Growing our Business. Growing our Team.

GAJAH ANNUAL REPORT 2015 | 1

Richard Brooksuk.linkedin.com/in/richardbrooks

twitter.com/@RichardMBrooks

plus.google.com/+RichardBrooks_L10N

0044 1908 557900Richard.Brooks@k-international.comwww.k-international.com

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@RichardMBrooks #ALTCconf16 | 7

Strengths

Opportunities

Weaknesses

Threats

Located in UK

From outside the UK

Not be located in UK

Located in UKBrexit Brexit

Brexit

More nonsense

Stupid Waste Of Time

• PEST(LE) Analysis • Porter’s Five Forces• Resource Based View• Business Model Canvas• Strategy Canvas

Tools that Actually Work

Environmental AnalysisPESTLE Framework

Political Environmental Social Technology Legislation Economic

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• Exerci tation ullamcorper suscipit lobortis nisl ut aliquip ex ea commodo consequat.

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Industry AnalysisPorter's five forces of competitive position Threat of New

Market Entrants

Threat of Substitute Products

Rivalry within the Industry

Bargaining Power of Buyers

Power ofSuppliers

Porter, M.E. (March–April 1979) How Competitive Forces Shape Strategy, Harvard Business Review.

Bargaining Power of Suppliers

Suppliers are POWERFUL if...• There is a credible forward integration

threat by suppliers.

• Suppliers are concentrated.

• There is a significant cost to switch suppliers.

• The customers are powerful.

Suppliers are WEAK if...• The product is standardized.

• There are many competitive suppliers.

• They are supplying commodity products.

• There is a credible backward integration threat by purchasers.

• There are concentrated purchasers.

• The customers are weak.

What does the bargaining power of suppliers in our industry look like?

Bargaining Power of Customers

Customers are POWERFUL if...• There are a few buyers with significant

market share.

• Buyers purchase a significant proportion of the output.

• Buyers possess a credible backward integration threat.

Customers are WEAK if...• Producers can threaten forward integration,

taking over customers’ position.

• There are significant buyer switching costs.

• There are many customers – significant influence on a particular product or price is small.

• Producers supply critical portions of the customers’ input

What does the bargaining power of customers in our industry look like?

Resource Based View• Looks internally at a firm’s Resources (and Capabilities and

Competences) and how these can be arranged to deliver sustainable competitive advantage.

• Often used as a response to the Environment (PESTLE) and Industry (5 Forces) Analysis.

• Resources that are simultaneously Valuable, Rare, Imperfectly Imitable and Non-Sustitutable deliver sustainable competitive advantage.

• Look for these in your competitors businesses… Look for resources you have that are rare and try and add value to them.

Barney, J.B. (1991). "Firm Resources and Sustained Competitive Advantage". Journal of Management.

Use these tools to help your customers to

develop their strategy.

To add value…

Customer Segments

Who is your customer? What market segments are you providing a service/product for?

What value do we deliver to your clients? or To your client’s supply chain?Is it based on > performance, brand, value, convenience, price…

Value Propositions

Channels to Market

How are you going to get your product/service to your clients? Is it virtual? Or is it a physical product?Are our channels integrated into our client’s supply chain?

Customer Relationships

For each segment… what's the relationship like?Transactional, self-service, account/relationship managers, community.

Revenue Streams

What value are our customers willing to pay for? Per unit charge, hourly, subscription, licenses, leasing. Price discrimination or fixed price.

Key Resources

What key resources do we need for the right hand side? Are they human, intellectual, financial or physical.

Key Activities

The most important actions needed to make your business model work. e.g. problem solving (for consultants).

Key Partnerships

Who do you need as your key partners.Used to optimise your business model, reduce risk or acquire resources.

Cost Structure

Describes all costs involved in operating a business model. Is this business… cost driven, value driven, % of fixed and variable costs and are there economies of scale/scope?

Is translation a commodity?

A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers.

