Pavlo Phitidis has a method to make decisions in any business that he calls: The Onion Peeler. Listen to the podcast of his discussion about this on The Money Show on 702 & CapeTalk
The backstory:
Some years back, Pavlo was introduced to the CEO of one of the biggest mining companies in the world. When asked what Pavlo thought of his mining company, Pavlo replied: It’s like a giant onion!
The mining boss was unsettled and asked what he meant and Pavlo unpacked his theory that uses the analogy of the 3 major parts of any onion:
- The inner core where the flavour lies
- The middle layers where the burn comes to life
- The outer layer – the skin
Applying it to the mining business evolved a theory that Pavlo has been using ever since to make decisions quickly when a snap evaluation is necessary to take advantage of an opportunity.
Value stack
Before you apply the Onion Peeler, you need to understand your value stack: It’s everything you have hold and possess. This includes:
- Relationships: There’s value in the relationships you’ve built with staff, suppliers, customers, institutions, even competitors.
- Assets: plant, equipment, stock, cash, property and anything else you own.
- Momentum: Ideally these would be recurring revenues, but all businesses should be bringing some cash in.
- Time in the game: your experience is invaluable, if you stay within your industry and deepen your understanding of how it works and who to work with.
- Your team: There are so many stories of employees who have done things for employers that no-one knows about. Those credits are earned.
- Experience: Every crisis you lead your business through enriches and empowers you as the business owner in a different way.
THE ONION
Once you understand your value stack you can apply the method.
The core: Strategic and core
Everything strategic and core to your business’s existence.
Example: A business intelligence business needs two fundamental skills: One is the ability to slice and dice data, to be smart with numbers. The other is a competency in data visualisation and presentation to communicate those numbers meaningfully to clients and audiences.
Everything else sits in the other layers. When you look at an opportunity you need to know what is core and strategic to your business, and know that everything else is not.
Middle layer: strategic but not core.
Example: the hardware that you use – computers, printers, software even. This is necessary to deliver your solution so it is strategic, but it is not core to what the business is or does, so you do not need to own it. This can be hired or outsourced.
Outer layer: Everything that is not strategic or core.
This is everything you can discard and still function. It includes the pencils, coffee and tea, maybe even offices now that we have all adapted to working from home.
These things make things more comfortable and easier but you don’t personally need to invest anything more than the minimum in them. It’s a pricing game for everything in the outer layer.
So how does this apply to decisions?
When you’re considering a service, for example: advertising and marketing – if you think it is core and strategic you would hire in-house. This moves those functions from the middle layer to the core.
Anything that moves from the middle to the inner layer expands the core, increases costs and dilutes the focus on the core of the business. In times of crisis, if the core is not lean, you carry significant costs here.
If something is not strategic and core, it needs to be kept in the middle and outer layers. It is that simple, but the process of understanding your value stack, what is and isn’t core may take some time and effort.
If you need to decide what is core and strategic in your business, contact us.
