Thursday, June 28, 2012

Focus and Leverage Part 128

If you’re in the consulting world or even just in business making products, did you ever wonder why some companies seem to get more than their fair share of business?  We seem to always be looking for ways to get more business and make more profit for our companies.  What if there was a method for assuring that your business was able to bring in more work than you ever have in the past?  Would that be of interest to you?  Success in your business is not a matter of beating the price or service of your competitors, but what is the key?  This posting is all about something we call in the TOC world a mafia offer.  No, not going out and hiring gangsters to get you more business….not that kind of mafia.  A mafia offer is all about increasing the value of your product or service….an offer that your customers simply can’t refuse.  Sound interesting?

A mafia offer is an offer that is not difficult to construct and if it’s done correctly you could reasonably expect an 80% offer closing rate.  So let’s talk about the basics of mafia offers and how the Theory of Constraints enters this discussion.  Once again it was Dr. Goldratt who developed the mafia offer back in the 90’s.

Many of my blog postings have been about TOC and I’ve said many times that there is always an internal or external constraint that is limiting your system’s performance when compared to your stated goal.  I’ve told you that the key to profitability is not through how much money you can save, but rather how much you can make.  One of the keys to the mafia offer is creating a proposal that seeks to maximize your client’s profits by identifying and focusing on your client’s system constraint.  The mafia offer is intended to remove or diminish the effects of the system constraint and demonstrate more value for your products or services…..and for sure much more value than your competitors.

The presentation you make to potential clients is really the key to the mafia order, but you must know your industry inside and out.  You must understand your own capabilities and those of your competitors.  My advice is to follow a very simple presentation format like the following:

1.    Using a very simple Power Point presentation, I recommend that you start with an overview of problems within the industry and not the typical company background that most presentations include.  They are very boring!  Clients want to know right away what you can do for them.  Show them the negatives from your industry and watch to see if heads are bobbing in agreement.  Start with things like typical lead times, minimum order quantities, high inventories, on-time deliveries, etc. that demonstrate how the industry’s current practices are hurting their business.  Stop every once in a while and ask them if they are feeling these negatives in their business.  What you’re doing here is getting them to agree on the problem.

2.    The next step is to get the potential customer to agree on the general direction of the solution.  Start with something like, “So how do we fix these problems?”  We are attempting to describe what life would be like if we had solutions to these problems in place.  In this step we are developing, with the client, what the basic criteria for the solutions would look like.  When this is complete, we present an overview of our offer first and then in a bit more detail for each of the solution criteria.  Keep it very simple, but it’s important to provide to explain the results they will experience.  When you’ve finished this part, ask the potential client if they believe the offer you have presented, the solutions, will solve the problems they are facing every day.  You’re looking for agreement here.
3.    The next step is to draw a comparison between your company and the competitors…a contrast if you will.  Here is where you offer proof that your solution will work by presenting relevant case studies from clients you’ve already served and delivered for.  This is the central core of your mafia offer.  One key point is the advantages that you are presenting must clearly be significantly greater than the cost of your product or service.

4.    Finally it’s time to close the deal, but keep this simple too.  I recommend that you repeat your offer with specifics like, “Our offer will slash your lead times by “x” days or weeks, improve your cash flow, reduce your inventory by “x” % while eliminating stock-outs, etc. or whatever you truly believe will happen if they accept your offer.  Be bold and ask the potential client what they think?  If you get a positive response, you’re most probably looking at a contract, so ask them what the next steps are and then let them tell you what they are.

The key to remember is that a mafia order will be something that your competition can’t, or is unwilling to, match at least in the short term.

Bob Sproull

No comments: