Transcript #148 Three Core Components Leading to Business Profit with Peter Burke, PhD

Arise2Live Podcast

Transcript for Episode #148  ‘Three Core Components Leading to Business Profit with Peter Burke, PhD’

Intro:   Welcome to the Arise2Live podcast, episode #148.

Today Scott and Peter have an unscripted discussion about business profit and why it really is beyond the bottom-line. They came up with 3 things about profit that every business owner should know.

Peter’s past interviews have been insightful and popular and this episode should be no less.

Enjoy!

Scott R. Weaver’s Intro:     0:32

Howdy folks,
My name is Scott Weaver, the Arise2Live business coach and I am so excited to bring back Peter Burke to the show again. He is one of the fan favorites.

Quickly here, please check out the show notes and transcript at Arise2Live.com/podcast because Peter in his fashion, refers to a lot of names and I have links to their background.
Remember that my new VPI coaching packages, that is Vision, Profit Loop Planning, and Implementation are available to business owners looking to increase profits and improve company performance.
Also, please like and share this episode.

Business Profit and Contribution is today’s topic. We try to answer is profit a by-product of a lot of other working things or is it just the dollars in the bank at the end of the day. We explore the claim that business leaders, or anyone, really can’t chase profits because profits can be only counted after all the work is done.
Peter refers a lot to a book called “The HP Way” by David Packard, the co-founder of Hewlett-Packard, well known for printers, computers, and more. Peter worked there for a number of years so he has seen the principles in the book in practice.
It’s important to know that Peter Burke has been one of my mentors for a number of years, so that familiarity with each other comes across in this episode. He is older than me by over 30 years, so I’m the kid, and he shares his experience and observations.
In a few places, I think we forgot that we were in a podcast interview. Which means, you will hear behind-the-scenes discussions about our thinking and how we approach things. Hopefully we won’t get into too much trouble over them.
There was a little tension when I, being the young punk, suggested that “The HP Way book’s definition of profit was outdated” and then the question arose if the word ‘profit’ has become too ambiguous to be useful anymore or do we have just new names for old stuff?
We also laughed numerous times, especially when I made the cheeky comment about a business with only one key principle to stand-on is like being on a pogo-stick.

With that, let’s go!

