradstreet research).

                  Richard Peters, Chair



  
LinkedIn: https://ca.linkedin.com/in/richardpeters2
Direct: (416) 471-1956
E-mail: rpeters@tec-canada.com
Blog: Profit and Leadership

From the Outside In: Supply Chain as Strategic Advantage

By Lisa Harrington

Even non-supply chain executives appreciate the value of flexible and agile operations.

Leading companies have come to realize that supply chain management is vital to success in the global market. Organizations now put logistics operations on the agenda for management discussion—including in the C-suite.

CEOs recognize that their supply chains are strategic assets, both for delivering on the customer promise and for fueling growth. Overall, they give their supply chains reasonably high marks for client satisfaction and operational efficiency, according to a recent study by IBM's Institute for Business Value.

Executives in outperforming enterprises, however, rate their supply chains even more highly. "Sixty-five percent say their supply chains are very effective at satisfying clients, and 62 percent say they are very effective at generating higher revenues, compared with just 42 percent and 27 percent, respectively, of executives in other organizations," the study reports.

To gain better insight into how "outsiders" perceive supply chain management, Inbound Logistics asked senior non-supply chain executives at two leading companies to share their views. They discuss the supply chain's role in business generally, and within their enterprises specifically; how that role has changed over the past few years; and how it contributes to profitability, success, sustainability, innovation, customer service, and competitive advantage. 

AT Unilever, flexible Supply Chain is The new table stakes
On any given day, two billion people use Unilever's products to look good, feel good, and get more out of life. From long-established names such as Lipton, Knorr, Lifebuoy, Sunlight, and Pond's to new innovations such as the Pureit affordable water purifier, Unilever's range of brands is as diverse as its worldwide consumer base.

The company markets more than 400 brands, ranging from nutritionally balanced foods to indulgent ice cream, affordable soap, luxurious shampoo, and everyday household care products. Many of these brands embrace long-standing, strong social missions, such as Lifebuoy's drive to promote hygiene through hand washing with soap, and Dove's campaign for real beauty.

In 2013, Unilever reported annual sales of $66.6 billion. Emerging markets account for 57 percent of its business. The company employs more than 174,000 people.

"Unilever sees the supply chain as strategic, driven through global scale and deep expertise, and fully integrated into the business strategy," says Kees Kruythoff, president, North America, Unilever. "Supply chain is absolutely critical to Unilever's success. Most importantly, it is about delivering value to customers. In an increasingly omni-channel environment, it becomes even more important to create a channel-segmented, responsive, and flexible supply chain—and to do so at the lowest possible cost. That has become the new table stakes."

Supply chain plays a lead role in supporting the global Unilever Sustainable Living Plan (USLP). Launched in November 2010, the USLP "sets out to decouple our growth from our environmental impact, while increasing our positive social impact," Kruythoff says. "It is our blueprint for sustainable business.

"By 2020, the plan calls for helping more than one billion people enjoy better health and well-being; halving our environmental footprint; and achieving 100-percent sustainable sourcing," he adds.

Supply chain has played a significant role in advancing the company's sustainable sourcing initiative. "We went from sourcing 18 percent of our commodities sustainably in 2011 to 48 percent in 2013," Kruythoff notes. "That strategy includes a big drive to source from small farmers.

"We've also realized an 18-percent improvement in CO2 efficiency since 2010," he continues. "By 2020, our goal is to have CO2 emissions from our global logistics network at or below 2010 levels, despite significantly higher volumes."

To achieve this, the company plans to reduce truck mileage, operate lower-emission vehicles, employ alternative transport such as rail or ship, and improve warehouse energy efficiency.

"Supply chain is strategic, critical, and an enabler of change," Kruythoff concludes. "As the world gets increasingly digital and connected, supply chain will only become more important."

Supply chain creates value in three key areas, according to Salwan Sumeet, Unilever's senior vice president, human resources, North America. "First, delivering cost effectiveness—the most obvious and direct benefit," he says. "Second, driving brand preference through product and service quality. Finally, driving growth, which is the most critical role.

"Customers are increasingly driving channel-specific business strategies, and adapting to a highly volatile world," he adds. "Being a partner of choice as they see opportunities or difficulties in the marketplace is a huge driver of growth."

Logistics operations also influence Unilever from within. "Nearly 65 percent of our employees work in supply chain," Sumeet says. "We can never underestimate this large and diverse workforce's impact on our culture, values, and implementation of broader company strategies."

