Philip Letts, CEO, blur Group
Businesses across the globe are waking from the slumber of recession with a resolve to march with the progress of technology, rather than amble in its shadow. We are witnessing the rise of what we call The Size Zero Enterprise – a business built on low costs and high revenues achieved through automation and smart deployment of manpower.
Our own research shows increased efficiency is high on the business agenda for 2015. More than half of the businesses we surveyed said they were planning to invest more in technology this year and a third wanted to outsource more to bring down costs. We have already seen some dramatic reshaping this year from the likes of IBM and Foxconn, who are both reducing headcount and investing in automation.
Take a look at Tesla, too. Here is a young automotive business with a market capitalization the size of Audi’s, yet one that only employs 6,000 people. The value of Tesla all comes down to its revenue per employee ratio which is overall revenue divided by the number of employees. The latest figures show Tesla delivering a mind blowing $2.7 million per employee, while GM can only achieve $750,000.
Clearly, Tesla has been able to achieve more with less, which is the cornerstone of the Size Zero business. The company attributes its productivity to a number of factors, but mainly that it has kept employee numbers down by relying on outside suppliers and assembly automation.
Here are six tactics companies can use to become Size Zero businesses:
1. ZERO PASSENGERS
Determine which employees in your company create value, who supports them and who is just part of the background noise. This is about more than simple revenue generation. Instead, it also incorporates goodwill generation and customer success into employee value. Evaluate closely which employees achieve none of these things and aim for Zero overhead staffing. In other words, everyone should create value, not simply be a passenger.
2. ZERO BAGGAGE
When you focus on championing value, you will automatically see baggage trimmed from the business. But leaders can take it a step further. “Outsource everything except your soul,” the management guru Tom Peters once exhorted. As well as the savings on statutory payments associated with employment like social security and health care benefits, an outsourced workforce can be tuned up or down to reflect the peaks and troughs of demand. Do some calculations based on removing a whole department and sourcing skills from outside. Do you need your current list of retained agencies and supplier rosters? Aim for Zero additions to payroll over next 12 months.
3. ZERO UNPROFITABLE CUSTOMERS
Just as you expect employees to demonstrate value, require it of your customers, too. Don’t let customers who take up your time and resources, but contribute little in revenue, hold all the cards. The customer is king, but so is cash. Ask yourself, how well do you truly know your key customers and how distracted are you from focusing on your most valuable customers by the least valuable yet ‘noisy’ minority? How good are you at analysing your per customer profitability?
4. ZERO TECHNOPHOBIA
Don’t shy away from technology. Embrace the latest innovations to advance your company. Move your business into the cloud, get fully mobile, and automate some of the functions currently handled by people. Develop a more radical technology strategy, accelerate innovation cycles and add a Zero to your R&D budget.
5. ZERO WASTE
Learn about Lean business – the reduction of waste. Put sustainability at the heart of everything you do. And don’t forget that this is not about working harder – just smarter. Aim for ZERO carbon footprint. Manage all suppliers and costs across your business without slowing your business down. Aim for Zero unmanaged tail spend. It is a fact of business life that 20 percent of non-core transactions go unmanaged, usually due to a high volume of suppliers and limited in-house resources dedicated to managing them.
6. ZERO DEAD TIME
Ban all but the most important meetings. They are the biggest drain on productivity and create a culture of delegation. A Bain and Co. study reckons on average an organisation’s workforce spends about 15 percent of all collective time sitting in meetings. Make sure the meeting you are about to have will earn the company more money than it spends in time lost by all the participants, including travel. Good utilisation of staff time is key to a Size Zero business. Use advanced data and analytics on employee productivity not just customer behaviour.
Companies like Tesla, IBM and Foxconn are paving the way for businesses to slim down to achieve more with less. As more companies look to increase efficiencies in 2015, the Size Zero Enterprise will become an increasingly appealing solution for leaders to improve their business models and outpace their competitors.
About the Author
Philip Letts has run a string of high profile web ventures operating across the US and Europe including an established Silicon Valley venture. Philip co-founded Beenz.com in 1998, an internet currency programme. In 2000, he became CEO of Tradaq, formerly Internet Barter Inc, which became a part of a public company post merger. Following this he was CEO of Surfkitchen which was later sold to SymphonyTeleca. Philip then decided to focus on a new enterprise, wanting to embrace the Open Source software principles while creating a game-changing business – this became blur Group.