It would be an understatement to say that most companies were not prepared for the economic crisis that evolved from COVID-19. Since we can’t go back, we must move forward. What can businesses do now to revive and rebuild their brand, and how can companies prepare for future economic crises?
Richard Manders is CEO of FreeScale Coaching Systems. He works with CEOs and leadership teams to scale their business for success, with increased personal freedom. In this episode of Expert Opinion, Richard spoke with Andrea Fabbri about what businesses can do now to weather the storm, prepare for and embrace the changes to come, and why a strong brand promise is important.
Topics included in this podcast:
The Grey to Black Plan – what is it, and why should you take the time to use it? (1:43)
How to make your business adaptable to change – confront the brutal facts (7:08)
The Business Model Canvas exercise – how it can help (13:25)
The important role of brand during times of change (16:46)
*Links mentioned in the podcast can be found in the transcript below.
Welcome to Expert Opinion, the Branding Business forum where leaders share their views, insights and experiences from the world of B2B branding. And now, here’s your host.
Andrea Fabbri: Hey, everybody. This is Andrea Fabbri, Managing Director for BrandingBusiness in New York City. Today, as part of the Expert Opinion series, I have the pleasure of speaking with Richard Manders. He’s a very successful serial entrepreneur, and he’s also currently CEO of FreeScale Coaching Systems, a company that he created, and he works with the CEOs and the leadership teams to scale their businesses and also their personal freedom. And he does that through a variety of coaching and development systems that he has purposely developed over the years based on his own experience as a successful entrepreneur.
Richard Manders: Oh, thank you for having me. It’s a pleasure to be here.
Andrea Fabbri: I think it would be an understatement to say that the last two or three months have been rather interesting from a perspective of business. A lot of companies faced with a sudden task of having to look at their business with a critical eye, trying to understand how to reduce costs, trying to understand how to manage cash flows. The image of the fire hose comes to mind. So my first question to you as a person that works with a lot of mid-market companies, what have you been doing in the last two or three months to help clients navigate these times?
Richard Manders: Yeah. Thank you. Actually, the interesting answer to that is it’s something we’ve been planning for for a long time. The last business that I built before this coaching practice, we were a distributor of high tech automation gear and an evaluated manufacturer, and we brought in private equity investors about 10 years into the running of that business to help us grow the business to the next level. And the first thing that they had us do, and this is 2007, things were fantastic in the marketplace, and the first thing that they had us do was this Grey to Black Plan. And we were very resistant to it in the beginning when they had said, “Listen, this is the time while things are great for you to figure out your plan when things aren’t great, when you have a clear head” and so on.
And so, they had us run through this process where we would model the business being down 10%, 25%, 50% and 100% down. Most people couldn’t have imagined back then that there could be a case where you might be 100% down. Now, there’s lots of businesses that are seeing that today. So we created this whole model. And we didn’t want to spend the time on it, but when things got bad, we were able to pull it out of the drawer and start executing on that plan.
And so with all the coaching clients that we work with, having that plan in place, we were working on that with almost all of the ones that we’ve been working with for a period of time. We usually do that about a year into the engagement. They had a plan, so they knew what to do right out of the box, where they were going to cut, what they were going to change, et cetera. That was all made with clear heads. So that’s how we started working them through that process.
Andrea Fabbri: Yeah. That’s very good. What are some of the things that you’ve done with some of these clients? Can you share any specific-
Richard Manders: Sure.
Andrea Fabbri: Maybe decisions, any specific activities?
Richard Manders: Yeah. And I’ll share with anybody who’s listening, I’ll send some links for a spreadsheet and a process and a video of how to do this whole planning process. But essentially what you’re doing, is you look at your situation and you look at your fixed cost and your variable costs, and you plug them in, and then you assign people in the company to figure out ways to reduce costs.
So, ones that comes to mind right away are what are all the fixed costs. Things like rent. Can you renegotiate your leases? A lot of people are in the middle of doing that. One big one is software as a service subscription. We have quite a few companies we’ve worked with and seen where they’ve kept signing up for different pieces of software that, many of them, they don’t even use anymore. And they’re spending anywhere between several thousand to tens of thousands or $50,000 a month on software that nobody even knows what they’re using it for.
