Build a Better Business Podcast

67 – The Interior Design of Your Business – Operational Systems

3 Key Points in this Episode:

  1. Operational systems are often the easiest to create and yet most businesses do not have documented systems.
  2. Delivering on your brand promise often involves developing a guarantee.
  3. Don’t shy away from quality control, safety, and customer service issues.

Show Notes:

Your home has operational systems like plumbing, electrical, HVAC and other systems that make it function properly in all four seasons. Your business requires operational systems as well. Developing operational systems are often the easiest for self-employed people to create and yet most businesses do not have documented systems.

We have discussed previously that the “casting a wide net” approach to finding customers is a strategy that many new small business owners try with little success. Just like when you define your ideal customer, it is equally important to define the ideal product or service for that customer.

Many small business owners make the mistake of trying to offer too many products and services. They become a generalist when what they should be is a specialist.

Your product or service strategy must provide your ideal customer with a customized solution that uniquely addresses a specific need or want. This sounds terribly complicated like you are going to need to create something that will disrupt an industry like Amazon did to retail or Apple did with the I-Phone.

The great news is you don’t need to be Amazon or Apple to do this. Assuming your competitors are not Amazon or Apple of course. The reason you don’t need to be like these companies is that your competitors aren’t.

All you need to do is figure out how to outperform your competition.

All you need to do is learn something about your ideal customer that your competitors don’t know. Once you learn this key insight you can build a customized solution around a product or service that solves a specific problem or gives your ideal customer something they want in a way that no one else does.

In my contracting business, we focused on a problem that all of our customers had – moss on their roof.

Our competitors were offering moss removal services but the chemicals they were using were often not good enough to provide lasting results or were harsh and did damage to the roof and to the surrounding vegetation. They also applied the products with backpack sprayers which meant that they were unable to wear their safety lines properly, opening the homeowner up to liability issues if there was an accident.

We spent two years talking to customers about this problem.

We spent two years testing different products.

We spent two years developing a system that would allow us to safely apply the environmentally friendly, non-caustic, non-toxic product we selected on the roof.

A product that did no damage to the roof and surrounding vegetation but also gently removed moss from the roof over a longer period of time than any other product on the market.

When we launched the moss removal roof cleaning service we took our marketplace by surprise. We dominated for several years and it brought me great pleasure to see our competition trying to copy us. It brought me pleasure, not because of my ego, but because I knew we had done something special for our customers and now everyone in the market was benefiting because it was forcing our competition to raise their standards to the benefit of customers and employees everywhere.

Did you notice that my story unfolded over a two-year period?

Developing something that is unique takes time. This is why it is so important that you don’t try to offer every conceivable product or service to every possible type of customer.

Creating a product or service strategy that is unique, solves a problem, or provides a want and differentiates you from your competition takes time. If you try to take on too many products or services you will end up getting nothing done; but if you focus on one key product or service at a time and develop a customized solution that addresses all of your ideal customers needs and wants, you will build a great product/service strategy that in turn will be part of your great business.

Delivering on your promise

We have discussed the importance of creating predictable results for your ideal customers.

Your brand promise is an important part of the identity of your great business.

One of the best ways to ensure that your brand promise and the promises that are attached to specific products and services are delivered consistently is to attach a commitment to them.

That commitment comes most frequently in the form of a guarantee.

One of the most common objections I hear to this idea goes something like this, “We can’t control what happens out there in the world so if we guarantee it and we can’t deliver on our promise, we will lose money.”

I will concede that sometimes things happen that are out of your control and at times this may cost you money. If you deliver on your promise, the increase in revenue that you will experience will far outweigh any loss you may experience because of a single event that is out of your control.

To illustrate this let’s look at an example from many years ago:

A popular pizza restaurant chain made a promise, they guaranteed that your pizza would be delivered in 30-minutes or it would be free.

What effect did the guarantee have on sales and profit?

There are two ways to look at it.

Let’s say that for every 100 pizzas delivered, the restaurant had to give away 3 pizzas because they were unable to live up to the 30-minute guarantee due to external factors outside of their control.

That translates into a 3% failure rate. Those 3 pizzas cost the restaurant money.

With a 97% success rate, what impact does the guarantee have on sales?

Sales would need to go up in sufficient quantity to not only cover the additional expenses incurred by the 3 pizzas the restaurant had to give away but to justify the entire program.

It has been my observation that many small business owners are afraid to make written and public commitments because they don’t have systems in place that give them confidence in their ability to live up to their guarantees.

They make general statements in their marketing; “Best Service”, “Highest Quality”, “Fast Delivery”, “World-Class”, “Famous”.

What do these general statements mean?

Since you can’t really define them or measure them, they are meaningless.

I once went to a restaurant that advertised themselves as “Famous”. I ordered the Chicken Chow Mein, it was famous alright, it was MR. NOODLES and DELI MEAT! The meal was famously awful, I couldn’t even finish it, and I never went back to that restaurant and warned everyone I knew about how “famous” this restaurant was.

