Companies, and their leaders are constantly engaged with two challenging tasks – grow the top line, do it profitably. To achieve the first one companies try and have in their possession products and services that they can offer to their market that answer the market needs, or even anticipate needs to be answered, they then try to target the geographies where these products and/or services are going to be offered (normally wherever they currently operate and in addition new desired geographies), they then prices their products and/or services trying to not deteriorate the attractiveness of the product/ service and still leave some decent margin.
On the other side, companies try to have their costs as low as they can, to enhance the probability that at the end of the day, the level of profitability will be good enough. They try to find supply sources that are cheaper, to subcontract parts of the work that others can do cheaper, to enhance efficiencies so that more work can be done with lower costs.
Those two streams of investment, cost, effort and management attention are demanding and consuming. So, wouldn’t it be a good idea to try and make the utmost effort to not wast significant portions of that?
The business of a company, can be looked at as a funnel; from the entry side we pour into the funnel business opportunities converted to customer orders and at the exit side of the funnel we collect the revenues from our customers. This analogy can be used to understand one basic rule of funnel flow – Garbage In Garbage Out (GIGO). If you allow entry into the funnel of bad business opportunities the effects on generating profitable revenues is negative.
So, what are bad business opportunities? How do they affect the business? and, of course, can we do anything about it?
It seems that the moment companies have defined sell-able products and/or services they commonly operate (de-facto) on the basis of the assumption that anyone willing to buy the product and/or service at plus, or minus the desired price point is a good business opportunity. Accordingly, anyone willing to place an order with the company, commonly the order will be accepted (and even celebrated and rewarded). But more often than not, the opportunity is not really that good, and quite likely it is even really bad.
A bad opportunity is one that consumes resources on the expense of better opportunities, piles obstacles on the delivery system, absorb management attention, negatively affects the ability of the company to service well the better opportunities, and at the end lives both the bad opportunity customer as well as the better ones dissatisfied. This happens, when the “bad” opportunity does not fit the company’s business strategy. For example, when companies have a strategy that calls for long term relationships with customers, opportunities that cannot be long term, are bad. Or, when a company has a strategy for relationships with customers that can buy large volumes for some meaningful time, any opportunity that is low volume, short term is bad. What normally happens, is that sales people (wanting to get their commission) would normally present the bad opportunities as opportunities that have a potential of becoming good in the future. I urge you to check your statistics and observe: How many of the bad opportunities did turn into good ones, ever? And how many of the good opportunities you lost, as your service levels were unacceptable? I am quite confident you will be surprised.
It all starts with the opportunities companies allow into their pipeline. GIGO. It is not too difficult to prevent it and the negatives of those bad opportunities are insurmountable and grossly underestimated. What you need to do, is to have clear definition of the criteria for a good opportunity and the discipline not to allow any other opportunity into your pipeline. It is a simple as that, sadly though simple does not mean easy. It is much easier to fall for the fallacy of the opportunity promise and shut the eyes to the fact that what started as a bad opportunity almost never turns into a good one.