Moving out your terms with your suppliers so that you have more time to pay, and trying to get people to pay you early, all in the service of making sure… because it’s been so uncertain. Nobody’s known how long this is going to last or when and how things are going to come back. So having as much cash as you possibly can and having as low expenses as you possibly can during this time of uncertainty, I call it a flying blind period, is critical to surviving.
And if you survive, and we did when 2008 and 2009 came and we executed our plan, we came out of that very, very strong and ready to come out the other side with a plan for recovery. And because we were one of the few companies left standing and standing with some strong financials because of the steps we took, we were able to capitalize and gain a lot of market share over that time.
Andrea Fabbri: Yeah, definitely cash is king in periods like this. And so obviously, what I can tell even from conversations that I have regularly with executives, is that leaders are beginning now to raise their heads to start to plan for their future, partially also tied to the decreased amount of cases of the COVID virus. Now obviously nobody has a crystal ball to figure out what’s going to happen, but it is safe to assume that uncertainty will be quite pervasive in the coming months and maybe years.
I’m a big fan of Jim Collins who said that great companies foster a balance between continuity and change. I always loved that quote, but that quote to me applies to an environment where you actually have time to figure out what needs to continue. And Darwin seems to be more of a fit these days. He claimed that the ones that survive are not the strongest or the most intelligent, they’re just the most adaptable to change.
I guess my question to you, in these years as an entrepreneur, but also as working with companies, how do you make a business adaptable to change? In other words, what conditions you want that business to have so that it can navigate change, it can navigate the next months or year and then come out strong?
Richard Manders: Yes. So, you mentioned Jim Collins, and one of my favorite sayings that comes from him is “confront the brutal facts,” actually looking at your situation in a very detached, but very carefully orchestrated way. And what I mean by that is, to answer your question, is how can you get facts? What can you put some certainty around?
And that’s the challenge. Most businesses are familiar with the concept of looking for leading indicators in their business, things that will predict the future. The challenge in this particular circumstance is most of the things that you used to measure, things like hits on your website, people who are pulling off white papers, downloads, getting demos, et cetera, are not necessarily very good leading indicators right now. There’s a lot of people working from home. They have time on their hands, but no budget, so they might be using up a lot of your time.
And so, what I’m suggesting to all of our clients, and what I’d suggest to the listeners, is to take time to actually talk to your customers. The best tool you have right now in this world is your telephone, because people are actually answering the phone. And call up your top 25 customers, the ones that you really count on to keep your business going. Most businesses follow the 80/20 rule or the Pareto principle, which (states) 80% of your business comes from 20% of your customers. Actually call them up and just ask them, “Hey, how are you doing? What’s going on with you? What kinds of things are you learning? What are you doing to plan? What kinds of things are you seeing in the marketplace? How has your forecast changed? How can we support you during this time in a better way?” And I’ll send a script of these questions to ask as well. And make this a job that’s not just the CEO or the head of sales to do. Divvy this job up across your leadership team so that they’re all getting different data points from this top 25 customer piece.
Then the second element is up your meeting cadence. You should probably be talking to businesses every day about what are you learning and what’s changing, and adjusting course on a regular basis, with this being one of those elements, that each day, one person’s coming with the results of a conversation from a top 25 customer. And from all this data, one, having those calls with the clients are going to make them think about you and move you to top of mind. Secondly, as you triangulate all these pieces of data about what they’re seeing and feeling and hearing, you’re going to start to build the picture of what’s going to happen to your business based on what’s going to happen to their business.
And especially in the business to business case. If you’re in a business to consumer case, it’s the same idea, but you’ve got to figure out how to reach your customers through whatever channels you have, chats, et cetera, so that you can find out how are they making decisions, what are the things that they’re looking at to decide, should I re-up my subscription and make a purchase, et cetera.
