Are You a Prime Target for Creative Destruction?

Scary thought, isn’t it? Please allow me to put a more positive spin on this concept. It was introduced by Austrian-American economist Joseph Schumpeter who lived from 1883-1950. He considered entrepreneurs (Yes, that’s you, whether you are the third generation running your Family Business or you have started your own shop…) to be the lifeblood or most dynamic factor in pushing the business cycle forward through capitalism.

He developed the term “Creative Destruction,” outlining how entrepreneurs continually disrupt economic stasis, by introducing new concepts to the market place. And before you become annoyed about “continual change,” consider that, without it, you wouldn’t be able to read this Next Level Thinking™ blog post, unless, of course, the one person I had mailed it to decided to share it with another person, and so on…

So, let’s take a look at what “Creative Destruction” looks like in real life. During a recent Client meeting, they described a situation where an employee had developed an “attitude” and had decided that, not only did he know more than the Foreman and the Owner of the business, he would be absolutely defiant about the process, to the point that he was recorded on video stating that “he would only do it his way…” Initially, I thought this looked like a prime “cost cutting opportunity.”

However, after thinking about it for a while, I realized that was simply “Downstream Thinking,” i.e., putting out fires after they had been started. So, at the risk of sounding like a “ruthless capitalist,” I realized that it was an opportunity to combine the “Creative Destruction” concept with “Upstream” thinking that Author Dan Heath describes in his book of the same title.

Now, this is what I really get excited about. The Client’s Labor Cost was about 30% above where I wanted it to be. Thus, I asked the question, “How can I take control of this process and change it, so that I am not chasing the problem? What steps can I take to change this?”

The annual cost of the labor associated with this segment of my Client’s business was about $171,000. If we added in the expense associated with Workers’ Comp, Benefits, Overtime, and Corporate Taxes that were being paid, the annual tally was around $225,000. That’s the bad news…

The good news is that this entire segment could be “automated” for about $2.1 million. However, this capital investment would easily be repaid in 9-10 years without changing the rest of their operation. Oh, but there is more good news. This change would allow them to increase the through-put of their business by at least 20%, reducing the payback period to about eight years.

There is no telling how much it might boost employee morale & productivity among the remaining employees, but it would certainly be beneficial to eliminate the Labor Cost, Workers’ Comp, Benefits & Corporate Taxes being expended in this part of this Client’s operation.

Using the combined thinking of Joseph Schumpeter (Creative Destruction) and Dan Heath (Upstream), my question for you is this:

“What innovations do you have available to you right now to boost the productivity of your business?”

If you spend some time on this, I guarantee that you will continue to expand your future opportunities and profitability results!

I urge you to please join me in making the changes we need to in order to succeed and prosper! As I move forward with my Next Level Thinking™ blogs, I’ll continue to focus on the benefits of this type of thinking, and if I can assist you in any way on this process, please reach out at john@success-strategies.com or at 209-988-8960.

When Will You Go Upstream?

So often, we get caught up in the throes of responding to various crises in our business. You know, feeling like you are always “on call,” just waiting to put out the next fire… We basically are, as Author Dan Heath suggests, “…downstream, handling one problem after another, but we never make our way upstream to fix the systems that caused the problem.” So, why do we act in this manner?

I have two suggestions. First, you do not have to act in this very manner. Second, I’ve worked with my Clients to avoid this problem. I’ve taught them to respond, when needed, but, more significantly, start exploring (as Dan Heath describes it) “Upstream,” in effect where the problem started.

Let me provide you with a real-life example. My Client was a distributor of various fruits & vegetables. They would contract with growers, and then market these items after they were “re-packed” into their containers. Historically, they were fairly profitable, but their labor costs were getting out of control… Imagine that!

Regardless of what type of business you are in, you should consider the similarities of their situation with that of your company. Whether you measure your Revenue, Expenses and Profitability on a per box or per bag basis as they did or some other measure, this same thinking is still applicable.

If we know our costs, as we did in this case, and we understand the historical levels of rejected units under normal conditions, we can predict, with some degree of certainty, our expected results & profitability. Remember, if you can measure it, you can understand it. If you can understand it, you can control it, and if you can control it, you can improve it! Looking at these early in the process is what Dan Heath calls “Pre-game measures.”

