Focus and Leverage Part 134

From time to time on my blog I reference books that I am either reading or have read and then share key parts of these books with you the reader.  Today I want to talk about a book entitled, Viable Vision - Transforming Total Sales into Net Profits by Gerald Kendall.  To quote one of the reviewers of this book (Patrick J. Bennet, Executive Vice President, Covad Communications, "This book is for anyone responsible for increasing the profitability of their business."  When you stop and think about it, aren't we all responsible for increasing the profitability of our businesses?  Gerald Kendall is a Principal of TOC International and a noted management consultant, public speaker and facilitator who has been serving clients worldwide since 1968.  He is certified by the TOC International Certification Organization in all six disciplines of the Theory of Constraints and I highly recommend this book.

So you may be wondering, just what is this thing called Viable Vision?  In its most simple definition it is the strategy and tactics to ahieve, within four years, net profit equal to your current sales.  Sound impossible?  According to Gerald Kendall and another great consulting professional, Dr. Lisa Lang, it really isn't!  Just imagine being able to raise your net profits to your existing sales revenue and to be able to do so in just four years.  I won't be trying to explain the details of how to achieve this remarkable level of success in my simple blog, so I encourage you to read Mr. Kendall's book or link onto Dr. Lisa's site using this link http://www.viable-vision.com/ to learn more about the details.  Although I won't be giving you the details of the Viable Vision, I do want to briefly discuss one part of it on this posting.

In Chapter 3 of Kendall's book, Moving from Complexity to Simplicity, he starts with a quote that is worth repeating, "The more complex the problem, the simpler the solution must be or it will not work!"  He goes on to explain that "most organizations deal with complexity by breaking down their organization into functional parts and demanding that each part figure out how to improve itself."  Kendall refers to this approach as the silo approach.  He also explains that cross-functional battles emerge as a result.  He tells us, "These cross functional conflicts are driven by the silo approach, where the organization measures each silo on improvement independently.  If you are a cost center (e.g. procurement, production, engineering), improvement naturally means a focus on cost reduction or greater efficiency within your silo."  "In this frame of reference, costs are seen as obeying the "additive" rule.  The costs of each silo, added together, equal the total cost of the organization.  Therefore, managers see any cost reduction in their area as "good," since they see a direct translation to cost savings for the company as a whole."

As I've written about many times, this thinking comes directly from traditional cost accounting's beliefs and teachings, but the fact is, this thinking is flawed.  The sum of all localized improvements do not add up to corresponding system improvements.  The real key here is the subject I've written about many, many times....focus and leverage.  I know I must sound like a broken record, but the concept of focus and leverage truly is an important one and really forms the basis of the Viable Vision.  The key to driving net profits higher and higher is directly proportional to driving Throughput (T) higher and higher while maintaining or decreasing Operating Expenses (OE) and Inventory (I).  Viable Vision shows you how to do just that!

I encourage you to check out Viable Vision through both of the references I listed above because it will be truly worth your effort.

Bob Sproull

Focus and Leverage Part 133

Yesterday I arrived back at a consulting engagement with an MRO contractor that I have been consulting for in the past.  Since I hadn’t been here in a while, this trip was to see just how they are sustaining the wonderful improvements that were put in place over the course of 3-4 months.  This contractor had established an all hourly core team of Mechanics, Avionics Techs, Supply Personnel, Flight Line people, etc. a true cross-section of the work force.  I had explained how important it was to form this group and actively listen to their improvement ideas and potential solutions for improving the availability of aircraft for this DOD organization.  Active listening is the practice by which the management of the organization not only listens to ideas and solutions, but implements them as long as they are compliant with company and customer requirements.  This particular contractor had been struggling to deliver “x” number of aircraft to their customer every day.  They had been using enormous amounts of mandatory overtime in an attempt to meet their contractual requirements and it simply wasn’t working.  The mandatory overtime, as well as the past management practice of “command and control” had created a serious morale problem.

