In a near perfect world we all eat only healthy food, get lots of exercise, go for regular medical check-ups and undergo preventative testing to catch things before they get out of hand. But more people than not don’t adhere to that lifestyle – they do some but not all and most inconsistently. We’re human, we make mistakes, we get caught up in the business of living and little things start to slide here and there – and out of the seeming blue we’re faced with a problem. And so it goes for businesses as well.
In a near perfect world businesses are continually monitoring and adjusting processes, practices and people to meet the business of today and the expected business of tomorrow. But most don’t – business is going well and so we get distracted from the core foundation. Growth is what all businesses want but the stress it puts on existing process is often overlooked because leadership is focused solely on the benefits of growth. Mergers and acquisitions naturally result in duplication and overlap. Downsizing results in processes that no longer fit a smaller workforce. In all of these situations you have the additional burden of entrenched processes – piece parts owned or created for political purposes – to fulfill a contrived need rather than a sound business basis.
When a business is young the stakeholders treat it as they would an infant. It’s the rare person who fails to take their baby to every milestone check-up, assuring all immunizations are properly administered and all tests are not only scheduled but followed through. Businesses do the same in the infancy of the company – constant monitoring, tweaking, adjusting to the market, their customers and suppliers to assure best practices are in place to meet all needs and provide robust revenue streams. But so often confidence in the business slides into complacency – monitoring, tweaking, and adjusting start to take place only at high levels. The stakeholders get farther and farther away from the foundation upon which the business runs and too often take it for granted. Health checks for best practices and processes fall further and further down the list of priorities.
Enter the Revenue Gap
Revenue gaps result from sliding health checks. As the revenue gaps grow or continue, the pain of missing money can no longer be ignored. Never has a client engaged me to improve processes – a few have engaged me to create a new process – but no one ever started out asking for process improvement, management or reengineering. What they all had in common was missing money – a revenue gap. They had become aware they were losing money in a specific area and wanted/needed the problem fixed. Fix it – get me my money – can’t be much clearer than that! That’s the pain that drives change – and it’s most readily diagnosed by an impartial, outside perspective.
When that occasional ache in your foot becomes a constant, nagging, red hot and swollen pain – you head for the doctor. Businesses are the same. Someone, somewhere within the business noticed a down tick in an area. First they noticed, then they watched it, then they shared the information. Without the resources and much needed management support to do more than a cursory investigation, the problem just grows. One day it lands on the CFO’s or CEO’s desk and the pain is so glaringly evident that it must be addressed.
This is where the process improvement comes in. You might not agree to those preventative health care appointments and suggestions but you will agree to surgery, treatment and physical rehabilitative care when that swollen foot is so painful you can’t walk on it. Pain and fear are tremendous motivators and losing money generates a lot of pain and fear.
A classic example is a client who contacted me because of a $500K revenue gap. Middle management did nothing, but when it hit the CFO level, I was hired to investigate, determine the underlying cause and close the revenue gap. By the time I’d dug to the bottom, I had a list of problem areas and improvements to create a permanent resolution not only for the original gap, but also for additional unknown leaks and revenue gaps.
Revenue gaps are most often created by any new effort that isn’t fully considered for integration into the current business. The effort is initiated without assuring the existing processes and practices will meet that new effort. The current processes are usually down deep in the organization where those who initiated the new effort don’t look and aren’t overly concerned about.
Taking action on Revenue Gaps
Every business has revenue gaps – those places where people and processes are no longer aligned to operate effectively and efficiently – where business health has broken down. What does your business health look like? What got lost in the latest downsizing, merger or acquisition? How long can you afford to let it slide? Are you billing all of your customers completely and accurately? Are your suppliers billing you accurately? Are you maximizing and capturing all of the incentives from your suppliers? Where are you losing money and how much can you afford to lose?
Revenue gap recognition – and proof of what’s causing it – is the major driver for a commitment to innovative change solutions. In the same way that a person faced with a serious illness commits to treatment and rehab, a business will commit to doing the hard work – making necessary changes when they come face to face with their revenue gaps. Change is difficult – revenue gaps are far more painful and have the potential to be fatal. If you’re feeling the pain, give me a call.