The next step Heath suggests is to “Align incentives.” With this mind, we reinvented the labor/pay structure completely to include incentives for these workers to produce positive results. Since we had already modeled their Revenue, Production & Costs, we could simultaneously incentivize the workers and boost results on both their productivity and the profitability of the company.

As a direct result of going “Upstream,” several positive things happened. First, the workers involved made more money by being incentivized (And, trust me when I say: not everyone bought into this concept. They left for what they assumed were greener pastures elsewhere…). Next, the increase in productivity levels was astounding, partly as a result of the remaining employees “buy-in” to the new process. Finally, the profitability of the company jumped dramatically from a seven-figure loss to a very healthy profit, as we had predicted!

This is just an example of what can happen when we go “Upstream,” and rather than just “putting out fires,” in this case on the Labor front, actually determine the true source of the problem and then work to preemptively correct it. In stark contrast to their old program, which wasn’t working for either the Company or its Employees, this new incentivized program worked better for both of them. My question for you is this:

“Where, when and how will you go Upstream in your business?”

If you will continually do this, I guarantee that you will continue to expand your future opportunities and profitability results! I urge you to please join me in making the changes we need to in order to succeed and prosper! As we move forward with my Next Level Thinking™ blogs, I’ll continue to focus on the benefits of “Upstream” thinking from Author Dan Heath. If I can assist you in any way on this process, please reach out at john@success-strategies.com or at 209-988-8960.

Are You Using “Pareto’s Law?”

Are you taking full advantage of Pareto’s Law? Vilfredo Pareto was an Italian economist who lived from 1848-1923. Of course, he was initially known for his observation that 80% of the property in Italy was owned by 20% of the population. This was later summarized into the Pareto Principle, which states that 80% of our results typically come from 20% of our efforts. This is also known as a Pareto Distribution.

Take some time and list all of the tasks that need to be completed in your business. You are probably already thinking, “John, all of these tasks need to be done!” Maybe so, but do they all need to be done by you? Not necessarily… Please allow me to explain. Even in the early years of my business, when I couldn’t necessarily afford to hire a lot of staff members, I had my children (Ages 10-13 at the time) complete filing, do inputs for Inventory spreadsheets & Client Activity Summaries.

This actually accomplished several things. They learned how to work, they took part of the load off me and they also funded their future college tuition through their efforts.

After you’ve made your list of tasks, I’d like you to categorize them into four categories:

L – Lead on these tasks. They are the ones that you do best in your business, simply because you have what my Business Coach Dan Sullivan calls a Unique Ability. You are really great at this, others recognize this positive skillset you have, and you enjoy it so much that the day just seems to “fly by.” They are the tasks that will likely also make you the most profits.

E – Eliminate these tasks. Do you really need them? If you are spending 80% of your time on these, and only getting 20% of your results, you are limiting your profitability.

A – Automate tasks whenever possible. I use tools like Auto-Responders on my website to expedite replies to some of my website requests. I also use some e-mail responses that cover Frequently Asked Questions or FAQ’s. What tasks can you automate in your operation? In this world of rising labor costs, you simply cannot afford to overlook this question!

D – Delegate tasks whenever possible. There are some tasks that just make sense to delegate to others on your Team or to a third-party provider. The question to ask is, “Can someone else do this task, perhaps even better than I can complete it?” In my own operation, I use a third-party provider to do my billing, payroll & several other tasks, which frees up more time to spend with Clients. In most cases, delegation will free you up to focus on more profitable tasks. I know this certainly has been true for me.

The ultimate question for you is “Where, in terms of your efforts, can you place 20% of your efforts and achieve 80% of your results right now?” Talk to your Team about this idea and where it can be applied. There may be some tasks that are 70/30 or 60/40, but they are still worth looking at.

If you will continually do this, I guarantee that you will continue to expand your future opportunities and profitability results!

I urge you to please join me in making the changes we need to in order to succeed and prosper! As we move forward with my Next Level Thinking™ blogs, I’ll start my focus on the benefits of “Upstream” thinking from Author Dan Heath. If I can assist you in any way prior to that, please reach out at john@success-strategies.com or at 209-988-8960.

