Saturday, November 18, 2006

John D. Rockefeller's Secret

I just read this.....Another great article from Bob Parsons of

The secret John D. Rockefeller used to build Standard Oil. It’s simple. Putting it to work in your business.
Here is one of the most popular articles that has ever appeared on this GoDaddys' blog. Given the timeless value of Mr. Rockerfeller's secret and the number of businesses I encounter that could benefit from putting it to work, I thought it might be worth while to re-publish it again.Everything that is watched improves.

One thing I learned early in my business career is that anything of significance that is measured and watched, improves. John D. Rockefeller knew the importance of business intelligence.Back before I started Parsons Technology I became impressed with something I read about John D. Rockefeller. In fact, I still think about it and use it to this very day. I learned that Mr. Rockefeller was one of the few people in his industry (perhaps the only one) who knew exactly how much it cost to extract, refine and deliver a barrel of oil.

In fact, he was entirely aware of all his costs. Knowing this information (and acting on it) gave him a huge competitive advantage. He knew how much he could price a barrel of oil for and still turn a profit. He was always keenly aware of each area of revenue, cost and market share, and he worked on improving in every area. As a result, he did cost saving things like manufacture his own oil barrels, have his own cartage company, and on and on.

He eventually managed his way to where he could sell a barrel of oil, with impeccable customer service, and turn a profit at a price less than what it cost his competitors to deliver the very same product. By paying close attention to the things that mattered, Mr. Rockefeller made his Standard Oil Company so successful that he became the wealthiest man in the world!

I measured everything significant at Parsons Technology. So when I started Parsons Technology, I began the habit of measuring everything that I felt was significant on a daily basis. I did this with unit sales cross referenced by the print advertising I purchased and direct mailings that I did throughout the month.

I worked to sharpen profits every day.
When I sold Parsons Technology, the company was snail mailing anywhere from 6 to 8 million offers each and every month. Because our monthly investment in printing, postage, and fulfillment systems was huge, it became imperative that we knew where we stood at all times. We developed a system that allowed us to project the success (or failure) with reasonable certainty of any mailing, after receiving just a few days of results. If the mailings appeared to be successful we planned more of them, and if the opposite was the case, we immediately cancelled anything similar we had in the works.

This allowed us to sharpen our profitability each and every day. Also because we watched and constantly worked on improving each aspect of the cost of doing direct mail, our costs were just a fraction (often less than 50%) of what it costs our competitors to do the very same thing.

While our direct mail and advertising tracking systems at Parsons Technology became very sophisticated, they were very similar to the systems I developed and used much earlier when it was just my then wife and I trying to make the company succeed.

My staff and I try to watch everything important at Go Daddy.
I use the “measure and watch everything of significance” rule at The Go Daddy Group. We prepare a detailed daily profit and loss snapshot, of the prior day’s business, for each of our operating companies and for each of our significant products. We make major business decisions daily and do so as soon as the information appears (which may be only a few hours old) to warrant key decisions. To quote an overused cliché, “We are able to turn on a dime.”

Real-time information about your business is critical.
Real-time information that actually gets used is particularly helpful when launching a new product. It’s extremely handy for finding the right advertising and positioning that maximizes any new product’s sales.

But the benefits don’t stop there.
Current information can also provide an incredibly effective early warning system that lets you know if there is a problem that needs immediate attention.Traditional financial reporting doesn’t cut it.Traditional financial reporting is done monthly. In many businesses that’s when you’ll see the only financial statements showing how the company performed. Often these monthly “financials” are produced by the accounting department sometimes a few days after the end of the month, and often times much, much later. By the time the people in charge get their hands on this information and are able to digest it, small problems have become large problems, and many an opportunity is long gone.

You need to know how you’re doing on a daily basis.
I think business, particularly in today’s age of the internet, needs to be managed on a daily basis. On an overall basis, knowing how each key part of my business did the prior day tells me where I should focus my time. I also use other statistics which I get real-time to pinpoint opportunities and problems.

Old news has little value.
As you might already guess, one of the big points I’m trying to make here is that for business information to have any real value, it has to be current, and ideally real-time. Beyond that, someone needs to be paying attention to it, thinking about it, and making an effort to improve upon it.

You can start building your business intelligence systems in small steps.
There used to be a time, before the computers and the problem solving software we use (like spreadsheets, databases, etc.) today, when knowing how your business stood on a daily basis was quite a challenge (of course that didn’t get in the way of John D. Rockefeller). With the tools we have today, there is no reason why every company doesn’t have this type of information. If you don’t have daily performance information at your company, you can’t make it appear all at once. What you can do is to implement your information systems in small steps and improve them daily.

Start with the stuff that really counts.
Then as the ideas flow (and flow they will) build upon your systems. Before you know it, you’ll be in control like never before and you’ll marvel at your systems. The point is to get started. That’s how it’s always worked for me.My rule even helps me stay in shape.Measuring everything doesn’t just help with business systems.

I also use this rule to help keep me in reasonable shape. I don’t track much but I track enough to keep me working out and building physical strength. Every time I work out, I keep track of the day, how many minutes of cardio exercise I’ve done and how many calories I think I’ve burned. I also track how many push ups I do. Just seeing this information (I keep it on a spreadsheet on my laptop) let’s me know if I’ve been lagging, and when I notice that I've been falling behind, I do something about it. This simple little system works well for me. In fact, I can tell you how often I’ve worked out every week for the past three years.---Bob Parsons

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