Seven habits for business achievement: Part one

This week measured the passing of a titan, Stephen Covey (Snr), the author of one of the seminal books on personal achievement “The Seven Habits of Highly Effective People“.  Stephen was also widely recognised was one of the 10 most influential people in business in the 20th century.

It is almost impossible not to have come across Stephen’s work because the principles have become so embedded in modern business practice.  It is thoroughly worth the read and is as relevant today as it was in 1989 when the book was first released.

Can you remember what those 7 habits actually are?  I struggled, and  refreshed my memory of the book by downloading an abridged version as an audiobook from www.audible.com playing it back in the car as I drove up the freeway.  Wikipedia also has a good summary.  I was struck afresh at how these habits are a precondition to a success in any endeavour, and particularly in rapidly growing businesses.  In a business context, here is my summary of them.

This article deals with the first three habits of highly effective people.  These are centred around “Self Mastery” – the basic “get your act together” material that generates personal and business achievement.  In a second article I will cover the Interdependence or “achieving through people” habits.

1.       Be proactive.  The key message of the entire book is contained in this habit.  The nub of the message is this: “if you want to achieve something and things are not working because you think someone or some obstacle is standing on your way, that thought is the problem.  The real question is “how can I change to achieve my goal given the environment I am in”.  That is a mantra for business in the 21st century.

Take the situation of the major retailers and the dairy industry.  For months this story has run as a campaign by dairy companies to get the retailers to raise their prices in the middle of a price war and/or blame the retailers for the demise of margins in their industry as consumers shifted their buying preference to low cost private label milk.  Irrespective of who occupied the moral high ground, this sounded like a strategy that put  a lot of effort into a campaign that was unlikely to build short term sales of branded milk for dairy companies – limited effectiveness.  Then a stroke of genius in market research revealed that the vast majority of consumers did not want permeate additives in their milk.  The dairy companies changed their thinking about their approach and commenced marketing permeate free milk, moving the war to a different battleground.  This in turn created an increased demand for branded milk and a turn by consumers away from private label without the need to battle the immovable retailers.  Someone in the executive teams of the dairy companies changed their paradigm from one of reactivity – “I am a victim at the hands of the retailers”, to one of proactivity “let’s create a new market”.

2.       Begin with the end in mind.  This habit is centred around identifying roles, relationships and goals to progress activities that connect to your key values.  Lost you yet? What do “values”, roles, relationships and goals have to do with adding 50% to your top line for the new financial year?

One of our clients in the cosmetics industry, Illamasqua, is illustrative.  Cosmetics is a fiercely competitive industry. One end of the industry faces the threat of a move to generic brands and warehouse retailers.  The other end of the industry is inhabited by the indomitable cosmetics leviathans and their unlimited marketing budgets.

There is fierce competition for floorspace in high street retailers who can pick and choose favourites.  How then do you outperform the leviathans?  In Illamasqua’s case, the answer started with a very clear definition of values; connecting to the counter culture and cult pop/ fashion movement.  Illamasqua connects to the desire to  self express/ show off your alter-ego and stand out through professional make-up with a focus specifically on performance for night time partying.  Think Lady Gaga.  The goals connected with this values statement went far beyond merely making money from selling cosmetics.  The brand occupys a position as an ambassador and educator for the counter culture.  Delivering on this goal statement required a clear definition of the roles the brand plays in the market place and the relationships the brand has with its customers.

A key role was as a teacher – the “how-to” of make-up artistry – creating a “school of make-up art”, and a shop floor environment to educate customers. Another key role was to act as an ambassador for alternative culture and an understanding of people who are “different”.  This is embodied in the Sophie Lancaster Foundation.  The foundation’s purpose is to educate and create tolerance and understanding of subcultures.  Finally there was the role of social connector using social media in all its guises to provide a platform for individuals to express themselves and share experiences.

Outperforming the major brands was no accident, it was the result of a very clear vision defined not just in writing, but in web media, art videos, and roles and relationships that made the brand live with customers.

