Most of us are reviewing our business and personal expenditures.  Many of us are also becoming more socially responsible as we become attuned to the work of Thomas Friedman, Al Gore, the Intergovernmental Panel on Climate Change (IPCC) and the Kyoto conferences.  Carbon emissions and global warming are threatening the earth’s environment.  We are learning that not only are our businesses at risk - our planet is at risk of becoming seriously damaged.

What are some of the critical issues and possible solutions?  

 An example is the Kyoto climate change conference.The objective of the Kyoto climate change conference was to establish a legally binding international agreement, whereby all the participating nations commit themselves to tackling the issue of global warming and greenhouse gas emissions.  The target agreed upon was an average reduction of 5.2% from 1990 levels by the year 2012.

The Intergovernmental Panel on Climate Change (IPCC) has predicted an average global rise in temperature of 1.4°C (2.5°F) to 5.8°C (10.4°F) between 1990 and 2100. This affects the entire planet including the oceans, forests, polar ice regions, plants, animals, humans, etc.  No one knows what the exact tipping point is for global warming irreversibility - only that humanity has an opportunity to avoid it  - by holding carbon dioxide concentrations to no more than 450 ppm, to keep the average temperature increase at or below 3.6 degrees F (2 degrees C.)  Once the tipping point occurs, there may not be a way to stop the cumulative effects of climate changes such as droughts, flooding, loss of coastlines, species extinctions, etc.

Fossil fuels are the primary source of human produced greenhouse gases causing global warming.  A wide variety of renewable resources are being developed to take the place of oil, coal and gas. These energies include:

• Geothermal - heat which comes from the warmth of the earth
• Hydro - water power which can turn turbines and create electricity
• Solar - direct heat from the sun
• Waste - methane harnessing (from garbage dumps, byproducts of agriculture)
• Wind -clean electricity generated for homes, businesses, energy grids

 Today, Jim Lane, Editor and Publisher of Biofuels Digest, referred to the controversy of cellulosic ethanol and the debate about whether its production was actually responsible for more carbon emissions than previously thought.  There was also an article about ExxonMobil and its entry into the ‘algae race’.

So what does all this talk of carbon, algae and global warming have to do with your business?

If we think about the PROFITS Principles, the ones that come to mind are:

REALITY

• What is your business doing to both reduce energy costs and at the same time reduce carbon and other greenhouse gases into the atmosphere?
• How conscious are you about the affects your business has on the environment, especially if you are producing products that use chemicals and create waste?

 OBTAIN VITAL INFORMATION

• Are you tracking greenhouse gas emissions within your business? This includes energy usage.
• How educated are your staff about the environment and the hazards your business may be contributing to the environment.

INTEGRATION

• Do you have an energy strategy for the current and/or future of your business?
• If so, how do you coordinate your various business functions to work seamlessly to incorporate this strategy?
• How are you creating a strategy that takes into consideration your financial plans and day to day operations as your business contemplates energy resources for the next three years?

 Future blogs will focus on renewable energy issues and global warming trends.  We will also feature specific companies that are dedicated to environmental concerns.  We hope this will be an exciting topic that encourages your business to be thoughtful about how it utilizes natural and renewable resources.

As always, we welcome your experience, wisdom and comments.

 Warm regards,
Rosalie

As a small business CEO and/or owner, what impact has the current economic situation had on any of your decisions to restructure the financial foundation for your business?

 CIT Group Inc., the small-business lender with $1 billion in bonds maturing next month, pressed for more aid from regulators who are reluctant to use taxpayer funds for a company that may not be a risk to the financial system, people familiar with the matter said.

Treasury officials have indicated in talks that they are reluctant to deploy funds from the $700 billion bank-rescue program, and the Federal Deposit Insurance Corp. continues to balk at debt guarantees.   As of late Tuesday afternoon (yesterday) the Federal Reserve was considering granting permission to shift some CIT parent assets to its bank. That could boost the amount New York-based CIT could borrow from the Fed’s discount window, affording more time to restructure its debt. 
Today, CIT was turned down for a federal bailout and it probably won’t receive a federal bailout and is studying alternatives with advisers.

“They’re too little to be politically relevant, and therefore too little to obtain substantial federal support,” said Sean Egan, President of Egan-Jones Ratings Co. “You’ve heard of ‘too big to fail.’ This is ‘too little to succeed.’ “ 

The FDIC is concerned that standing behind CIT would put taxpayer money at risk because the company’s credit quality is worsening, people familiar with the regulator’s thinking said last week. CIT’s collapse would be the biggest bank failure measured by assets since regulators seized Washington Mutual Inc. in September. CIT reported $3 billion in deposits at the end of the first quarter.

The general consensus is that some of CIT’s riskier clients, for instance, entrepreneurs in the start-up phase of their businesses who lack a proven track record, or those that have a blemish on their credit, may find themselves abandoned.  Also, new lenders would likely demand stiffer terms, including higher rates, to offset risks. The banks might also ask borrowers to put more equity into their business.

The problem small businesses have right now is that they have fewer customers, lower cash flow, less equity. Borrowing for small businesses is not going to get easier anytime soon.

WHAT ARE YOUR OPTIONS?

Before you either panic or throw up your hands in disgust, it may be useful to ask yourself some questions that provide perspective about your expenses that may impact how you design your current and future funding and borrowing strategy - by cutting through the complexity of your business.

