Today, I want to start with a simple story.
There were 50 CEOs that were doing a world wide tour to visit the best run companies
in the world.
And one of their stops was in Malaysia to a pewter plant who had figured out how to
extract lead out of the pewter and they made various pewter products.
The company had over 3,000 employees.
Well, when it came time to the presentation, you can imagine how surprised these 50 VIPs
were when 5 people in their blue overalls walked out.
Not the senior management team or the CEO of the company or the owners, 5 of the workers
walked out.
And they proceeded to explain the products they made, the technology they used, their
positioning in the industry, their marketing strategy, their economics, their finance.
It was astounding.
These 5 workers understood the business.
So at the end of the presentation, one of the CEOs raised their hand and said, OK, how
long did it take for you to be trained to say all this?
Well, the workers were a bit confused and they said, well, so we heard that 50 VIPs
were coming, so they put up on the bulletin board who would like to make the presentation
and all 3,000 people put their names down.
That is an impressive story, because what that tells us and what we can learn from that
is that when people understand how they're contributing to the bottom line, then everybody
works together seamlessly.
So here, people weren't just being trained in their one little area, they had a good
sense of the business itself.
It's important that everyone in the team has a good sense of the overall economics of the
business.
So we don't have to share salaries and so on, but in our business, we believe that everybody
knows everything except salaries.
And the reason for that is we want everybody in the team to understand the business.
Now we also want everyone to understand how they contribute, what they do, and how that
adds and contributes to the bottom line.
Which reminds me of a second story of a consultant who went to a company in Chicago, he was brought
in to help improve their operations.
To get his own sense of it before he went through the front door, he did something unconventional.
He went to the loading bay at the back of the factory and he met somebody there and
he said, hey, what are you doing?
He said, well, I'm packing all the telecom equipment for one of our big customers, Walmart,
and the installers are going to take the truck and go and install this new equipment.
And he said, well, how is this contributing to the bottom line?
How is this helping?
He says, well, last month, I reduced the install cost by 30%.
He said, well, tell me more.
So I go out with the installers regularly to make sure that the way I pack the equipment
makes it the most efficient for them in terms of how they install the system.
They don't want to have to unpack everything and then search for all the parts they need.
I pack them in exactly the right sequence.
So every time they improve the installation process, I go out with them and I figure out
how to pack it so we can reduce our installation costs.
And last month, I reduced it by 30%.
I love that.
I love that story because that gives people a real sense of their contribution and what
they do and why it matters.
So what's the one big dial that would change it for you?
Every company has one big dial that when you turn that, it moves the needle more than anything
else.
And I'm not talking about trivial answers like, well, we need more revenue and less
costs and so forth.
I'm talking about there's one thing that if you turn that one thing, everything in the
company moves up.
The company thrives at a whole different level.
Let me give you a few examples.
Let's say that you run a restaurant.
One might say, well, what's the one big dial?
Well in a restaurant, it's not just the number of customers or, you know, labor costs and
so forth.
It's revenue per customer.
What's the revenue per customer?
We have a lot of fixed costs.
There's rent, there's labor, food costs, etc.
But if we can change the menu, if we can learn how to upsell, if we can train our service
better, if we can all understand how we're going to raise the revenue per customer, and
if we calculate that revenue per customer on a daily basis or even a weekly basis, and
the whole team gets to hear the number is going up, everything changes.
That reminds me of a story of Maria, who is a family-owned restaurant in a suburban strip
mall.
Now, in her case, she started with 200 customers.
customers a day, averaging $38 average ticket.
So that meant that they were really, really struggling
because $38, they had rising food costs,
the rent was busy going up, and she wasn't even sure
that she could even keep the business going.
It really was that serious
because they were just breaking even.
Well, when she went through this exercise,
they identified the big dial as the revenue per customer.
So what did they do?
They went back and analyzed the top 20 receipts
to see if there were any patterns,
and they found out that big families
were often attracted to their restaurant.
So they created a family feast option for 46 people.
They trained their servers on wine pairings
and making suggestions.
They even added premium desserts displayed
near the register where people were paying.
Guess what happened?
The average ticket increased from $38 to $58
within eight months.
Same customer account, but 53% increase in revenue.
So the business went from break even to an 18% net profit.
I love that story.
Another thing could be, for instance,
if you run a SaaS or a software as a service company
where people are paying a monthly subscription,
but you have high churn rate.
So the big dial is the monthly churn rate.
Reducing the churn really compounds growth.
It has a profound effect on the business.
Keeping existing customers is a whole lot cheaper
than getting new ones, right?
So that meant improving onboarding, feature adoption,
customer success programs, and so on.
And that is exactly what happened
with one specific company.
And in that particular company,
the owner, Alex, ran a project management software
for construction companies, but the churn rate was high.
So they were doing about 8% monthly churn,
and it was just killing their growth.
They worked so hard, they knew their acquisition costs,
they knew what each customer represented,
about $2,400 a year to them.
And when they lost one, it was huge loss in revenue.
So they redesigned onboarding to ensure
that there was much larger feature adoption
within the first 30 days.
They set themselves a goal that certain number of features
had to be used within 30 days.
Great plan.
Then they created a construction-specific templates
and workflows that construction people
with the way they think and the way they work.
And they also added a customer success manager,
not just customer service, but customer success,
because now we're managing to customer success.
Guess what happened here?
They reduced their churn rate from 8% to 2.3% monthly.
The company went again from just above break-even
to 40% annual revenue growth
with the same acquisition costs.
I could go through so many stories
like this story after story.
Big question is, do you know what the one big dial is
that if you turned it,
if everyone in the business works towards it?
Because the one big dial isn't just one thing.
There are many aspects that make it up.
In each of the examples I just gave,
there was a lot more to it.
It was a general everybody getting around
and in their area of responsibility,
in their contribution,
knowing that they helped contribute to the one big dial.
And here's what happens.
When you successfully identify and focus
on your one big dial, a couple of things happen.
Number one, clarity emerges.
And we know that clarity drives speed.
Every business decision becomes obvious
because it's filtered through that one primary metric.
Number two, growth accelerates.
There's a focused effort produces exponential results.
Three, team performance improves
because everybody's pulling in the same direction
and we understand the priority.
And it's like watching a ball game.
There's a scoreboard and we can all see what the score is.
That's really useful.
Then the value, business value increases, of course,
because now we've made the company more valuable.
And in the process of doing that, strangely enough,
stress decreases.
No one's worrying about if the business is gonna make it
because we can all see the score.
We know what the one big dial is
and we can see the numbers improving.
So that's your exercise for today,
to successfully identify and then focus on your one big dial.
Okay.
Hope you enjoyed that.