Today I downloaded an E-book that set off a new train of thought that I think is worth sharing with you. The E-book was "8 profit triggers for explosive growth in any economic climate" by Bob Serling. Bob made the powerful point that the way to leapfrog your competition is to own a way of generating higher quality Ideas; real breakthrough ideas. (Google will find it for you if you want to check it out)

This is seems so obvious when you read it that I have to ask "How do you generate your breakthrough business ideas?"

After some reflection I concluded that I have a just a few ways, so here is my list.

• Solve a problem; this has been the source of most of my best ideas, the ones that are so obviously right that everyone accepts the solution as soon as it is explained.
• Talking to my friends and clients. This is a constant source of triggers for new ways of improving business performance. A favourite question is "What might happen if ........?" Ideas rarely translate from one type of business to the next, but if you ask "What do we have to do to create a brand, like Nike did, in our market space?" the ideas that will translate the strategy will flow.
• Reading good books and articles. The ideas in what I read are rarely the direct solution, but when I connect the idea with some other idea from the past, a truly innovative solution so often emerges. The time I spend reading is never wasted.

The trigger for this newsletter was Bob Serling's Profit Trigger Question 2.  "Where have you hidden your time machine? He then makes the surprising statement that:

"the captain of the ship always has been and always will be Fred in accounting."

He argues that this is because Fred knows what is producing results and what has stopped working. Fred should make the decision about pulling the plug on a formerly successful marketing campaign.

This is a great argument except for one problem I have observed too often for it to be an accident.  Most accounting systems tell you a lot about what worked in the past but little about what will work in the future. The common reason is that the accounting system does not provide sufficient detail to enable analysis of the return on specific products or marketing campaigns.  Most times, when I have asked for this information, it is simply buried in the totals and Fred can only tell me what the total marketing spend was for a period.

Connecting the dots.

One of the most useful trigger questions is "who buys what?" Now extend this by asking " ... and how much do we make from it?"

Answering these questions usually requires some digging into the past, and because you are working with raw numbers, some creative analysis.  My experience is that time and again, this approach to analysis has produced strategic initiatives that proved to be real breakthroughs.

This is a form of market segment analysis, and it is so important that every business strategist, not just the marketing jockeys, should make sure that Fred's time machine collects the data.  If the accounting time machine is to be really useful it eliminate the needs for forensic archeology to reconstruct the past.

How can we decide what will be important tomorrow?

This dilemma can be resolved by creating a business model that enables you to track the performance of individual customer and product segments and to use the accounting system to feed the numbers into the model.  You will need to set up the model to measure market segment contribution using this formula:

Segment contribution = segment gross profit - segment marketing and selling costs.

Now you can do something really useful. You can look for:

• The segments that yield the highest contribution, both total and per transaction..
• The marketing campaigns that generated the highest contribution.
• The segments that had the lowest marketing and selling cost, both total and per transaction.
• The lowest yielding segments.

And now you can ask the really important "what if?' questions.

• What if we applied Marketing campaign D to Market segment K?
• What would we have to do to translate D so that it works in K?
• What if we dropped segment Z and applied the resources to segment K?

Yes - it is obvious.

What is more, it always works.

The lessons for me are:

• Your accounting system is not your business model; it should feed your business model with high quality data.
• Your business model should be a KPI Model that shows you the effect of a change in marketing strategy on your business return.

A business model based on your key performance indicators will enable you to test the most likely effect of a change in strategy before you spend money on it.

One of the ideas that prompted this article was my recent investment in a Time Capsule and setting up Time Machine on my new Imac, so now I have my own personal history of my business.  I am sure that it will help me generate great new ideas for a long time to come. Many thanks to Bob Serling for prompting me to make the connection.

PS:  If you want to explore market segmentation and the strategies it reveals, the bizlearn Market Segment Model 1.2 will make a good starting point. You can back it up with my whitepaper Market Segment Forecasts.