3:20

Scott Weaver: Hello, everyone. Welcome to the Arise2Live podcast. I am Scott Weaver and I am pleased to bring in Peter Burke. He has been on this show before. In fact, this will be his third time. I have to say the very first one, which was episode eight of the Arise2Live show, it is a top five download and Peter’s Three Core Competencies for business was a big hit. And so I am just thrilled that Peter is back. Peter has a long career, lot of wisdom. He’s been my mentor. Stanford graduate and Material Science, Ph.D., worked in the high tech industry for a long time, Hewlett Packard for many years and then when he retired, he started exploring. He’s helped out at SCORE, helping business owners there. He helped at the Business Enterprise Center in Corvallis, Oregon, was on the board of directors there, and just recently he has undergone publishing journals, self-improvement journals, particularly a one on grief, and that’s been occupying his time.
Welcome, Peter.
Peter Burke: Thank you, Scott. As usual, I’m looking forward to this interview because it’s always a fun conversation. I just want to warn all the listeners of my experience running business where I have to make profit or I’ll go out of business that I do not have that experience. I’m retired. I sort of feel like I’m seeing what I think is a problem, and it’s partly to explain the world to myself, but also to provide service to a variety of other peoples. As I’ve mentioned before, you know the curiosity and fun, those are primal emotions and if we could kind of get our head and body working in an excited kind of way, our ability to analyze is improved, our ability to think is improved.
Scott: Curiosity and fun. So let me ask you this, when you just got out of school, were curiosity and fun foremost on your mind?
Peter: No, no. I was seriously concerned about earning a living and finding a job. The interview process was strenuous, and it was sort of dumb luck that I got the job that I did. The economy had taken a major downturn and government funding had stopped. But I ended up with Tektronix.
Scott: So you could say that (I guess) one of the transformations or thing you’ve learned over many, many decades, that curiosity is important and having a little fun is important.
Peter: Well, and dumb luck. I think that’s actually in terms of making a profit but observing what’s going on around you and being aware of changes in customer needs and market trends. You know, you get your head buried in product development and then maybe the market moves on you and some (Tektronix, Hewlett-Packard, and Apple) companies that are fairly profitable like to say to their engineers, “Well, about five or 10% of your time is up to you what you do with it.” So that’s a good time to explore. And I think when you’re a small businessperson struggling with payroll and so forth, where do you find that 5% to get your head up and look around? Because, like I say, these things go on around us.
Scott: Yeah, yeah. The world changed. Pandemics hit. We get, I know personally, in small business, we had nose to the grindstone so, so much that you don’t see the weather changing.
Peter: Or maybe as in your case, the COVID shutdown actually was kind of a benefit to them because their Zoom capability was very high, and so they became Zoom hosts for other people who are less skilled. So now that’s an example of the world changes and if you have skill that is appropriate for that change, so go for it.
Scott: Or just taking the skills and the equipment that you have and apply it in new ways.
Peter: Yeah. So I think that one key to staying profitable is to stay current. HP and I’m sure many, many other companies, I think as much as two thirds of their annual sales come from products introduced that year, which from a consumer point of view, while they’re always getting something new and better, but what do you do with that old device that’s 90% as good as your new device and still functioning? Wasteful, but it’s part of the profit world.
Scott: So our main topic is on profitability and we’re going to take probably a different approach than many people, which is why we’re having the interview. For small business and in profits and profitability is, I don’t know, it’s hard, I think for a lot of people because they’re so focused on just getting the day to day stuff and they don’t have the full team they need as a big corporation might have. They’re just like struggling in their day to day. I guess one of the questions for you, Peter, is how do you maintain a focus or how do people you’ve seen in your career maintain a focus on profitability?
Peter: I’m thinking of several examples, which I won’t relate because they were examples of people getting distracted and changing direction or burrowing down when they weren’t succeeding, but they are doing the same thing over and over, even though it was energy and money consuming. I’m thinking of two people, maybe three that were sole entrepreneurs, and I think they have been successful in that. They were clearly focused. They set boundaries. When I worked with Elizabeth, who was a copywriter and web designer, we spent a lot of time together. But when I would try to go beyond what the problem we were working on, she just said, “I’m not going there. I know I’m capable of doing that, but it’s not appropriate to what the two of us are doing at this time.”
Scott: OK, so that’s a focus and a boundary at the same time.
Peter: Yeah. They’re slightly different because you can get focused and then the world expands around that focal point. But setting boundaries is a real skill.
Scott: You know, I’ve heard a phrase a little bit differently is the ability to say ‘no’ and to say ‘no’ to good opportunities because they’re not the main opportunity that you’re chasing.