Cut through complexity

• § What expenses beyond the obvious ones do you bear?
• § Are you earning sufficient return on your investment in advertising promotions, marketing, discounts and other related fees?
• § What is your cost of capital?
• § Are your margins shrinking or increasing?
• § Are your inventories too high or adequate?
• § Are you paying overtime frequently to complete orders? If so, is this because due dates are often missed?
• § Do priorities change often? § Is it difficult to respond to customer demands?
• § Are there frequent shortages of materials, parts and/or supplies?
• § Do improvements in one department often come at the expense of others?
• Do you measure what you do?

Can you find a cause and effect connection between the answers to these questions and issues that your current financial structure may or may not be addressing optimally? 

In depth questioning about your business financials is the first step in developing a funding and borrowing strategy.

As always - PROFITS Principles Community encourages your wisdom, experience and thoughts!

Warm regards,
Rosalie

The last blog focused on the defensive strategy for survival - first things first, which means making sure your current business is in order.  This means right now, today….getting clear about ‘what is’.
Now that you know the facts, you can choose whether or not to make changes within your business.

You now have an inexhaustible and clear ‘well’ to draw from. 

Though you want to be on the cutting edge and as proactive as you can be, 2009 is a year to respect the limitations of the economy.  Though I do not suggest  you follow a different approach than you might follow in a prospering economy, I do suggest that you take more time to make decisions and exercise caution.  Time and caution means exchanging information with customers, competitors, supplies and other sources.  It also means conducting yourself with the utmost professionalism.

PROFITS PRINCIPLES TIPS FOR A PROACTIVE BUSINESS

• Reality
  ANSWER THIS QUESTION:  WHO GETS THE PROFITS?                           

The first step is to think about how you perceive your current value chain.
Typically, your end user will have the most direct relationship with consumers.
Yet, you, the business leader are losing control of the consumer through social networking.  You may not agree or want to consider this. 
Reality is - that you need to ‘get your social networking’ in order because your end users and consumers provide vast on line feedback about you…..and THEY ARE DETERMINING PRICING AND PROFITS.

A month ago, Don Bartholomew, member of the Measurement Commission of the Institute for Public Relations, asked the question, “Is 2009 the tipping point for social media accountability?’ The answer was a resounding YES.
Your next question for guiding your proactive business approach is:
Am I attempting to control my brand - or am I willing and able to interact with social media and engage effectively?

 

David Cearley, of Gartner spoke at the Emerging Trends Technology Conference in Melbourne last June, about the total disruptive social media technology.  Social media IS NOT a tool.  It is the key shaper of your business.  Social media provides a platform that encourages participation and feedback from employees and customers alike,” he said. “The added value for businesses is being able to collect this feedback into a single point that reflects collective attitudes, which can help shape a business strategy.”

 

• Flexibility
  ENGAGE YOUR BUSINESS PROCESSES TO RESPOND TO SOCIAL MEDIA INFLUENCES 

There is nothing more important than creating responsive customer processes.

The late Michael Hammer, in his business revolutionary books, Reengineering the Corporation:  A Manifesto for Business Revolution, HarperBusiness, 1993), The Agenda, What Every Business Must Do To Dominate the Decade, (Crown Business Books, 2001), speaks to the FLEXIBILITY OF PROCESS.

This may sound like an oxymoron, as process defines a structure - yet you will find the flexibility and freedom that process truly provides.  It’s being ‘in control, out of control’ at the same time.
If you have not already done so - allow social media to influence how you shape and brand your business processes, rather than the other way around. 

Think about how you will best adapt to how your customers make decisions - not only psychologically, but through the influence of their on-line influencers.  Many times, decision making becomes an instantaneous ‘interaction effect’ between customer and social media, much like the new physics highlighted the shaping of the observer and the observed.  (Gary Zukav,The Dancing Wu Li Masters: An Overview of the New Physics: Bantam Books, 1984).  Make sure your processes allow for quick adaptations.

 

• Obtain Vital Information
  ENGAGE WITH INFORMATION SOURCES 

Find out what people are saying about your company, your competition, your vendors, your sales outlets, your leaders.
In the past, companies relied on focus groups and pilot studies, as well as information research databases such as Neilson and others.
This is no longer sufficient. 

Your leadership MUST have the mindset - a sixth sense in absorbing social media information into the fiber of their being - otherwise, they will miss vital information.  (See Frank Rushkuch, PR Media, July 1, 2009).  Many business leaders still tend to resist its influence and persist in controlling their brands, rather than adapting quickly to customer’s ‘legitimate’ demands as contrasted with fickle demands.  You must develop the judgment to sort between these.

According to Jeffrey Henning, the biggest advantage of online feedback is that it becomes an asset.  Where focus groups are variable costs, online communities, when companies create them are fixed costs.  Where focus groups must be organized to address the issue at hand, not providing results for weeks or months, online communities are like ongoing focus groups that can provide answers in hours or days.  Where focus groups can only provide qualitative research, well-designed marketing-research online communities can provide qualitative and quantitative research.      
                                  

 
Your comments keep this blog alive.  Thanks all, for the wonderful responses, particularly those who migrated their comments from Linked In and Twitter for the previous entries.  Keep posting!

Warm regards,
Rosalie