Unnecessary Roughness?

Wow! My Client was irate, possibly just plain hurt, by the negative commentary. As you know, the years of 2015-2018 were tough years for profitability in the dairy industry and some other agricultural sectors as well… He had met with his loan officer, and despite being profitable in both 2019 & 2020, this is the message he caught: “You are a problem loan!”

What? Problem loan customers don’t show profits for two years in a row, reduce their Accounts Payable by over $200,000 and also service their debt structure as agreed. Oh, and did I mention that the Client’s Loan to Value was 60% on his herd loan and 80% on his feed line, along with an excellent diversification plan in place?

The point is this. If we had been playing football, the loan officer would have been flagged for unnecessary roughness! I understand that being a loan officer is not an easy task, but being one also doesn’t give him or her a license to be a butt-head either… The job isn’t that difficult. I know, because I did it successfully for eight years. My message for this loan officer is one that comes from former President Teddy Roosevelt, who said:

“Complaining about a problem without proposing a solution is called whining.”

Now, more significantly, what can you do, as a borrower, to avoid being the recipient of such “unnecessary roughness?” I’d suggest the following items, which this borrower had already put in place:

  1. Monthly tracking & reporting of Inventories & Accounts Payable.
  2. Monthly Cash Flow Analysis of your operations. Remember, if you measure it, you can understand it. If you can understand it, you can control it, and if you can control it, you definitely can improve it!
  3. Regular CPA Prepared Financial Statements, at least 2X per year.
  4. Positive goals that seek to boost profits long term.
  5. A Diversification Plan in place to survive the downturns.
  6. A Plan that includes opportunities to evaluate, adjust course and implement the process.

Following these steps doesn’t guarantee that you won’t become a target of “Unnecessary Roughness,” but I assure you it will prepare you for greater levels of success and the ability to stave off any success comments.

I urge you to please join me in making the changes we need to in order to succeed and prosper! As we move forward with my Next Level Thinking™ blogs, I’ll start my focus on the benefits of “Upstream” thinking from Author Dan Heath. If I can assist you in any way prior to that, please reach out at john@success-strategies.com or at 209-988-8960.

What Just Happened?

The realization is now – Written by Marketing Expert Seth Godin

*** I wanted to share a copy of Seth’s article with you, simply because I believe it has a fantastic message, one that could serve as a sound directive to get our country and hopefully keep your business on track in so many ways. This was actually written five to six years ago. I hope you enjoy his thoughts, which fit almost every industry (The italicized items are my comments.):

“New polling out this week shows that Americans are frustrated with the world and pessimistic about the future. They’re losing patience with the economy, with their prospects, with their leaders (of both parties).

What’s actually happening is this: we’re realizing that the industrial revolution is fading. The 80 year long run that brought ever-increasing productivity (and along with it, well-paying jobs for an ever-expanding middle class) is ending.

It’s one thing to read about the changes the internet brought, it’s another to experience them. People who thought they had a valuable skill or degree have discovered that being an anonymous middleman doesn’t guarantee job security. Individuals who were trained to comply and follow instructions have discovered that the deal is over… and it isn’t their fault, because they’ve always done what they were told.

This isn’t fair of course. It’s not fair to train for years, to pay your dues, to invest in a house or a career and then suddenly see it fade.

For a while, politicians and organizations promised that things would get back to normal. (Remember, this was written 5-6 years ago, not during our recent pandemic… It’s fitting today, though, isn’t it?) Those promises aren’t enough, though, and it’s clear to many that this might be the new normal. In fact, it is the new normal.

I regularly hear from people who say, “enough with this conceptual stuff, tell me how to get my factory moving, my day job replaced, my consistent paycheck restored…” There’s an idea that somehow, if we just do things with more effort or skill, we can go back to the Brady Bunch and mass markets and mediocre products that pay off for years. It’s not an idea, though, it’s a myth.

Some people insist that if we focus on “business fundamentals” and get “back to basics,” all will return. Not so. The promise that you can get paid really well to do precisely what your boss (…or government leaders claim) instructs you to do is now a dream, no longer a reality.