By making a promise, a well-defined guarantee, something that can be measured, you will differentiate yourself from your competition and your ideal customer will be drawn to do business with you because your promise will say to them, “we understand what you need and want, and this is exactly how we will deliver that.”

In our contracting business, one of our guarantees was that we would provide them with a written estimate within 24-hours. We followed that up with a price guarantee, we promised that if they didn’t change the scope of work, our estimate would be the exact price they would pay.

This commitment, this price promise, meant that on occasion when something went wrong the business barely broke even, sometimes even lost money, but we never made that our customers problem. It was our responsibility to identify all the costs involved in doing the job and we always kept our promise.

In the moment, I will admit, it was very frustrating to do a job and not make any money, but that promise to the customer, that well-defined commitment was always worth it when I took a step back and looked at the larger picture.

Customers were often impressed that we didn’t try to get out of our promise and that we kept our word. They would refer us to their friends, and an even better referral, they would refer us to their family. This was the ultimate endorsement of trust.

Our business grew by no less than 25% every year we owned it. So, on the rare occasions when external factors conspired against us and things didn’t go as planned, we more than made up for it on all the other jobs we did that went according to plan, and sometimes even better than we expected.

When making a commitment, a guaranteed result, a brand promise, take the time in advance to work out exactly how you will deliver on that promise. Make sure that you can deliver on that promise 95% to 99% of the time. When you can get to that level, don’t be afraid to make a well-defined promise, it will set you apart in your industry and marketplace as a great business.

Creating a quality control system & establishing safety protocols

To deliver consistently on your promises, you must have systems in place.

Two of those systems are in quality control and safety.

Quality Control

Quality control is a term most frequently used in manufacturing.

When I was just out of school I worked in a remanufacturing company, we had a machine shop, and as I learned the business I took courses and apprenticed under the head machinists. The parts we made replaced components that had worn out and could not be reused. The quality control system we used, to ensure the parts we machined met or exceeded original manufacturers specifications, was a critical factor in ensuring the finished product delivered on the company’s brand promise and met the warranty terms attached to the product.

When manufacturing a part, you can use highly accurate measurements to test the quality of the part. These measurements tell you if the part will function properly and make the finished product work or fail. The individual parts make up a complete product.

This manufacturing illustration is a good word picture of what building a great business is all about and the role quality control plays in the development of the business. Just like in manufacturing, the individual systems of a business make up the complete system, which in its entirety make up the business; and just like in manufacturing you can develop accurate measurements to tell you if the individual systems will function properly and make the business work or fail.

Quality control is not just a way to ensure that quality products are made. Quality comes in many forms, it, of course, includes any products you sell but also encompasses services that are offered to the customer and any other function in the business. Quality control is simply the measurement that is taken to ensure predictable results are being achieved.

Quality control can be found within the leadership foundation of your business, it can be found in the management framework, it can be found in the curb appeal that your brand creates, and it can be found in the interior design of your business systems. When you create a set of quality control metrics to ensure that your individual systems form a complete system that delivers a predictable result you then have a great business.

Safety

Remember when we used the pizza restaurants promise of “30-minute delivery or it’s free” as an example of attaching a guarantee to a product or service to fulfill a brand promise our business has made?

We can learn another valuable lesson from this example.

According to Wikipedia, this guarantee created an expensive problem because one factor was missed when this guarantee was created.

Safety!

Apparently, restaurant managers encouraged their delivery drivers to speed to avoid having to give out any free pizzas. This resulted in accidents and injuries, which led to legal action being taken against the restaurant, which led to the end of this guarantee.

The safety of people must never be forgotten. Everything the business does must have stringent safety procedures and protocols to ensure that customers, employees, the public, and the environment are protected.

It is your responsibility to use the guidelines of your Safety or Workers Compensation Boards and Environmental Protection Agencies as MINIMUM safety protocols. It is your responsibility to establish whatever safety systems are necessary to prevent injuries from happening and to protect the environment.

It has been my experience that when you proactively work with the Safety Boards and Environmental Agencies they are typically very willing to assist you in complying with regulations.

Handling customer service issues

We have talked extensively about how a great business produces predictable results through developing brand promises and product or service guarantees and delivering on those promises with individual systems that when brought together create one greater system called a business.

In a perfect world that would be all that was necessary. Our business would satisfy every customer and there would be no need for a system that addresses customer service issues. Sadly, we don’t live in a perfect world.

Therefore, measuring things becomes very important because it tells you where you were and where you are. As this number improves we get closer and closer to 100% but it is important for us to be realistic. We will never get to 100%.

For example, we created an estimating system in our contracting business that helped us close more residential business. Our baseline was at 50% when we started, and we moved that all the way up to 90%. This was a phenomenal accomplishment, but we still lost 1 out of every 10 customers.

Things are going to happen. People will make mistakes. Internal and external problems will occur.

Therefore, it is essential that you create a system for handling customer service issues.

As a business professional since 1997, I can tell you from personal experience that more business is lost because of internal issues than external problems. That our greatest competitor is ourselves. That all the work to find and convert customers can be quickly undone by a failure to give good customer service when something goes wrong.