Supply chain also plays a major role in business strategy. "Delivering reliable customer service is top priority, and a critical foundation to engaging in strategic joint business planning with customers," says Todd Tillemans, Unilever's senior vice president, customer development. "Supply chain is critical to our U.S. strategy, and especially to our goal of being our customers' choice for top strategic partner.

"A flexible and responsive supply chain enables us to be thought leaders for our customers, drives overall market development, and makes it possible to achieve consistent top- and bottom-line growth for us and for our customers," he adds.

"Supply chain is important to delivering our USLP goals—not only for Unilever, but also for our customers, through our Joint Sustainability Plans," Tillemans explains. "These wide-ranging partnerships include building a sustainable future via renewable energy initiatives, cutting greenhouse gas emissions, and reducing solid waste.

"We are investing heavily in supply chain infrastructure to continuously improve, add more value for customers, and create competitive advantage," he adds. 

Total Wine & More: Raising a Glass to Supply Chain Efficiency
Headquartered in Potomac, Md., Total Wine & More is the largest independent fine wine retailer in the United States. Its 105 stores across 16 states typically comprise 20,000 to 25,000 square feet.

Total Wine's business strategy is based on three pillars: selection, price, and service. The supply chain is critical to delivering on each of these value propositions, says Edward Cooper, Total Wine's vice president of public affairs and communications. Without an effective supply chain, the company would be hard pressed not only to meet the challenges of succeeding in this heavily regulated industry, but to deliver growth and profitability for today and tomorrow.

"We are committed to offering the best wine selection, with an emphasis on fine wines," Cooper explains. "This differentiates us from many U.S. retailers that specialize in one geographic area or price category. Our typicalstore carries more than 8,000 different wines from every wine-producing region in the world.

"Total Wine & More stores also carry more than 2,500 beers, and more than 3,000 different spirits in every price range and category," he adds.

Since opening its first store in 1991, Total Wine & More has focused on being the price leader in every community it serves. "Our tremendous buying power and special relationships with producers, importers, and wholesalers offers us considerable savings, which we pass on to customers," Cooper says. "This includes matching prices with such retail powerhouses as Costco, the largest seller of alcoholic beverages in the United States."

Because Total Wine is a direct-to-customer retailer, the company designs its stores to be welcoming and easy to navigate, with products displayed and organized clearly. Recent generation Total Wine stores, for example, offer beverage selection and wine/food pairing programs on iPads, as well as televisions broadcasting educational information. Its more than 2,000 store associates receive constant training to stay current on the latest wines, beers, and spirits offerings.

Managing large stores with extensive inventory requires an effective and efficient supply chain. "Our supply chain team facilitates product movement between suppliers and stores," says Cooper. "They work to ensure we have the right product in our stores at the right time for our customers by managing orders, inventory, and store replenishment functions."
This is no easy task, given the unusual complexities of alcohol control regulations and taxation in the United States. Alcohol distribution involves a three-tier system, comprising producers (wineries, breweries, distillers, and importers), wholesale distributors, and retailers.

Some states—or even counties—operate as alcohol beverage control (ABC) jurisdictions. Producers may only sell to distributors, who, in turn, may only sell to retailers. Distributors store product under strict security regulations, shipping it to restaurants for on-premise consumption, or locations such as ABC stores, Costco, Walmart, and other retailers for off-premise consumption. Internet sales of alcohol in the United States are low—just two percent of wine is purchased online—primarily due to these complex and strict regulations.
In the context of this arcane regulatory structure, Total Wine's supply chain team is charged with working with producers and distributors to ensure a smooth operation.

"Jay Clarke, senior vice president of supply chain, works with our partners in the two supply-side tiers to ensure we are rarely out of stock, and customers can get what they want," Cooper says. "They expect that of us, and we do everything we can to deliver. This includes managing seasonal and holiday sales peaks and valleys.

"In summer, for example, beer consumption in the United States jumps by 15 to 20 percent," he notes. "Our supply chain team has to coordinate closely with producers and wholesale distributors to ensure the products we need get to our stores.

"To deliver on our lowest-price promise, Total Wine must closely manage its cost structure—and the supply chain comes into play in a big way," he continues. "Having a mature supply chain capability helps make sure products move from one location to another effectively and efficiently. 

Supporting Small Business
"Our business model is to seek out new small brewers, vineyards, and artisanal spirits distillers, and bring these products to customers," Cooper says. "The big breweries have sophisticated distribution capabilities, but small companies do not. So our supply chain team works with them to design the logistics needed to support our stores."

Part of this forecasting support includes the craft beer market, which is expanding 20 to 25 percent year-over-year, making it the fastest growing part of the industry. It is also, incidentally, the sector of the industry that is most desired by customers, and most underrepresented in distribution. That's why Total Wine seeks out purveyors of the latest craft beers, and puts together schematics for their distribution.