It takes a long time for a generation to come around to significant revolutionary change. The newspaper business, the steel business, law firms, the car business, the record business, even computers… one by one, our industries are being turned upside down, and so quickly that it requires us to change faster than we’d like.

It’s unpleasant, it’s not fair, but it’s all we’ve got. The sooner we realize that the world has changed, the sooner we can accept it and make something of what we’ve got. Whining isn’t a scalable solution.”

I urge you to please join me in making the changes we need to in order to succeed and prosper! Next month, I’ll start my focus on the benefits of “Upstream” thinking from Author Dan Heath. Stay tuned. If I can assist you in any way prior to that, please reach out at john@success-strategies.com or at 209-988-8960.

The Search for Meaning – What Does That Really Mean?

I wanted to take this opportunity to revisit a story that I had written in a previous blog almost three years ago. In spite of the difficulty we have faced with our economy at times during the past ten years, we certainly have a lot to be thankful for. Frankly, I couldn’t think of a better way to remind ourselves of this than to look at the story of Victor Frankl once again. I hope you can relate.

Throughout the crazy events sometimes surrounding us, it’s often difficult to find meaning – in effect, to make sense of things that are occurring every day. Victor Frankl was a survivor of the Auschwitz Concentration Camp in Nazi Germany. Many entered Auschwitz; few survived. Victor Frankl in his book entitled Man’s Search for Meaning explained that the key to survival was that people needed to do six things. There may be some sound guidance for us here, too.

First, he said, “Realize that the game of life has changed.” Isn’t that applicable today in all industries? As Frankl stated, the old game is over, a new game has begun. That’s true for you and me, too. We’ve got to operate under a new set of assumptions because the old game is over. Be prepared & remain open to change – it’s coming faster than ever!

Second, every day, you must find something beautiful. For Victor Frankl, from his cell, he could see a mountain range. For us, maybe it’s a sunset.


Third, every day, you must find something humorous, something funny. For Frankl, it may have been the way one of the guards walked. As you face the stress of working through any difficult situation, find some humor each day. Trust me. We all need some.


Fourth, every day, you must find something to be grateful for. Instead of focusing on what we’ve lost or what you don’t have, try to focus on what you do have; something you are grateful for!


Fifth, every day, you must find some way to be useful. For Victor Frankl, it was helping other prisoners in the concentration camp by listening to them. What will it be for you? How can you be useful to someone else or to your industry today?


Finally, every day, you must find something to help you prepare for the future – a big goal, for example.  We all need a bigger goal beyond this current experience. For Frankl, what kept him going was his goal to write his book: Man’s Search for Meaning.

As Dan Sullivan, founder of The Strategic Coach organization says, “All progress starts by telling the truth.” So, remember, as Victor Frankl stated, realize the game has definitely changed. We’re in a new experience. The sooner we realize this, the sooner we’ll be able to reach new objectives. Also, don’t forget the other five steps to success:

Every day, find something:

  • Beautiful
  • Humorous
  • Something to be grateful for
  • Some way to be useful to others
  • A reason to prepare for the future – A Goal!

Try this today. It works far better than complaining, especially on items over which we have no control… As Teddy Roosevelt said:

“Complaining about a problem without proposing a solution is called whining!”

Who Is This Guy?

As we wrap up the year, which has been a difficult one, I wanted to share with you a story of Howard Hill, perhaps the greatest archery performer ever. They say that, not only could he split an apple on the top of someone’s head successfully. He could split those halves a second time, and thank you, but “No, I’m not really interested in holding the apple…

I only tell you the story because as you wrap up you year, I want you set some, as Jim Collins calls them, BHAG’s, i.e. Big Hairy Audacious Goals!!! Make them big and challenging. The bigger the better!

  1. Define it clearly.
  2. Lay out the steps to get there.
  3. Determine who will be involved.
  4. Set a deadline for the completion of these steps.
  5. If you hit snags (Welcome to life…), adjust your course, as needed.
  6. Then, go forward, and “take no prisoners!”