Remember, it is not IF something will go wrong, it is WHEN something goes wrong.

By having a plan, you can save yourself a tremendous amount of grief. The way you handle customer service issues will dramatically affect your businesses sales and profitability.

In over 20-years of business, working on both the operations and sales side of the business, as an employee, manager, and entrepreneur I can tell you that customer service comes down to how your business reacts when something goes wrong.

The system that I have seen work in manufacturing, wholesale distribution, retail, and service-based businesses is very simple:

  1. Listen to the customer with little or no interruption
  2. Ask clarifying questions to get the whole picture
  3. Repeat the problem to the customer to make sure that you understand what the significant issues are
  4. Assure the customer that you will do everything in your power to address the problem
  5. Solve the issue by providing several options even if the options are not perfect
  6. Give the customer something to compensate them for their trouble
  7. Verify that the customer is satisfied

These 7 steps have allowed me to solve small and large problems quickly and have resulted in restoring the customer’s faith in the product, service, and business that I represent.

There is one thing that needs to be mentioned now, sometimes people have unreasonable expectations, and sometimes no matter what you do they will not be satisfied. We don’t live in a perfect world and getting to 100% will never happen.

In rare occasions, it is often best to just refund these people’s money and walk away. Honestly, it just isn’t worth your time and effort to pursue a business relationship with someone who is unreasonable. We often would recommend these people to one of our competitors as part of our system of dealing with these types of customers.

Developing a culture of more

Customer fulfillment is not static, it is very dynamic, which means that things are changing constantly.

What works today may be considered obsolete tomorrow. What was once considered to be superior customer service will be average in the future. Your competition will adapt and get better, your customer’s expectations will change, and your products and services will become outdated.

Sadly, it is just the nature of operating in a free market system. For your business to continue to be a remarkable success you must develop within the culture of your business a thing I call “MORE”. This is a basic concept but when consistently implemented over time has a cumulative effect that can be the difference between becoming a great business or not.

Developing a culture of more really comes down to asking this question:

How can we exceed our customers’ expectations?

To answer this question all you need to do is talk to your customers about what they want. Not just from you today, but what do they wish they could have, what do they think they will need as they age, what do they want for their children or pets, what are their dreams, for themselves, their family, their friends, their homes, and their careers or businesses.

By regularly having discussions with your customers you will learn over time what makes them tick, as it were, and that understanding can help you craft your customer fulfillment strategy so that it touches your customers on an emotional level.

This doesn’t mean that every time your customer does business with you they are left emotional and in tears of joy. It usually is subtle, making your ideal customer feel surprised or pleasantly impressed. Your ideal customer will probably not even realize what you are doing but will find themselves drawn to do business with you.

To illustrate this, let me give you an example.

I have been involved in the heavy-duty parts business for over 20 years. When I took over a sales territory I would spend the first three months conducting initial interviews of all the customers. It was a straightforward process, I had 14 questions written down on a piece of paper (now you would make a Google Doc on your tablet).

I would say something like this, “I’m new, do you mind if I take 15 minutes to ask you a few questions so that I can get to know you better and understand what I can do for you?”

They would almost always respond with, “Sure”.

Then I would sit down, pull out my questions, and with pen in hand ask question 1. I would listen, only speaking if I felt that I needed to ask a clarifying question, and then I would ask question 2, 3, 4 until I had asked all 14 questions. I would listen and carefully write down interesting or pertinent information.

At the end of this initial interview, I would say something like, “Thank you for your time, I really appreciate it, I am going to think about this and then I would like to come back, is that okay with you?”

They would always say something like, “That would be fine, and you know what, that was the best sales call I ever had!”

Of course, all this work would have been for nothing if I didn’t analyze the answers of my customers and develop innovative solutions that addressed their needs and wants. When I did this my sales territories always grew. I mean ALWAYS!

When you make your customers feel like you are genuinely interested in them by really listening to them and then you take appropriate action to give them what they need and want, the results speak for themselves. What is amazing to me is how many businesses, not just small businesses, but even multi-national corporations fail to do this consistently.

Customer fulfillment is simple, find out what your customers need and want and develop a system to deliver that in a predictable and profitable way. The best way to do this over time is to develop a culture of more.

Operational systems don’t just happen, you will need to take all the things discussed in this chapter and develop an operational plan. I recommend starting by mapping your customer’s buying experience. This exercise will help you to see what your customer sees and will alert you to operational changes that will enhance your business.

The mapping process is very straightforward and does not need to be complex. Start at the beginning, what will be the very first interaction with your business? Once you define this, write down the next step, and the next step, until the very last step.

Then take a step back and look at the entire experience.

What needs to be changed?

Where can you improve the buying experience?

Remember that each individual system is part of a larger system called your business. For your business to become great each individual system must contribute to the overall success of the business and work with, not against, achieving that goal.

This episode sponsored by:

Trackstar Web Design

Every business needs a website and I have used Gerrit and Trackstar Web Design since 2012 and so should you.

Process Street

I use Process Street to create systems in my business and I highly recommend that you use Process Street as well.


Thank you for listening and I look forward to working with you soon.

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