In very short order (i.e. about 4 weeks into this engagement) after implementing active listening, everything changed quite dramatically.  This contractor went from chronically missing their aircraft availability to levels that not only met requirements, but was recognized by their customer as a quantum leap above how they had been performing.  In addition, this contractor was also able to move from mandatory overtime to voluntary overtime and in fact had reduced their overtime in the neighborhood of 50%!  In so doing, the workforce morale improved dramatically!  So how is it that by using active listening that results like this can happen so quickly?  The answer to that question comes from a book entitled The One Minute Manager written by Ken Blanchard and Spencer Johnson first released way back in 1981.  I remember reading this book and the message I took away from it was this…..People who feel good about themselves, produce good results.  These authors wanted their readers to help people reach their full potential by catching them doing something right.

Since then, I have used the teachings of this book to my advantage by creating an environment where people have the opportunity to feel good about themselves.  This is the reason behind the formation of the all hourly core team to present and implement their great ideas and solutions for problems that have existed for years.  Problems and barriers that get in the way of success!  These teams always deliver great results if their ideas and solutions are implemented as presented and not variations of their ideas.  These core teams are made up of the true subject matter experts (SMEs) within a company.  The people charged with producing products, delivering a service, designing new products, etc.  They are SME’s because they live in the processes and experience the negative impact of ill-fated policies and procedures that have been in effect for years.

I had the pleasure yesterday of sitting in on a core team meeting and I have to tell you that it was a very pleasurable experience.  Because management had taken the concept of active listening to heart, this core team had confidence that their ideas and solutions to problems would not only be heard, but would be implemented intact.  Because of this confidence in the management team, the ideas brought forward were bold and beautiful.  It was apparent to me that if the core team was a cross-section of the work force, then there was no longer a morale problem in this organization.  They were indeed producing good results because they were feeling good about themselves and that was the message of Blanchard and Johnson over 30 years ago.

I would be remiss if I told you that the concept of active listening was the only ingredient we injected into this company, because it wasn’t.  Early on I spent one meeting with the core team teaching them about the concept of focus and leverage.  I taught them about the simplicity of identifying the system constraint and then focusing their efforts only there.  Once this team identified the system constraint and focused their thoughts and improvement efforts on it, wonderful things happened almost immediately.  So if your company is floundering, late on deliveries, having quality issues, wasting time on overtime, etc. try these simple concepts and you’ll see the difference.  Focus and leverage plus active listening is a combination that always works for me.

Bob Sproull

Focus and Leverage Part 132

Today's blog posting will be a link to an interview I did on Friday that you might enjoy.  The interviewer is my boss from NOVACES, Mike Hannan and the camera man/producer was NOVACES CEO, Bahadir Inozu.  It came out pretty good considering there as no prior planning or rehearsal involved.  Sometimes spontaneity is best and in this case I think it was.  Here's the link: 

http://www.youtube.com/watch?v=UXkCsv_eNmI&feature=plcp

Bob Sproull

Focus and Leverage Part 131

It wasn’t long ago that I was traveling with Delta Airlines and had all kinds of problems that I told you about.  Well this time it isn’t Delta, but it is another problem with an airline.  Recently, because of bad experiences with Delta, I recently switched my airline of choice to Southwest.  I had heard great things about them and I knew their prices were much lower than all other carriers and price is a differentiator isn’t it?  Sometimes it is, but not always…..let me explain.

In the past several months I have flown Southwest four times and each time it was a good experience.  Each time the flights arrived on time and for $10 I even purchased an option that would pretty much guarantee me a good seat.  In case you don’t know about Southwest, they don’t pre-assign seats like other airlines do.  It’s first come, first serve with Southwest and for someone like me who’s always early, it works out great!

Today I’m on my way from Atlanta, GA to Newark, NJ via Chicago, IL of all places?  I didn’t understand their sense of direction when I made the reservations.  I fly West to Chicago, change planes and fly East to Newark.  I questioned it, but I felt they must know what they’re doing….after all, they have a great reputation.  At any rate, I left my home in Kennesaw, GA at 9:00AM and started driving to the Atlanta airport.  At 9:30 I received a message on my Black Berry that said the flight that was originally scheduled to depart at 11:25, was delayed until 12:20.  If you know anything about Atlanta traffic, you’ll understand why I was calmed by that message.  You see, Atlanta is known for its horrific traffic jams and today was no different.  But then I look at my connecting flight and I only had 15 minutes between the new arrival time and my connector.