As you prepare for next year, I want to state that you can hit your target better than Howard Hill. I’d just have to blind fold him & spin him around until he was dizzy & could barely see. I know what you are thinking. You’re saying, John, that just wouldn’t be fair. No one hit a target they cannot see…

And, you know what? You’d be absolutely correct. The same holds true for you. You cannot hit a goal that you cannot see! You have to literally “Go for it!” You may recall what I suggested in my last blog:

  1. Determine what you want to pursue now. Define it clearly in your mind. If you don’t, guess what. Another year could go by, and you’ll still fall short of that objective!
  2. What steps do YOU need to take? What is your first one?
  3. Who else can assist you with this process? Are they already on your Team, or is it someone from outside? Forget about “saving your way to prosperity.” The right person on some of these tasks will pay for themselves 5-10X over. Ask anyone who has ever been saved from the brink of financial disaster. They never considered the cost, just the potential benefit.
  4. When do you want to achieve this result?
  5. What will the “drivers” of this challenge need?

If I can assist you with this process, please contact me at john@success-strategies.com or 209-988-8960. Best Wishes for a joyous Holiday Season and continued prosperity in the coming year!

What Would You Do?

Put yourself in this situation. It’s been a tough year, accompanied by lower sales & a small financial loss. I know – some of you are thinking – like normal… I know it can be painful. In fact, when I worked in the banking industry, we had a term for that. It was called a SNAFU, which stood for “Situation Normal, All Fouled Up…” I have a suggestion for you.

As you wrap up 2020, perhaps it’s time for a serious review of your accomplishments, e.g. what went well, what could have been better, and, perhaps most significantly, where can we improve?

First, what went right? What steps did you take & why do you feel it went so positively? When you know the answer to these questions, you have established the foundation for even greater success. How can you build upon it? Is it something that you will be able to repeat? If not, why not? Are you sure of this? If it worked in 2020, it could very well work going forward. Maybe you just need to make some adjustments & make it happen!

Next, what are the areas within which you fell short, and, once again, why? Was it due to the COVID pandemic, the economy or other items beyond your control? Was it due to poor or limited planning? Was it planned okay, but poorly executed? Please don’t take the answers to these questions lightly. Your future success might be dependent upon these very answers…

Finally, what are the areas that you feel you can do better on? More importantly, how? Here are some steps you can take to reach your objective(s):

  1. Determine what you want to pursue now. Define it clearly in your mind. If you don’t, guess what. Another year could go by, and you’ll still fall short of that objective!
  2. What steps do YOU need to take? What is your first one?
  3. Who else can assist you with this process? Are they already on your Team, or is it someone from outside? Forget about “saving your way to prosperity.” The right person on some of these tasks will pay for themselves 5-10X over. Ask anyone who has ever been saved from the brink of financial disaster. They never considered the cost, just the potential benefit.
  4. When do you want to achieve this result?
  5. What will the “drivers” of this challenge need?

If you can truthfully answer these five questions, you will undoubtedly position yourself for a stronger finish. If you take the time to complete this process, I’ll look forward to seeing you at the “Finish Line!” If I can assist you with this process, please contact me at john@success-strategies.com or 209-988-8960. Best Wishes for a joyous Holiday Season and continued prosperity in the coming year!

Would You Meet Me Upstream?

I recently completed an outstanding book entitled Upstream, which was written by Dan Heath. He is a Senior Fellow at Duke University’s CASE Center and has co-authored a number of excellent books with his brother Chip. You may even recognize some of them: Made to Stick, Switch, Decisive, and The Power of Moments. I’d highly recommend that you read this book in the near future.

See if you can relate to his opening story in Chapter 1.

“You and a friend are having a picnic by the side of a river. Suddenly you hear a shout from the direction of the water – a child is drowning. Without thinking, you both dive in, grab the child, and swim to shore. Before you can recover, you hear another child cry for help. You and your friend jump back in the river to rescue her as well. Then another struggling child drifts into sight… and another… and another. The two of you can barely keep up. Suddenly, you see your friend wading out of the water, seeming to leave you alone. ‘Where are you going?’ you demand. Your friend answers, ‘I’m going upstream to tackle the guy who’s throwing all these kids in the water.’”