"These beers—along with new brands of liquor and various types of cigars—are exactly what Total Wine's customers are looking for," Cooper says. "They are also the kind of business partners we want to build lasting and beneficial relationships with.

"Our supply chain team streamlines inbound-to-store deliveries to keep costs down—buying by the pallet load, for example, so we are not being inefficient by moving a few cases of wine on a big truck," he continues. "Supply chain takes our demand forecasts, determines what we need overall, how much inventory we can hold in our stores, and how we can move product efficiently to our locations."

Throughout all these activities, Total Wine's supply chain group tracks and manages compliance with federal, state, and local regulations. "Our supply chain team works closely with the state alcohol and tobacco regulators to ensure paperwork is done, taxes are paid, and product gets from Point A to Point B in the most streamlined way," Cooper says.

Total Wine's primary focus lies in being a brick-and-mortar retailer, and providing the in-store experience as a value-add to customers. But the company is also exploring the online channel. "We are looking at competitive threats such as Amazon, and the opportunities presented by Internet sales," Cooper says. "We are working with our supply chain group to work out compliance, taxation, and final-mile delivery issues. It's an ongoing exploration.
"We want to grow together with our producers and wholesalers," he adds. "We are big enough, and have enough heft to help build brands, and we like to do that. It's good for our customers, the producers, and wholesalers."

Total Wine's supply chain helps make this goal a reality.

The 11 Rules of Highly Profitable Companies

Image credit: Shutterstock

 

How do you generate the most profit with the least effort? How do you maximize margins without sacrificing quality? 

 

I'm not talking more customers, nor more revenue, nor more offices and employees. Profit.

 

Based on my interviews with high-performing CEOs ("high-performing" determined using annual-profit-per-employee measurements) in more than a dozen countries, I've listed 11 common "rules" below. This is a return-to-basics call.

Here's your cheat sheet for consistent profitability -- or doubling of it -- in 3 months or less. 

1. Repetition is Usually Redundant — Good Advertising Works the First Time

Use direct response advertising (call-to-action to a phone number or website) that is uniquely trackable – fully accountable advertising — instead of "image" or "brand" advertising (e.g. billboards with no URL/phone/messaging), unless others are pre-purchasing product to offset the cost (e.g. “If you prepurchase 288 units, we’ll feature your store/URL/phone exclusively in a full-page ad in….”).

Don’t listen to advertising salespeople who tell you that 3, 7, or 27 exposures are needed before someone will act. Well-designed and well-targeted advertising works the first time. If something works partially well (e.g., high click-through with low percentage conversion to sales (CVR), or low click-through with high conversion, etc.), indicating that a strong ROI might be possible with small changes, tweak one variable and micro-test once more.

Cancel anything that cannot be justified with a trackable ROI. 

2. Pricing before Product – Plan Distribution First 

Is your pricing scalable?

Many companies will sell direct-to-consumer by necessity in early stages, often through a simple website. Only later do they realize that their margins can’t accommodate resellers and distributors when they come knocking. This is true whether your "distributor" is iTunes, a worldwide widget distributor, or Orbitz.

If you have a 40% profit margin and a national distributor needs a 70% discount off of retail (or "cut") to sell into wholesale accounts, you’re forever limited to direct-to-consumer… unless you increase your pricing and margins after-the-fact, or launch new "premium" products to fix the problem. For a bootlegged start-up, this distraction can equal sky-high customer churn or death altogether.

Plan out your first two years of distribution plan before setting pricing.

Think digital is different? Think again.

Test assumptions and find hidden costs by interviewing those who have done it: will you need to pay for co-op advertising, offer rebates for bulk purchases, or pay for shelfspace or featured placement? I know one former CEO of a national brand who had to sell his company to one of the world’s largest soft drink manufacturers before he could access front-of-store shelving in top retailers. 

3. Less is More – Limiting Distribution to Increase Profit

Is more distribution automatically better? Not necessarily.

Uncontrolled distribution leads to all manner of head-ache and profit-bleeding, most often related to rogue discounters. Reseller A lowers pricing to compete with online discounter B, and the price cutting continues until neither is making sufficient profit on the product and both stop reordering from you (or selling/referring your product). This race to the bottom requires you to launch new products, as price erosion is almost always irreversible.

Avoid this scenario and consider partnering with one or two key distributors instead, using that exclusivity to negotiate better terms: less discounting, prepayment instead of net payment terms, preferred placement and marketing support, etc.