Peter: That’s true. I think that was certainly true that both HP and Tektronix said that that was the HP experience. My experience of that, we were so keen on inkjet that we didn’t have time to do anything else and at Tektronix, they were so inventive and so creative. They spun off companies left and right (I think) under the founder Howard Volun, he was quite wise, “You know, we’re not going to do that. It’s a good idea. But if you three guys want to go start your own company, I’ll give you a hand.”
Scott: So in a way, that’s it’s not a no-no, it’s like we will let somebody else do it.
Peter: Yeah, I think Bill and Dave, let Steve Jobs do it elsewhere.
Scott: So Peter here is referring to a book by Dave Packard. What was the name? It was the –
Peter: “The HP way: How Bill Hewlett and I Built Our Company” and it’s a really interesting and well written, and he knew amazing, really large numbers of people names that you’ve heard of like Herbert Hoover.
Scott: Those are a little bit before my time, but I’ve heard of them.
Peter: The objectives of the company, the 1966 version, there were seven objectives: number one, profit – to recognize that profit is the best single measure of our contribution to society and the ultimate source of our corporate strengths. We should attempt to achieve the maximum possible profit consistent with our other objectives. And those other objectives were the customers – figure out what the customer needs, the field of interest concentrated around a family of products that all served customer needs, emphasized growth as a measure of strength and a requirement for survival. Take good care of your employees, your organization, and your community. A story I heard was that up until the era, they did not want any single HP location to be more than 5000 people because they felt that when organizations got beyond that, the sense of community was hard to maintain. So they had several small groups around the West.
Scott: Well, they had the sense of community for the employees, and that gets into productivity for the employees, which gets into creating good products and that leads to profit.
Peter: Yeah, it’s really interesting. You know, there’s a slogan “All politics is local,” in some ways, I think a small business entrepreneur, this is local, too. But there’s two different locales: one, I joined the Chamber of Commerce and I feel like I’m becoming civilized and-
Scott: It’s time to get out of the wild, wild west then.
Peter: Maybe, any rate, one community is your bona fide local community, and the other is the Zoom community. I sat in on a workshop by Ernesto Sirolli, the enterprise facilitator and there were people from Africa, from Australia, the US, South America. It was truly an international meeting. Sirolli was living in California. So he and I were on a very convenient time, but other people were definitely up in the middle of the night. The local is the community that already exists, and you need to know about it or else it’s a community and you can help create for yourself, like the Scott Weaver Arise2live community.
Scott: So getting back to, you know. So in 1966, Hewlett-Packard was saying, “We’ve got to have profit. That is how we contribute to society. That’s how we have the strength. That’s how we help our employees.” So how do we take those, I’ll just say them outright, ‘relatively old concepts from the sixties’. Can we apply them to 2021-22?
Peter: Well, all right, Scott, you are a good person to answer your very own question. Conventional wisdom and packaging it in an efficient way, in a way that uses communication technology and applies, you know, spreadsheets and so forth, I’m not sure I have seen a completely new idea from you, Scott. I’ve just seen business school ideas pared down a little bit, a lot actually, and well presented. I mean, you know, it’s like we’re still standing on Newton’s shoulders, we’re still standing on, you know, Deming and Hewlett, and Packard.
Scott: And they stood on people before.
Peter: And the thing that actually drives me crazy is that all the ideas presented with new words.
Scott: I’m becoming a firm believer in timeless principles.
Peter: That’s a good way to put it.
Scott: Because if you went 1000 or 2000 years ago, whatever, they had trade. The Silk Road and people were on, you know, rode on camels and (whatever) ships, there are still principles that they use that are applicable today. But we can’t use the same language. We can’t say, well, make sure you take care of your camels and give them plenty of water before you cross the desert. So. But yeah, which gets into your principles?
Peter: The principles are the same.
Scott: Yes. You know, as society changes, as America is changing, the corporate definition or the purpose of the corporate has been changing, too. If you look it back into the sixties, it was very easy for them to say, “profits number one, because that’s our contribution to society, that’s how we remain strong. It’s how we take care of employees and our customers.” But now we have concepts like triple bottom line, you know, is profit everything? Or do we need to take care of people first and then the environment? So we have a mixture of now actually may be more complicated today than it was back then.
Peter: I think to some extent, that’s a problem of ambiguity of language. I like the word profit, you know, just to quote Packard. Profit is a measure of our contribution. The concept of profit as a measure, not too bad. It’s the bottom line in dollars, but contribution. What does that mean to the customers using the product to the customer’s community? If you go into community, when you go into environment. So I think Packard had a greater sense of responsibility to the community and the environment. I think he was ahead of his time in some ways, but protecting the environment is such a controversial and difficult thing. But if you follow profit as a measure of contribution, to expand the definition of contribution, I think I don’t know, Scott, it’s just such a hard thing.