But taking that information and then weaving that into your plan and looking for those new leading indicators, things that tell you with a lot of certainty of what’s going to happen in the future. And then reverse engineer that Grey to Black Plan, so grey being we’re running at a high growth, and black is we are stopped in our tracks, reverse that from wherever you are today and have a plan going the other way that says when we see these triggers, so when you’re going towards black, you’re looking for these triggers. “Sales has dropped by this amount, profitability has dropped by this amount, average days for customers to pay us has moved to this number.”
To trigger action, you do the same on the other side, where you’re saying, “When our daily sales get above $5,000 a day or a $100,000 a day,” depending on your company, “this is what we’re going to start bringing back. This is what we’re going to start doing.” And also know that some of your customer preferences are going to shift and they may not buy the same product or the same service that you currently have, but they do need something else. So in those questions, you’ll find out.
And then lastly, besides the top 25 customers, you want to randomly go through the middle customers and find out what’s going on with them. So take another 25 of them randomly selected from that mid-section, and gather that information from them, so how you might serve, and especially serve using automation versus a high touch model, to get them a service or product that they can use in this moment and going forward.
Andrea Fabbri: That’s a very clever approach. So, in other words, focus on the core first, and then build from the core. And then start to build adjacent layers of growth sort of stages, depending on how far out you reach to the different customer set.
Richard Manders: And most importantly is with data. Get the data from the customers. Ask them the questions because they know. And that’s what your path is to knowing, is to get from them what they’re thinking and seeing.
Andrea Fabbri: Yeah. Yeah. So it’s all fact-based, which then gives them, of course, the leader, a certainty and then courage to act, which is always a stressful moment when you commit to a plan and you start to execute.
Richard Manders: Correct.
Andrea Fabbri: One of the things that I’m noticing is, at least on with customers that I’m working with, the damage has been so severe, that they’re not just building new plans to go back to where they were before, to a new sort of profitable state, they’re, in some cases, even considering business model changes, which is far more complicated. That adds, I think, an incredible layer of complexity. What’s your take on it?
Richard Manders: Yeah. I don’t think that anybody… there are very few companies that will be doing business the same way they were before this in the next few years. It might go back to normal someday, but there’s going to be a lot of upheaval and changes.
I’m a huge fan of, and we used to coach the company that created this tool called the Business Model Canvas, where you map out your business, and the ecosystem around it as a model. And so what we do with leadership teams is we had built these out over time, and we’re taking, in our planning sessions with them, we’re putting it back up on the wall and going, “What about this has changed in the last 90 days?” That’s a normal part of our coaching rhythm.
I’ve never seen, as we are now in the middle of and have wrapped up most of our quarter two planning sessions, so many things have changed on that canvas. And so then the question is, how should we change the way that we operate? And what I mean by that is, what are our product offerings and what are the pains that they’re solving for? What are the channels that we’re selling through? Maybe this is a time to move to selling through a channel or removing channels-
Andrea Fabbri: Yeah.
Richard Manders: So disintermediating, or adding a channel, depending on where you are. What are we doing about our cost structure to be scalable? What can we outsource instead of building ourselves so that we can scale up and down more rapidly and with less pain? And how does our economic engine run? Where are we actually making money and losing money? And doing that deep dive into the data as best as you can to get insights about what’s moving around. And you take all that, along with what the customers are telling you when you do these interviews, and now you have the beginning of a plan of how you’re going to get out.
And most importantly, is once you have that plan of, “Well, these are the steps we’re going to take,” is having folks on the team have ownership of it with milestones, with dates on them, and that fit into your meeting cadence. And again, most of our clients are meeting daily today because the pace of change is so fast of what’s happening, and probably will be for the next many months, so that they can real-time adjust.
But most of our clients have taken a huge financial hit. Some won’t survive. We have a handful of ones that are thriving, that are in the right place at the right time, medical services, emergency vehicles, and digital advertising happens to be one that’s very, very strong right now. And they’re figuring out new ways to help their clients. They’re building partnerships and connections so that a company that has strength in one area can pull from another one.