Whether Apple or Estee Lauder, sustainable high-profit brands usually begin with controlled distribution. Remember that more customers isn’t the goal; more sustained profit is. 

4. Net-0 — Create Demand vs. Offering Terms:

This is related to Rule #3.

Focus on creating end-user demand so you can dictate terms. Often one large advertisement, bought at discount remnant rates, will be enough to provide this leverage.
Just because everyone in your industry offers payment terms doesn’t mean you have to, and offering terms is one of the most consistent ingredients in start-up failure.

To avoid getting strung out and cash-flow poor: Cite start-up economics and the ever-so-useful “company policy” as reasons for needing prepayment and apologize, but don’t make exceptions.

If you agree to receive payment on net-30 terms (they pay 30 days from invoice, or receipt of product), it will become net-60, which becomes net-120. Time is the most expensive asset a start-up has, and chasing delinquent accounts will prevent you from generating more sales.

On the hand, if tons of customers are asking for your product, resellers and distributors will need to buy. It’s that simple. Think a big order from Wal-Mart is a godsend? Be careful.

Since they're almost always net-180+, and they can return unsold product, it could actually be the death of your company. How are you going to pay for the needed inventory?

Typically, debt. What will you do if they return half of it because they didn't give it proper placement, so it didn't have sufficient sell-through? Be careful, lads and lasses.

Put funds and time into strategic marketing and PR to tip the scales in your favor. Consumer demand = your ability to negotiate better terms. 

5. Limit Downside to Ensure Upside — Sacrifice Margin for Safety

Don’t manufacture products in large quantities to increase your margin, unless your product and marketing are tested and ready for roll-out. In other words, only when you already have a proven demand and can forecast sell-through rate.

If a limited number of prototypes cost $10 per piece to manufacture and sell for $11 each, that’s fine for the initial testing period, and essential for limiting downside. Sacrifice margin temporarily for the testing phase, if need be, and avoid potentially fatal upfront overcommitments. 

6. Niche is the New Big — The Lavish Dwarf Entertainment Rule

Several years ago, an investment banker was jailed for SEC violations.

He was caught partly due to his lavish parties on yachts, often featuring hired dwarves. No joke. The owner of the dwarf rental company, Danny Black, was quoted in the Wall Street Journal as saying: “Some people are just into lavish dwarf entertainment.”

Niche in the new big, I tell you. And here’s the secret: it’s possible to niche market and mass sell.

iPhone commercials don’t feature dancing 50-year olds, they feature hip and fit 20-30-somethings, but everyone and his grandmother wants to feel youthful and hip, so they strap on Apple gear and call themselves converts. Who you portray in your marketing isn’t necessarily the only demographic who buys your product — it’s often the demographic that most people aspire to. The target isn’t the market.

No one aspires to be the bland average, so don’t water down messaging to appeal to everyone–it will end up appealing to no one. 

7. Revisit Drucker — What Gets Measured Gets Managed:

Measure compulsively, for as Peter Drucker stated: what gets measured gets managed.

Useful metrics to track, besides the usual operational stats, include CPO (“Cost-Per-Order,” which includes advertising, fulfillment and expected returns, chargebacks, and bad debt), ad allowable (the maximum you can spend on an advertisement and expect breakeven), MER (media efficiency ratio), and projected lifetime value (LV) given return rates and reorder %. Consider applying direct response advertising metrics to your business.

Look at "lean start-up" metrics for more methods of measuring during the start-up phase. The work of Eric Ries is a good starting place. 

8. Hyperactivity vs. Productivity — 80/20 and Pareto’s Law

Being busy is not the same as being productive. In fact, being busy is a form of laziness -- lazy thinking and indiscriminate action.

Forget about the start-up overwork ethic that people wear as a badge of honor–get analytical. I'm not going to say "work smarter; don't work harder," as I'm fine with hard work...but only as long as it's applied to the right things.

The 80/20 principle, also known as Pareto’s Law, dictates that 80% of your desired outcomes are the result of 20% of your activities or inputs. Once per week, stop putting out fires for an afternoon and run the numbers to ensure you’re placing effort in high-yield areas:

What 20% of customers/products/regions are producing 80% or more of the profit? What are the factors that could account for this?

Invest in duplicating your few strong areas instead of fixing all of your weaknesses. 

9. The Customer is Not Always Right — “Fire” High-Maintenance Customers

Not all customers are created equal.

Apply the 80/20 principle to time consumption: What 20% of people are consuming 80% of your time? Put high-maintenance, low-profit customers on auto-pilot. Sure, process their orders, but don’t pursue them or check up on them. And “fire” high-maintenance, high-profit customers by sending a memo detailing how a change in business model requires new policies at your company: how often and how to communicate, standardized pricing and order process, etc.

