business model | CorporateIntel

I’ve written the words People, Products, Profits (In That Order!) so many times over the years it would be easy to think of them as simply a slogan I use, a catchphrase meant to pique your interest. I assure you this is no more the case than Apple using the words Think Different as a clever tagline. Like the words Think Different, People-Products-Profits is part management philosophy, part rallying cry, and in an aspirational context, part religion. When I invoke these words to set the table for embarking on the outrageous, it is with the full knowledge that I could sound silly, fail miserably, fall on my face, or possibly convince you that relentless pursuit of the extraordinary is within your grasp. That’s a lot to bite off in a very few words. It’s meant to be.

In my new book, Endless Encores, a veteran CEO named Daphne spends an evening talking with an up-and-coming executive named Paul, helping him come to terms with the potential first failure he could be facing following a huge initial success. They are stuck in an airport, passing the hours. She is a leader and he is leader, only at the moment he is too obsessed with his own personal exposure to realize that he is failing to be a leader by trying to duck out of the way of his own mishap. By worrying more about what he has done than what he has learned, he has shifted the weight of his problem from marginal to endemic. In truth, the failure he might be facing is not so much a setback as it is an opportunity. By the end of the story, he has embraced that and reset his sights on the long game.

Save for the guidance from Daphne, Paul might have missed the boat. And the plane. And all that might have been ahead of him in the form of material reward, passionate accomplishment, intellectual richness, and emotional fulfillment. It’s a close call, but he makes it over the coals. You can, too, if either you have a Daphne in your corner and you’re willing to listen, or if you otherwise come to acknowledge your role as a leader is more about the long-term example you set than the specific offering you at the moment champion. One is permanent and tangible, the other fleeting and beyond your control. Where would you prefer to focus?

Leading through People, Products, and Profits means committing to the idea that talent is a priori to all success. This has much less to do with your own talent than the talent you assemble, empower, and inspire. World class products and services don’t create themselves. They are created by human beings, most often high performance teams, and the time you devote to building and bolstering those teams is a direct reflection of your values.

When your team identifies a product concept that is worth pursuing, leadership becomes the championing of execution over the touting of an idea. We can all dream up big ideas, but few of us can bring them to market. Those who can almost invariably need some form of stewardship to hold the team together through unending punch lists of details. If that’s not challenge enough, you can have the best team in the world and the best product in the world, but if your business model is not sensible and doesn’t sustain the enterprise, it really doesn’t matter what you set out to accomplish. A business has to create value, usually measured in the form of profit, and if you can’t lead a team to do that more often than not, you’re not likely to get many chances to stand in the center ring.

The point of the rallying cry is to set a tone of priority, balance, and perspective. Everyone likely wants a business that is profitable, but leaping straight to the outcome ignores the most valuable element in the mix: your customers. An exceptional team that has been well-directed puts the customer in first position, in essence their supreme boss, with the primary hope that if a customer’s expectations are exceeded, that customer can become a customer for life. When we talk about the notion of lifetime value, we are talking about just that: Have we surprised and delighted a customer in such a way that they ascribe emotion to the brand we represent? Will they come back for more with cost-effective prompting, and will they tell their influence circles about the breadth and depth of their fine experience? That’s why a business leader is accountable first to customers, because they hold all the cards, and that’s why when they pursue a business opportunity, they place investment in talent first, product innovation second, and business model third. You need all three, but put them in the wrong order and you are left extracting value from a customer rather than bonding a customer who becomes a partner in creating value.

Yes, you have to juggle three balls at once in sequence if you want to repeat success, and you have to do it over and over. It’s not easy and it’s not supposed to be easy, because if it were, you wouldn’t be worthy of praise or wealth because anyone could do it. Likewise, leadership is a choice. It’s not for everyone. The rewards are far often more intrinsic than measurable, and falling on your face in a public forum is never going to be fun. You will fail. We all fail. If you learn when you fail you will also win. You have to decide if leadership is really something you’re ready to shoulder. If you are, choose your words and the order of those words carefully. The talent around you will only become cynical if you’re insincere and don’t stand for something more than winning right now.