Andrea Fabbri: Yeah. Yeah. And I guess it’s all about adaptability. It’s all about reacting to the conditions to figure out what is the new business model, what is the new way of delivering value to customers? And in some cases, what I’m noticing also, who are the customers of the future?
Richard Manders: Right.
Andrea Fabbri: And in some cases, I’ve seen also companies suddenly inventing or evaluating new solutions to deliver to existing customers to protect that core, and maybe doing so through partnerships. So it’s all very fluid-
Richard Manders: Yeah.
Andrea Fabbri: As Heraclitus would have said “panta rhei,” everything flows. And I think that that’s the state of things right now. I guess one question for you is, what is the role of brand in all of this? Typically brand is always seen as something that doesn’t fit these kinds of conversations. And yet, what I’m noticing is those companies that including brand in part of the conversation, and for example, trying to answer what is the best brand positioning opportunity in what new future market? That input and that kind of conversation is helping quite a few companies being even more certain and gaining that kind of confidence as to where to direct their marketing dollars to stay afloat in some cases. What’s your opinion about the role of brand in a period such as the ones that businesses are going through right now?
Richard Manders: That’s a really good question. The number one thing that comes to mind right at the top is it describes who you are and why you exist, and what would be lost if you weren’t there. When I think of brand, that gives me a sense of confidence in the future about, “I know that what this company stands for. I know how they work, and I know how they tie it together into a cohesive system that delivers something to me.”
So I think it’s really important that you keep a tight eye on how that fits, and maybe how you have to, if you have to, how you morph it. And so for many companies, I think there is going to be a necessity to change the way that you’re communicating in this new world and change what you’re communicating because what you’re delivering is going to be different down the road. Did that answer your question?
Andrea Fabbri: Yeah, absolutely. I agree with you, obviously. As a brand strategist, it’s something that I believe companies will have to pay attention in the coming months to start to understand what do they need to be in the marketplace to be seen as relevant, to be communicating what they do in the most relevant manner. Up to that point, it was all about differentiation, and now there is an added level, an added sense of urgency. It’s about existence in a way, right? Because it’s tied so closely to business survival. So I certainly agree with you.
Let’s see. We’re arriving towards the end of this 20 minutes together. Any last observation that you would like to share with our listeners?
Richard Manders: The key here is to stay calm and work on the plan. Many people, because of the way the Payroll Protection Plan thing is set up, you may have excess capacity in your company. Take the time to use that capacity to do this research work and get certainty around who you are and what your clients need.
And then I would suggest, where I’ve seen the biggest transformation and folks who are taking real advantage of this, and I’ll tie it back to Jim Collins again, which is, a big part of what Jim Collins talks about is this idea of a brand promise. Like what does your brand promise to the client? And the ones that I’m seeing that are being very successful are performance-based. The way that you can make a promise to your customer about the outcome of a transaction, that is a very powerful tool because, one, it sets up the customer. It makes it easy for them to make a decision to work with you if you make a promise.
The classical one was FedEx, when it first came out, right? “If it absolutely positively has to be there overnight before 10:00 AM, we’re your guys,” and that drove their whole business model to make people who have low risk dealing with them because it would be free if you didn’t get it there on time. But also, it organized everybody in the company around how do we beat and deliver on this all the time.
And so, I would think about that. How can we make some kind of promise to clients about their return on their investment from working with us?
Andrea Fabbri: I completely agree. And that’s the new frontier of, I think, marketing firms. It’s tied to a variety of challenges and a variety of changes, talking about business model changes, and we’ll see where we end there in the coming years. But Richard, I want to thank you for your time, for your insights.
Richard Manders: You’re very welcome.
Andrea Fabbri: Always very helpful, always very interesting. And thank you again, and I’ll talk to you soon.
Richard Manders: And I will send those links over to you so you can post them on the podcast for the Grey to Black Plan and some other documents that your clients might find helpful, or your listeners might find helpful in plotting their plans.
Andrea Fabbri: Excellent. Thank you so much, Richard.
Richard Manders: Have a great day.