At noon I got in Southwest’s priority boarding line and began the wait until 12:20.  Southwest hadn’t actually started the boarding process, but my personality drives me to do things early and then the announcement of a new, maintenance delay came.  It seems that one of the autopilots was inoperable and had to be fixed before we could leave for Chicago.  So I waited…..and waited….and waited until around 2:00 when I knew I had missed my connector.  I went to schedule a replacement flight, but Southwest had already taken care of that.  The only problem was, it didn’t get me to Newark until midnight!  When I explained that that wouldn’t work, I was met with a stare that would kill.  The response was, “That’s all we have sir.”  When I asked about another port of entry, there was none.

So left with no options, I finally boarded the plane to Chicago.  But while I was in the air, I had received another delay notice on my new connector flight which would now get me there at 1:00AM!   I mentioned earlier that I didn’t think price was always a differentiator and here’s why.  Even though Southwest’s price was almost exactly 50% less, they couldn’t respond to my need to get to Newark on time for a very important meeting.  So how much was that missed meeting worth to me?  A lot!  In fact, that 50% I saved on the price of the ticket pales in comparison to missing that meeting.

It’s now 7:15PM and here we go with another delay.  To me, Southwest lacks the capacity of other airlines and as a result, they can’t respond fast when delays happen, and they will happen.  Southwest can't or should I say won't (at least not today) send you to another airline flying to your destination.  So here I go again, out searching for a more reliable airline…one that can respond to ever-changing conditions.  One that I can rely on to get me to where I need to go when I need to be there.  Isn’t that what airlines should be doing anyway?

Bob Sproull

Special Posting

In this posting I want to introduce Justin Roff-Marsh's blog to you.  Justin is in the process of writing a new book entitled, The Machine - A Radical Approach to the Design of the Sales Function and is actually posting each chapter on his blog as he completes them.  I've read the first 6 chapters and I have to tell you that it is a great read.  Justin is a TOC expert and perhaps the best sales person I have ever met.  Here's a link to Justin's blog where you can sign up for the first 3 chapters of his book and then download chapters 4-9 from his blog entries.  You won't be sorry that you did!

http://www.salesprocessengineering.net/

Bob Sproull

P.S. I will continue writing my posts on the mafia or unrefusable offer within the next several days, but I wanted to alert you about Justin's book.

Focus and Leverage Part 130

In my last posting I gave you several examples of what a mafia offer might look like, but it’s important to understand that an expert in TOC can apply the Theory of Constraints to virtually any environment.  There are essentially eight different TOC applications that you can use to formulate your mafia offer.  For example, if you recognize that your potential client has a problem with shop floor synchronization or scheduling, then you could apply the TOC technique known as Drum Buffer Rope (DBR).  DBR by itself can reduce lead times, inventories, overtime, and schedule adherence misses all with the same level of manpower you have now.

As I said, there are other TOC applications you can use to formulate your mafia offer as follows:

1.    Throughput Accounting (TA) – Traditional Cost Accounting causes managers to make incorrect decisions that typically result in higher levels of inventory (Raw Material, WIP and Finished Goods).  By demonstrating this to a potential client, you can convince them that TA will help them reduce these inventories.  In fact you should expect raw material inventories that are 40-60% lower, WIP inventories reduced by 50-75% and finished goods inventories reduced by up to 50%!

2.    Critical Chain Project Management (CCPM) -  CCPM enables clients to create and execute projects in 25-40% less time than the traditional Critical Path Management (CPM).  Clients will be able to meet promised due dates must faster than they ever dreamed possible with typically greater than 90% on time completions.

3.    Dynamic Replenishment Model – This TOC application will guarantee 40-50%  or less inventory with next to zero stock-outs.  By simply increasing the rate of parts replenishment based upon usage, you achieve close to 100% availability.

4.    Strategic Planning – Using the TOC Thinking Processes, clients can significantly shorten their strategic planning times with much more effective plans developed.  One such tool, the Intermediate Objectives Map (also known as the Goal Tree) is a simple to learn and apply TOC tool which always delivers fast, reliable strategic plans.

5.    TOC’s Five Focusing Steps – Using the five basic steps of TOC you are virtually guaranteed to significantly improve the throughput of your processes to not only meet current customer requirements, but to also grow your market share.

These are but some of the TOC applications you can use to generate mafia offers that will skyrocket your sales.  In my next posting, we’ll continue to discuss mafia offers, so until then, happy 4^th of July.  Stay safe!

Bob Sproull