A public health parable (adapted from the original, which is commonly attributed to Irving Zola)

This is a great example of “Upstream Thinking.” Have you ever noticed that we seem to spend a lot of time and money “fixing” problems, essentially those challenges that we are seeing “downstream” in our business? As you’ve heard me state many times, I firmly believe the following:

  1. If you measure some item in your business (e.g. Cash Flow), you can indeed understand it. It equips you to catch severe cost increases quickly before they get out of hand. Since these changes directly impact your break-even levels, they flow directly toward the “bottom line.” As I’ve said before, you can also use these cash flow measures to set your milk price floor within the Dairy Revenue Protection program.
  2. If you understand your cash flow, you can control it. You’ll know exactly what steps to take to positively impact it. Looking at your break-even levels, you can determine just exactly what changes you need to make in order to achieve improved profitability.
  3. Finally, if you can control it, you can improve your cash flow results. Isn’t that the objective of every business operation?

Well, whenever we identify a measurement that appears out of control, we should consider if we can go one step beyond this “downstream” measurement. Can we move more “upstream” and determine what is actually causing our problem? Here’s a simple example. Recently, one of my Clients was faced with higher than normal calf losses. These higher losses were the “downstream” measurement. At first, we thought that it may be due to changes at the calf ranch. However, as we moved “Upstream,” we determined that the machine used to pasteurize the colostrum being fed was only functioning at 60% efficiency. In other words, 2 out of every 5 days, it was not working correctly. This may shock you, but the employee that ran the faulty equipment noticed that it seemed to be failing. Unfortunately, he never bothered to tell anyone else. Hence, the challenges that arose “downstream.”

I’m sure you can think of other possible areas in your business that seem “off” in some respects, whether it’s a higher than normal “Cost/cwt” or another “Efficiency” measure. I would invite you to join me as I start to continually move my Clients “Upstream” in the next 12 months. Until then, what items in your operation are seemingly “out of kilter?”

Going back to the original question, “Would You Meet Me Upstream?” please give some consideration to this new type of thinking. It definitely will make a huge difference. If I can assist you with this process, please contact me at john@success-strategies.com or 209-988-8960. Best Wishes for a joyous Holiday Season and continued prosperity in the coming year!

When Will You Find Time?

This is a question I recently asked a new Client of mine. Please allow me explain my thought process. During our initial discussions and analysis, we had discovered several areas of his operation that needed some ‘fine tuning.” In other words, they were unintentionally off course in terms of their costs. Please take my word for it. They were way too high, in comparison to other producers.

To provide you with some background, his production was solid, and most of his expenses were admirable in comparison to industry guidelines. However, his Feed Expense and Cost of Supplies were both well above where they should have been. I had originally assumed that they were two separate challenges. However, as it turned out, they were both traced back to a common source.

For years, in an effort to save money, he had used the same Nutritionist from a local feed company. However, while saving the $1,000/month fee of a neutral third-party Nutritionist, he was spending thousands more on Feed Costs. His Supplies expense was also being impacted by the use of some “Pixie Dust” powder that was being added to the calves’ rations. Please don’t ask me why it was included in his Supplies cost. I assume it was placed there as a result of its’ “medicinal benefits…”

Now, understand that any Nutritionist can run into these same challenges and then need to make some changes. The difference here was that his current feed advisor wasn’t willing to make the necessary changes. With the guidance of another Nutritionist, this producer lowered his Feed Cost by $0.40/cwt and decreased his Supplies Cost by $0.10/cwt. Now, this change generated $10,500 of reduced costs per month. After paying the new Nutritionist $1,000 per month, his bottom-line return was still boosted by $114,000 per year.

Now, while the net impact of this change was dramatic, my point is not to pick on his former Nutritionist. This situation could happen with almost any advisor. The significance really revolves about the willingness of this producer to fully analyze these sizeable cost variances and then actually take the steps to improve his results. How much money had he left on the table because he was “too busy” to make these changes? Our industry is one with thin margins in most years. That is precisely why it’s so important to take action today! Do you know the best time to plant an Oak Tree? The best time was 20 years ago, but the second-best time is today.

Going back to the original question, “When Will You Find Time?” your very survival depends upon this type of thinking. Based upon my experiences of the past 22 years, it will make a huge difference. If I can assist you with this analysis process, please contact me at john@success-strategies.com or 209-988-8960.