The “Good Fat” in MWA Businesses

Thank you for your visit.

This page and site has been moved to TalkingStory.org

NEW LINK: The “Good Fat” in MWA Businesses

Comments

[Steve Sherlock]

Rosa, this is a good issue. So much has been made of cost cutting, and where do they cut first? The most expensive cost, people. If we looked instead at the processes and did some serious zero based budgeting around the business: does it still make sense to do this? does this still add value to the company, to the customers, or to the shareholders? If no, then it should be cut. If yes, then it should continue.

In this manner, we should also allocate some percent of "fat" to the future. Google has gotten some press about their 15% rule. 15% of the time folks can do an exploration in any area, and from these explorations, they have generated new business ideas. Without this 15% effort, they would not be growing the business as well as they have.

[Rosa]

Steve I didn’t know about the Google 15% rule! Hoorah for them! Very similar to the model we have in our MWA curriculum, but we go for 5% more— a take on the adage of the “20% that gets you the 80.” More about it is here:
http://www.managingwithaloha.com/2006/07/pala_ole_declut.html

There is usually no disputing that labor is the highest expense in most businesses, and it becomes an easy target. Unfortunately, what is overlooked is that people are the generators of all other possibility … revenues, service, productivity, AND discovering the smarter cost-cutting efficiencies! —when some good fat remains as Stored Reserves to Add Value, Power Strength, and Drive Vitality. You just can’t tap into what isn’t there.

I think the problem comes with inaccurate measurement too: Cost can be more naturally tangible and countable than can people-generated benefit, and we have to get better at quantifying it. Whether you use the Google 15% rule or the MWA 10/70/20 guideline, there has to be an = somewhere that illustrates what the result is.

[laurence haughton]

I would say the best fat is a "big, fat moat." I use the word to mean the protections that a business creates to endure in the face of an assault from outside forces.

Trust (from suppliers, customers, associates) can fatten your moat as can a good credit line. The idea is to list the items that protect your enterprise from outside assault and then (when depleted) be sure to refill your moat. I got the idea when I interviewed James Crowe of Level 3 for my book. He credits Warren Buffett.

[Rosa]

Great examples Laurence, thank you! The whole-ness of the financial savvy necessary to maintain the overall health of a business cannot be denied or neglected.

What you offer to the discussion reminds me of a similar conversation I had with an executive recently about the need to protect intellectual property today, as a “reality of this thing we call the knowledge economy.” I would definitely count intellectual property as a moat-filler, with the engine which continually creates it as the good fat a business needs.