Curtis Guilbot's Blog

Executive Coaching & Consulting

Strategy: Multipliers for increased margin, not just revenues

Former President Bill Clinton reportedly makes $250,000 per 45 minute keynote speech.  While that dwarfs my attorney’s $450 hour rate,  I doubt even the President could charge that for 2,000 hours per year.  Truth is, no one is worth very much by the hour.  For a business or an individual to escape the time-for-money (or retail price) trap, they need a multiplier.

Traditional multipliers have been those things that generate “mailbox money”- Create Once, Resell Everywhere (CORE™). The most classic recent example was Bill Gate’s stroke of genius to license his Microsoft’s MS-DOS (then later, Windows) operating system to IBM and other computer hardware makers.  Gates’ EOM strategy evolved into annual subscriptions from enterprise customers for updates and service. This is a classic CORE™ strategy.  But there are others, even for those who are not in high-tech fields.  And multipliers apply within an organization’s operational  structure, not just at the sales level.

Curtis’ CORE™ Multiplier Strategies

1. Good leaders are multipliers. Managers can be either positive, neutral, or negative leverage points for an organization.  If they are good, they are positive leverage.  But if they exhibit true exemplar leadership and grow their people, they become multipliers within an organization, much in the same way that- don’t laugh now- successful MLM distributors teach their salespeople to become multipliers for their downlines. This is true of any good business school, enterprise sales force, professional sports team, or municipality.

Good leaders multiply their effectiveness not by personally supervising every decision, but by hiring good people, giving them training and tools to improve, and empowering them to succeed (and occasionally fail) with a large degree of day-to-day autonomy. In crisis situations, when leaders must act rapidly and autocratically, the trust they’ve engendered with their staff and colleagues allows them to react rapidly, like a well-trained military unit. When they are bad, however, they are worse than useless (“neutral” leverage)- they are actually counter-productive to the organization.  Merely useless managers are the organizational equivalent of multiplying by 1: no difference either way. Truly bad managers are like multiplying your staff by 0.5, or even -1: the whole becomes less than the sum of the parts.

This can happen even when a manager has strong technical skills (finance, technology, operations, etc.).  Often, these managers run an overly-flat reporting structure in practice, making too many key decisions, and paralyzing their direct reports with the fear or embarrassment that comes with making a “wrong” decision (i.e., one that the manager doesn’t agree with). This is like multiplying the team productivity rate by a fractional or negative number.  These managers have both the most potential for positive impact, if coached properly, and the most potential to damage productivity and poison the company culture, if they are not coached.

2.  Value-based fees structure is a multiplier. 

Most large consulting firms like McKinsey, BCG, and Accenture have built up enough brand equity to charge a high rate per hour, their fundamental model of per person-hour billing is still inherently inefficient, and in my view, unethical. If I could offer you the solution to your problem is 1 week or 1 year, which would you choose?  If you can get your important package delivered in one day or one week, wouldn’t you pay a little more for overnight delivery? The value to you would be even greater, since getting the answers faster allows you more time to implement and react.  Waiting a year is suicide in this hyper competitive business climate. Yet the person-hour billing model forces vendors to withhold the solutions until they have milked the client sufficiently to make a profit, while the client incurs the cost and bother of tracking hours and is deprived of a speedy solution to their issues! What a short-sighted partnership for both consultant and client!  What we need to be charging for is the value delivered to the client, not the hours our butts are in a seat, or even ostensibly working from home.

3.  Communication is a multiplier.

Marketing, whether in the form of paid advertising, unpaid publicity, or any other variation of “getting the word out,” has always been a multiplier, though we haven’t thought of it in those terms.  Marketing costs money, to be sure, but it costs less than traditional product or service creation and distribution.  Hollywood, for example, may spend $20 million per blockbuster to generate buzz- a lot of dough.  But peanuts compared to the $200 million price tag of the average tent pole feature these days.  Amortizing that cost over the life of the movie yields a much higher profit spread than without the advertising spend, especially considering that the paid advertising prompts free word-of-mouth advertising; a virtuous circle for Hollywood studios.  This is also true of sales forces, which is why we can afford to pay them commissions.  They cost money, but cost of sales is (or should be) usually a small fraction of any successful product or service.  The ability to communicate effectively provides critical “grease” to the small gear, free-wheeling strategy cogs, and the larger, more deliberate implementation flywheel, which is where we gain traction.  Without this grease, there is no leverage.

Other CORE™ Multipliers

In recent consulting and keynote speaking engagements to business leaders, I’ve shared the above multipliers, and 19 other multiplier techniques, including a dozen aimed at traditional product-focused (or service product) oriented businesses, such as financial advisors, CPAs, insurance agents, technology consultants, and ISVs.

Please share your experience.  What multipliers are you using to help your clients (or yourself)  escape the time-for-money trap?

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This entry was posted on January 30, 2013 by in consult, Uncategorized and tagged , , , , , , , , , , , , , .
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