Scott: Well, that’s why we’re talking about it. I mean, if it was easy, we wouldn’t be here. But let me twist the question a little bit. So how can a small business owner, a medium sized business owner, A) define their contribution and B) measure it?
Peter: It’s so easy just to say, well, I have customers that need to be able to make a particular kind of measurement or a particular kind of analysis, and I have the skill to help them do it and I will sell either service or product. So now that single level problem is dealt with. You know, you provide advice to a person who’s just starting up a company, got the business skills to do that. How do you measure your contribution? You’ve gotten some money. The client has gotten a successful business going. How do you look beyond the trade contract? You know, if you are simultaneously evaluating your own hiring practices and you are holding the company that you’re consulting with, are you holding them to their hiring practices of what your environmental footprint? What’s their environmental footprint? Don’t know how to deal with that, because it’s kind of like a board of directors kind of problem, you know, like, will Exxon actually work towards seriously reducing oil consumption. And then when you get into the board of directors level problems, you also get into government problems and will the government stop subsidizing this and start subsidizing that?
Scott: But I think one thing that hasn’t changed over the years is for business, doesn’t matter the size, when they run out of cash, they’re out of business. And so the need to have profit in dollars is still there, is still important.
Peter: Packard will say, “Well, if you treat your customers right and find what the customer wants and run your business well, you will not run out of cash.”
Scott: So does that imply that profit is a result, a byproduct of other things?
Peter: Yeah, yeah, that’s exactly what he’s saying. It’s a measure of how well you did. And if you say we’re going to grow at 4%, well, that restricts you, doesn’t it? If you’re doing better, you know how did Packard deal with avoiding this, what I’m calling arbitrary goals or he also believed in getting everybody on board and having clear cut objectives and then letting people meet those objectives in ways that were unpredictable. You hire competent people and don’t restrict them, you know, keep them focused, but don’t restrict them. Then many successful business people and we’re great believers in human ingenuity. It’s a really major challenge as a management team to keep people focused while allowing their ingenuity flourish that sort of I think I’ve talked about the defined problem statement. Do we know what the problem is? Keith Bartlett of HP, he said, “What’s the HP way? Define the problem. Solve it.” So that first phrase – define the problem is really critical.
Scott: So along this line that profit is a measure of contribution and to measure something, it had already happened. So it’s a lagging (oh yeah) it’s a lagging indicator of how well you’ve done other things right. And that gets into what type of goals. We talked a lot about the importance of people, people power inside the company. So you don’t chase profits, because you can’t. You can only measure them then that all of a sudden the focus of a business owner is no longer just pure dollars and cents. It is something actually more important.
Peter: Yeah, I remember you asked what was life like for me going from college graduate school off to industry. In the last month or so I was in school, a visiting professor from Ford Motor Company came in, PhD metallurgist (probably). I told him I was going off to Tektronix and the electronics industry, and he says, “Oh you, you can help them out.” And it was such a shock to me because I thought, “No, no, I’m going there, so they’ll pay me money. I’m looking for a job.” And he was pointing out that, well, your role in life is to make a contribution and you’ve got skills to do it. So I think the small business person, if they think of their role as to make a contribution and “I have to define the contribution and know who does it benefit.”
Scott: Yeah. Other words is create value.
Peter: Create value.
Scott: Yeah, not expected. I like that, right? The purpose of getting a job is not for you to get paid, right? It’s for you to actually contribute to the company.
Peter: To contribute, to create value. Well, here’s a very easy approach to starting your business plan. Make it, sell it. Keep track of the money. And that kind of language, whether business school knowledge can be rephrased in the language that the feel-good community can relate to. Wow. So I’m going through a four day workshop next week run by Hay House.
Scott: That’d be pretty interesting.
Peter: Yeah. And people from around the world are signing up. It’s a zoom.
Scott: You know, the topic was three competencies. So, did you come up with three?
Peter: I came up with the thought that Scott likes the word three.
Scott: Yeah. Well, that’s because we used it for the other two podcasts of yours. The third time’s the charm, right?
Peter: So the third time’s a charm. Make it. Sell it. Keep track of the money. Those are all skills towards profit. Those are the tools with which you run your company well. And, of course, in the world of relating to the customer, the strategizer business plan talks about what can I do that will enhance the customer’s ability to succeed in terms of positive contributions to the customer. And the other way is what can I do to the customer that will take away the burdens that the customer is suffering. It’s not creating a new idea. It’s applying – OK, your books are a mess. I’m a bookkeeper. I can straighten this out. I’m relieving the pain. I’ll enhance the gain, and reduce the pain. Now where’s the third? What would be a third?