Commodity Good?

from Investopedia.com

No it bloody isn’t.But some of us sell it on price, so it feels like price is the only differentiator (a bit like a commodity). And… more importantly – it’s in the interests of those buying it to buy it as a commodity (see five forces).

Pretium = PricePretium = ValueThe thinking in 10 B.C.

Price = ValueThe problem in 2016 A.D.

Price ≠ Value

Pretium

… 4G is “the communications equivalent of the change the jet engine made over steam”

>>> Inability to monetise value creation

Olaf Swantee, CEO EE

3G1GB£31

4G1GB£26

When Value > Price

Becky Williams M&S Apology

When Price > Value

>>> lack of understanding of an emotive reaction to a small price change

• The last time you met an Accountant?

• The last time you met someone from procurement (or vendor management?

• The last time you met someone from the pricing department?

Rich ponders…

Of all the 7 Ps Price has the single most immediate effect on

the bottom line. (hint hint… would make a nice tweet)

Effect of Increasing Prices5% 10% 15% 20% 25% 30% 35% 40% 50%

1% 17% 9% 6% 5% 4% 3% 3% 2% 2%

2% 29% 17% 12% 9% 7% 6% 5% 5% 4%

3% 38% 23% 17% 13% 11% 9% 8% 7% 6%

4% 44% 29% 21% 17% 14% 12% 10% 9% 7%

5% 50% 33% 25% 20% 17% 14% 13% 11% 9%

7.5% 60% 43% 33% 27% 23% 20% 18% 16% 13%

10% 67% 50% 40% 33% 29% 25% 22% 20% 17%

Existing Gross Margin %

The sales volume decrease which will maintain the existing Gross Margin.

EGYou can put prices up by 5% and sell 20% less if your Gross Margin is 20%.

Let’s Check the Maths

Unit Price €100Number sold 50Gross Margin per unit

Total Gross Margin €1000

Price up 5%. Sales down 20%Existing Position

Effect of Discounting5% 10% 15% 20% 25% 30% 35% 40% 50%

1% 25% 11% 7% 5% 4% 3% 3% 3% 2%

2% 67% 25% 15% 11% 9% 7% 6% 5% 4%

3% 150% 43% 25% 18% 14% 11% 9% 8% 6%

4% 400% 67% 36% 25% 19% 15% 13% 11% 9%

5% 100% 50% 33% 25% 20% 17% 14% 11%

7.5% 300% 100% 60% 43% 33% 27% 23% 18%

10% 200% 100% 67% 50% 40% 33% 25%

ntExisting Gross Margin %

The % amount sales need to increase to maintain the existing Gross Margin.

EGIf you discount by 5% and your Gross Margin is 20% you need to sell 33% more to make the same amount of Gross Margin.

Let’s Check the Maths

Discount 5%. Then sell 34% more.Existing Position

Cost Plus.Amounts to a mark-up on costs… is widely used but rarely the most profitable.

Competition driven.Amounts to using price within a game theoretic framework for strategic advantage.

Customer Driven.Amounts to using price to achieve short-term sales objectives rather than profits. Value Based.Amounts to understanding the value created and then maximising its capture.

Pricing Strategies

Cost Plus.Amounts to a mark-up on costs… is widely used but rarely the most profitable.

Competition driven.Amounts to using price within a game theoretic framework for strategic advantage.

Customer Driven.Amounts to using price to achieve short-term sales objectives rather than profits. Value Based.Amounts to understanding the value created and then maximising its capture.

Pricing Strategies

More and more academic research in this area.

Value = Benefits - Cost

REMOVE COST OR ADD VALUERemove Cost

• Machine Translation

• Workflow

• Translation memories

• Volume

• Off shore PMs

• Portal

• Reverse auctions and other horrors

Add Value• Integrated services• Increased complexity• Key account management• Value delivery • Consultancy• Innovate your pricing model• DON’T commoditise your own

product

Limited by

the amount

of cents in

the Euro.

Limited by

creativity.