Indicate that, for those clients whose needs are incompatible with these new policies, you are happy to introduce other providers.

“But what if my largest customer consumes all of my time?” you ask? Recognize that 1) without time, you cannot scale your company (and, oftentimes, life) beyond that customer, and 2) people, even good people, will unknowingly abuse your time to the extent that you let them.

Set good rules for all involved. Minimize back-and-forth and meaningless communication. 

10. Deadlines over Details – Test Reliability Before Capability

Skill is overrated.

Perfect products delivered past deadline kill companies. Better to have a good-enough product delivered on-time. Google "minimal viable product" for more on this philosophy. Even the great Reid Hoffman, co-founder of LinkedIn, has wisely said that, "If you are not embarrassed by the first version of your product, you've launched too late."

Test someone’s ability to deliver on a specific and tight deadline before hiring them based on a dazzling portfolio.

Products can be fixed as long as you have cash-flow, and bugs are forgiven, but missing deadlines is often fatal. Calvin Coolidge once said that nothing is more common than unsuccessful men with talent; I would add that the second most common is smart people who think their IQ or resume justifies delivering late. Don't tolerate it. 

11. Keep it simple. Complicated answers are rarely the right answers.
'Nuff said.

Tim Ferriss

Why a Botched IT Project Will Destroy a Major Corporation in the Near Future

The risks associated with major IT projects are being vastly underestimated, according to the largest study of global IT projects ever undertaken.

Back in 2003, the US clothing manufacturer Levi Strauss made the fateful decision to upgrade its global IT system. The project was budgeted at $5million and the advantages appeared huge. 

As Levi Strauss had grown into a global company, its IT system had become fragmented and antiquated, with different systems in operation in different countries. So switching to a single integrated system seemed eminently sensible. “But very quickly all hell broke loose,” say Bent Flyvbjerg and Alexander Budzier at the University of Oxford in the UK.

For example, the supermarket giant Walmart, one of its biggest customers, demanded that the new IT system connect seamlessly with its own supply chain management system. That created an entirely unanticipated set of problems.

Then, when the new system was switched on, the company discovered that it could not fulfill orders and had to close its three US distribution centres for a week. In 2008, five years after it began the project, the company took a $193 million charge against earnings to compensate for the problems and company’s chief information officer was forced to resign.

That’s one example of a nightmare scenario–a  botched IT project that forced a major company to its knees. But this kind of problem is much more common than you might imagine, say Flyvbjerg and Budzier, who have carried out the largest global study of IT change initiatives ever conducted. “We examined 1,471 projects, comparing their budgets and estimated performance benefits with the actual costs and results,” they say.


The results are eye-opening and should come as a warning shot for anyone in charge of major IT initiatives. Flyvbjerg and Budzier say that the average cost overrrun for an IT project is 27 per cent. That seems more than manageable for most companies.

But this figure holds a surprise because more than one in six of the projects these guys examined had a cost overrun of 200 per cent. 

“This highlights the true pitfall of IT change initiatives: It’s not that they’re particularly prone to high cost overruns on average, as management consultants and academic studies have previously suggested. It’s that an unusually large proportion of them incur massive overages,” they say.
In other words, the average cost overrun is an entirely inappropriate measure of the state of affairs and gives little indication of the true risks associated with IT projects.
  
The limitations of taking averages are well known in many areas of science. An average is only a useful figure when it is associated with certain distributions. For example, the height of fully grown men follows a so-called normal distribution for which an average is a useful description. However, it’s possible to calculate the average size of an earthquake but the figure is entirely nonsensical since it gives no indication of the size range of earthquakes which vary over many orders of magnitude. If building standards were based on the average size of earthquakes, they would fail to account for the huge devastation that big earthquakes can cause.

IT projects fall in to a similar category. Calculating the risk associated with an IT project using the average cost overrun is like creating building standards using the average size of earthquakes. Both are bound to be inadequate.  

These dangers have yet to be fully appreciated, warn Flyvbjerg and Budzier. “IT projects are now so big, and they touch so many aspects of an organization, that they pose a singular new risk….They have sunk whole corporations. Even cities and nations are in peril.”

They point to the IT problems with Hong Kong’s new airport in the late 1990s, which reportedly cost the local economy some $600 million.

They conclude that it’s only a matter of time before something much more dramatic occurs. “It will be no surprise if a large, established company fails in the coming years because of an out-of-control IT project. In fact, the data suggest that one or more will,” predict Flyvbjerg and Budzier.