Sunday, July 29, 2012

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 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

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