The better wine makers of Burgundy have a simple recipe most businesses could adopt: achieve quality in every step of the process.
In my other life as a wine lover I have often had the opportunity to learn management lessons but have overlooked the connection between the making of great wine and the fundamentals involved in growing one’s business.
Not long ago I was doing some research for a book on wine while living in Burgundy in France. The wine industry in Burgundy defies logic. It should not be growing and yet it is. It is not legally possible to extend the wine-growing region of Burgundy, which should mean the industry shouldn’t grow, and yet there are people there who are going from strength to strength.
One afternoon I sat down for an entire afternoon with a Burgundian who befriended me and who had forgotten more about wine and wine-making than I would ever know. Pascal is a very prominent person in Burgundy, who works for the producer of some of the region’s great wines.
I asked him what is involved in making great wine. He replied: “In the process of wine-making, there are many steps that have to be taken, from the choice of the location and soil where it is intended to grow the wine, to the manner in which the wine is treated in the cellar before bottling.
“In every step, without exception, you have to concentrate on achieving quality. If you make one mistake in one of these many steps, you will not produce a great wine. To achieve quality, you have to have the people who have the passion for quality and you have to give them the tools to help them achieve that quality.”
The failure to learn this lesson has been the downfall of many a promising business.
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Not only is there a failure to realise that quality at every step of the way is critical to achieving a competitive advantage, but not infrequently the focus on management is to put obstacles in the way of achieving quality.
There is often a mistaken belief that cutting costs will lower the cost base of the business and improve its competitive advantage. In fact, this will only reflect in the bottom line for a time.
At some point in time, cost constraints impose such frustrations on people who genuinely want to achieve quality results that ultimately there is an exodus of talent, and the very asset that has been fundamental to the success of the business has departed.
Cost leadership is one of the competitive strategies (as I mentioned in my blog about Michael Porter some weeks ago), but this is not necessarily achieved by simply cutting costs.
Cost leadership is achieved by finding new and more economical ways of doing things rather than just putting budgetary restrictions on every section of the organisation. These budgetary restrictions work for a while but in the end good people, who need resources to achieve the standards of quality to which they aspire and who are denied these resources, ultimately find other outlets for their talent.
This loss of quality people is something that cannot be overcome in the short term and the business that goes through this process suffers significant damage.
I recently came across a situation that occurs all too frequently. An organisation was told by its financial adviser that it had to lower its costs. One of its main costs was a sales person supported by a vehicle – get rid of that person and the vehicle and you will save $120,000 a year. It seemed like a great idea; the business has been booming and growing and this was a great way of reducing costs while maintaining the momentum of sales.
The first thing that happened was that the business lost a customer who was worth $120,000 a year and who had been secured by the sales person identified as a “cost” to the business.
I know it sounds stupid but, regrettably, I see the same mistake being made over and over again.
At the end of the day, quality is going to differentiate the successful from the unsuccessful, and to achieve quality you have to make sure that you have in place the resources that will help people, at every step in the process of your business, achieve their best in everything that they do in the organisation.
If you don’t you will fall into the trap of quite a few wine makers in Burgundy, who find that their competitor is growing while they are going backwards.
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