3.       Put first things first.  This habit deals with the “urgency addiction”.  That is, many of us love the adrenalin rush of having many urgent tasks.  But in our frenzy to do everything that is urgent and tick off that do-to list, we can overlook those things that are truly important and where enduring value is created.

You know the drill.  You know that the enduring value comes from your plan to set up meetings with your key customers to expand relationships, get feedback and deepen awareness of your products and services.  But first you have to do the IT update to your server, reconcile the sales figures that don’t make sense, negotiate the overdrawing on your account with the bank, deal with the staff squabbles at the warehouse, read about Tom and Katie’s bust up in New Idea, defend the worker’s compensation claim that was faxed to you by the ambulance chasing law firm your worst performing employee has engaged to represent him in the “office chair incident”.  And get home in time to read the kids a bedtime story and be a loving engaged life partner to your significant other.

Yes, we are in the realm of time management.  Stephen advocates a 4 quadrants model breaking activities into urgent/ important (prioritise), not urgent/ important (book time for), urgent/ unimportant (delegate), not urgent/ not important (drop).  There is a maze of paper systems out there based on this model that might have destroyed forever your passion for this type of personal planning.  I have good news. In the age of technology the app store is your friend.  Try Priority Matrix to name but one of many.

Stephen coins a great phrase about having “integrity in the moment of choice”.  That is, in that moment where you decide to (a) read another spam email or (b) phone your key customer who just complained about service, integrity in doing what you know is right is the key.  Even though the important action is also the hard one.

Next time, we’ll shift the discussion to the “Interdependence” and “Renewal” habits.  These are the 4 habits that deal with achieving things with and through people.  I look forward to sharing them with you.

Stephen Cribb is a Director of Business Services and Tax at Prosperity Advisers Group

Rebalancing for a new financial year… Which asset class will prevail in 2012-13?

30 June 2012 closed a difficult year for share investors. Australian shares returned -6.7% and International shares (in Australian dollar terms) – 2.1%. By contrast the Australian and International fixed income segments returned 12.4% and 11.6% respectively. That was the year that was but where to from here…

Firstly, for those investors relying on income from their investments, it is worth remembering two things about last year’s results

1.       Negative share returns do not equate to no income from shares (particularly in the case of domestic equities). The price of a share may fall but that does not necessarily translate to a fall in payout (for example, the share price of BHP fell nearly 30% but the dividend per share increased); and

2.       Positive fixed income returns do not equate to higher income from fixed interest. The pure income return from fixed interest does not change over the life of that fixed interest investment. But, similar to a share, fixed interest investments are traded and it is this market quality that results in price volatility. In general terms, as interest rates fall, the (traded) value of a fixed interest investment rises.

The headline constraints for International shares still remain – Eurozone weakness, a fragile US economy and slowdown in emerging economic growth.  However, resolution of the Greek political landscape appears to have prevented a breakdown of the economic union, there are signs of subtle recovery in the US and with inflationary pressure reducing, emerging countries such as China and India have scope to ease policy and stimulate growth. In Australia, the three big drags on shares – relatively high interest rates, a high Australian dollar and concerns about a hard landing in China – appear to be diminishing.

By contrast, with interest rate policy generally eased or easing around the World (and as noted above fixed interest prices move inversely with interest rates), there are headwinds for the fixed interest sector in the next year.

Successfully predicting the asset class that will outperform the others for the next 12 months, let alone the return itself, is fraught with danger. If you wish to speculate on that, and back that with your money, I wish you the best of luck. A less volatile approach is to diversify a portfolio of assets across a range of asset classes.  In general terms, the lower the return required from your portfolio, the lower the allocation to equities that is required. However, given that equities are yet to recover to their 2007 highs (and may well take longer than the 40 month average since 1900 to do so following the GFC), and the relative tailwinds/headwinds facing equities and fixed interest, I would be disinclined to significantly reduce existing equities exposure in re-balancing a portfolio.

Gavin Fernando is a Director and Financial Adviser with Prosperity Advisers