Scott: Well, I think we can just use the Hewlett-Packard one. Profit is the measure of contribution.
Peter: Yeah, yeah, I like that. Those three go together well.
Scott: Let’s see, enhance the gain.
Peter: Enhance the gain and reduce the pain.
Scott: OK, I like that. So, yeah, so once again, I mean this happens so much when we get together and we start talking because we come from a different angle, we’re actually probably a generation apart. So we have different viewpoints and stuff and we just come, you know, this podcast is unscripted and we come up with three things in terms of profit and which (is this amazing) is profit is the measure of contribution. You make it, sell it, keep track of the money and then for your customers, enhance the gain, reduce the pain. It just distills the complexity of a company’s owners pressure to make money so they can stay in business into. Yeah, I see it, but I’m having a hard time expressing it.
Peter: Well, it’s a better foundation and you’re on three legs instead of one.
Scott: Yeah. So you’re off the pogo stick.
Peter: Yeah.
Scott: You got me thinking here. You know, there’s a lot of ideas and then they have to be implemented.
Peter: They have to be implemented into the Marketplace So that is the secret to profit. It is getting information from people outside of your immediate sphere or getting information from potential customers. Find those customers while you’re developing the product. That there’s the secret to profit. When I worked at Tektronix that whole division got shut down because they kept expanding, expanding, expanding, and not selling.
Scott: Definitely have to put that in the show notes.
Peter: You know, 2020 started off very bad before the pandemic, and it didn’t get better, you know, so 2020 was about half functional.
Scott: You got through it. Yeah, it was a rough year for a lot of people.
Peter: You know, I may have mentioned in the past, my team is not a very stable team. We’ve had great success in getting where we are. But Elizabeth went back to graduate school, which took her out of my life and Adrian’s starting two other companies, which took her pretty much out of my life. And then the COVID. Really, it wasn’t just so 2021. It’s off to a slow start, but it’s, I think, a positive start.
Scott: So we can get your journals at journalsforseekers.com. What kind of journals do you have available?
Peter: Available but not instantly. I have one on the serenity prayer, “serenity to accept, courage to change, wisdom to know the difference.” I wrote another prayer that I like because I thought the Serenity prayer was ho-hum well it’s a hard one to deliver, “with confidence to use the skills I have, curiosity to learn new skills, and gratitude for being able to do that.” And then I wrote a grief journal because Adrian’s mother was passing and she wanted a grief journal, and that led to this work with grief anonymous. I wrote one called “Keep on the Sunny Side”, which is on attitude. How to keep your attitude up. I’ve done a simple version of the strategize your business canvas. I’ve got. I’m on hold. I’ve got about six other titles in mind, but I need to start selling the titles I have. That was one of the hiccups, you know, it’s feature creep or product evolution or what? Where is the good product? Where’s the sweet spot? So my original journal was 16 pages long and then thanks to Adrian and Elizabeth, I went up to 32 and 48 pages and then agents started working on what do booksellers want? And they said why they really want 90 or more pages. So we’re still wrestling with where? What is the product definition now? One of the things that these little journals I’m writing, I’ve been wrestling all along with this dilemma of, I’m writing about topics like bike business plans, for example, and which is a whole growth industry in itself and has been forever, I think probably from the Romans on.
Scott: Definitely, yeah.
Peter: But there’s a whole other growth industry out there. That’s the self-help books and the flavor of the self-help books tend to (I’ll use the word spiritual) – They all seem to have a spiritual flavor to them. And this grief journal I’m working on, Holly Barker, the founder of British Anonymous, has approached the Balboa press, which is a subset of Hay House and Hay House is a major publisher of Feel Good. I feel in a luxurious position. Curious about and I have not really terrified my wife. You’re spending money. We have this threeway agreement. Your money, my money, our money. I’m spending my money. She says OK. But still she’s nervous, though, anyway. Yeah, I remember you talking. If you haven’t waked up in the fetal position in the middle of the night, wondering where the next nickel was coming from, you haven’t the experience of being in a start-up business. Well, I do not have.
Scott: Well, you’re lucky. Is there anything else you’d like to add before we end?
Peter: Scott, it’s always good talking with you. Like you said, I think we think about the same things, but with different backgrounds and different language.
Scott: I always enjoy it because you get me thinking in a different level. Oh, I should be thinking about it more so. So, yeah, your wisdom has definitely helped my coaching.
Peter: I really have to compliment you on your endurance. But I think it’s more than endurance. I think it’s just again, you’re seeking to make a contribution.
Scott: Thank you. Maybe if you can share how people can contact you, what you’re doing right now, how to get a hold of your journals. That would be great.
Peter: Journalsforseekers.com is easy to remember. But it will bounce you off to a different website- Www.MacBurkepublishing.com.
Scott: Well, with that, we’ll end the interview. And thanks for listening. Definitely check out the show notes. Check out these journals of Peter.
Peter: Thanks, Scott.