Add Value…Think how the impact, capability and cost change as you increase the complexity of your product/service to have a larger impact on your customer. Increasing (and demonstrating) value as you go.

… and extract some of it

P&G paid $57 Billion for Gillette (in 2005) but they only acquired $6 Billion of tangible assets*.

*David Haigh, Brand Finance, Marketing Magazine, 1st April 2005

•Better price•Higher sales•Lower prices •Better terms•Higher Search Engine Results•More partners•Better retention •Lower salary expectations•Better qualified candidates•Higher PE ratio•Lower volatility•Lower borrowing costs

In other words… Revenues upCosts downRisks downProductivity up

What does a Brand give you? Hint: It is way more than just your logo…

http://www.forbes.com/powerful-brands/list/#tab:rank

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.”-Warren Buffet

You can put lipstick on a gorilla but you still have to kiss it.

If you improve the sizzle you have to improve the sausage.

July 1925E.K. StrongThe Psychology of Selling

People don't want to buy a quarter-inch drill, they want a quarter-inch hole Theodore Levitt

Your ProductPotential Customer Awesome person who can do amazing things.

This isn’t what you sell This is

Not actually drinking.

+ =“I just start kissing them. It's like a magnet. Just kiss. I don't even wait.”Quote Source: Adweek. October 8, 2016

What Tic Tac didn’t want

The Total Share of WalletMade up of• What you do for the client• What your competitors do for the

client• What the client does themselves• What the client doesn’t do but should

Therefore Different StrategiesOr Marketing Approaches…• To retain our key clients• To take business from competitors• To convince the client to outsource• To educate the client

‘pro

fit’

Starting to level out as market matures

Breakeven point (may be 2 years)

Heavy investment at the start of the relationship

Barrier to Entry

Suspect

Prospect

Customer

Client

Support

Advocate

Partner

5% increase in customer retention leads to a profit improvement of at least 25% in NPV of future earnings.- From a study by Reichheld & Sasser. Harvard Business Review. September

• 96% of dissatisfied customers never complain but 90% of them never return.

• ONE happy customer tells at least NINE others

• 13% of unhappy customers tell at least twenty others

• It takes five times as much effort, time and money to attract a new customer than it does to keep an existing one.

- Source: USA White House Office of Consumer Affairs

Mutually rewarding relationship where neither party intends on leaving.

"After being charged £20 for a £10 overdraft, 30 year old Michael Howard of Leeds changed his name by deed poll to 'Yorkshire Bank Plc are Fascist Bastards'. The bank got upset and asked him to close his account. Mr Bastards asked them to repay the 69p balance by cheque, made out in his new name." -The Guardian. May 1995

@RichardMBrooks #ALTCconf16 | 74Bennis, Warren, 1989. On Becoming a Leader. New York: Addison Wesley.

Bennis’ list of differences• The manager administers; the leader innovates.• The manager is a copy; the leader is an original.• The manager maintains; the leader develops.• The manager focuses on systems and structure; the leader focuses on people.• The manager relies on control; the leader inspires trust.• The manager has a short-range view; the leader has a long-range perspective.• The manager asks how and when; the leader asks what and why.• The manager has his or her eye always on the bottom line; the leader’s eye is on the

horizon.• The manager imitates; the leader originates.• The manager accepts the status quo; the leader challenges it.• The manager is the classic good soldier; the leader is his or her own person.• The manager does things right; the leader does the right thing.

http://hackthesystem.com/blog/why-i-hired-a-girl-on-craigslist-to-slap-me-in-the-face-and-why-it-quadrupled-my-productivity/

Richard Brooksuk.linkedin.com/in/richardbrooks

twitter.com/@RichardMBrooks

plus.google.com/+RichardBrooks_L10N

0044 1908 557900Richard.Brooks@k-international.comwww.k-international.com

Contact me anytime about anything

Download this deck… http://tinyurl.com/ALTCconf16RB

Growing our Business. Growing our Team.

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