Repeating success is about the journey. Leading is about tone and substance. Projects are always short. Careers can be short or long. The choice is always yours. Your values always matter. If you’re deliberate in determining how you build a culture of shared values, the best around you will always be listening. Stay authentic and their results will surprise you. Those are likely to be extremely pleasant surprises.

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This article originally appeared on Leadership Now.

Photo courtesy of Free Range Stock

With the September 22, 2015 publication of my second book, Endless Encores, I wanted to share a few excerpts to catch your interest. Published by The Story Plant, this is a business parable about People, Products, Profits—in that order. This excerpt is from the chapter about Profits.

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There was a modest rumble in the room. A flight had been called. It was not Daphne and Paul’s flight to Los Angeles, but both were heartened by the rustling of computer bags and rollaboards around them as fellow passengers-in-waiting began ambling to the door. It had been a long night, but now it appeared the delay would not go on forever, nor the conversation.

“We have hope,” proclaimed Paul. “We’re going to get out of here.”

“Hope is the strength that keeps us going,” said Daphne, watching people around her happily begin to leave the airport lounge. Since their flight wasn’t leaving, she had no reason to follow them, but she knew her remaining time with Paul would be limited.

“When you set out to determine strategy, how do you think about building the business so it keeps growing?” continued Paul. “No sane executive wants to lead a company into the Dead Brand Graveyard, yet so many end up there. Suppose they have the best people and the best products. How do they get their head around a business model that is going to both work now and expand into the future?”

“That’s the greatest enigma of all,” answered Daphne. “You have to think about recurring revenue alongside new revenue. Some transactions have to be there without your prodding, so you can add new transactions on top of them. If you’re going to spend money to acquire new customers, you have to balance that with what you’re spending to retain the ones you have. If all you do is spend to acquire new business, your margins will be perpetually squeezed. No fun, I assure you.”

“My boss says that all the time,” agreed Paul. “If every year you start the P&L from zero, it’s virtually impossible to grow. You have to know there is some business already on its way from your catalogue of products, and on top of that you add new product introductions.”

“Smart guy, your boss,” said Daphne. “He gets the mix a lot of us miss. Maybe he was at the same Paul McCartney concert I attended.”

“The same boss who isn’t going to can me for this lackluster sequel?”

“Yes, that clever fellow. Let me ask you something about that catalogue of products, the base of recurring revenue. Do you cannibalize your own markets before the competition does it for you?”

“Well, we don’t put out the same videogames, so it’s not exactly possible,” said Paul. “But if you’re asking do we sometimes leave one out there longer than we should to extract the last bit of profit from it, yeah, we do that sometimes.”

“How does it make you feel?”

“Queasy”

“Me, too,” winced Daphne. “I think we all do it to some extent, but the key to all of this is balance. Yes, you need a base of recurring revenue, but if you don’t give your customers something new and exciting before your competitors do, they will sweep your customers into their camp. You have to study and manage the ratios of evergreen and introductory endeavors at work in all your sales channels. Remember, constraints on distribution are low, choices are high.”

“It’s staggeringly hard to find the stamina to pull a product from the shelf when it’s still selling,” said Paul. “R&D costs are ridiculously high. We need all the sales we can muster for contribution margin to make sense.”

“One of the hardest choices in business is to pull a product while it’s still moving. Again, what we are talking about is strategy. Of course you don’t want to leave more money on the table than you should, but you’ll often find you need to leave some. If you don’t do it, your competitors will happily obviate your offerings. That can be the end of one brand and the birth of a new one that is no longer yours.”

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Endless Encores: Repeating Success Through People, Products, and Profits by Ken Goldstein is available in hardcover and as an e-book from Amazon, Barnes and Noble, iBooks, Kobo, IndieBound, Indigo, and at independent bookstores near you.