At its peak, IBM was generating revenues in excess of $53,000,000,000 (that’s fifty three BILLION dollars) per year. That means every hour of every day was worth around $6,050,000 … in small, unmarked bills.
But IBM lost its way. So what went wrong? And what can we learn from their mistakes? Here are some thoughts…
First, you must never confuse head count with true growth. During its years of explosive growth, the IBM staff head count grew at twice the rate of its revenues. The simplest and surest way to keep hold of this factor is to constantly monitor staff productivity – expressed most simply as $Sales per $Wages.
Second, you must make your people responsible for their actions. At IBM, some staff were so mobile that they’d moved to a new position before their mistakes became obvious. The lesson here is, if you move a person to a new position, you must ensure that they retain at least some responsibility for any projects or decisions which were commenced or made during their stewardship.
Third, you must know which products are the most profitable. IBM sales people were rightly recognised as being amongst the best and brightest on the planet. Problem was, they (and their managers) didn’t know which lines carried the ‘fattest’ margins. As a consequence, they did the best they could by selling the most expensive products possible. History has shown that many less expensive products would have made a greater contribution to profitability.
Solve this problem by telling your sales team what the Gross Profit is on every significant product that you sell. If there are too many lines for them to remember, develop a tag or colour-code or some other system which lets the salespeople see, at a glance, which products are more profitable.
Reinforce this and keep them focused on promoting these lines by tying commissions and incentives to Gross Profitability, rather than straight sales value. Better still, tie the commission or incentive to the actual COLLECTION of the money, rather than paying it as soon as the invoice is cut. This alone will make a world of difference to how quickly you get paid – and it will keep your sales team focused on providing a quality ‘after sale’ service and experience.
Bottom line: let’s learn from IBM’s mistakes. You might never achieve the same turnover which it achieved … but then again, IBM started out as just another small business. And as Michael Gerber, business author and philosopher says, “Big businesses are just small business that got it right.”
Who knows what you might achieve if you make all the right moves and none of the mistakes?
Virtual Business Advisor
How to book a meeting with a business advisor, mentor or coach?
Find out about Government Grants for Queensland business?
Would you like to become an Accredited Advisor?
Need information on how to prepare a business plan?
Do you want a step by step guide to growing your business?
Become a sponsor or partner of BAN and connect with small business decision makers?
I wish to make a donation to help small business.