A Value Problem with Lean Marketing

A few days ago, Joel Standwood posed this question on the Lean Edge. Why has the Lean movement largely failed to capture the imagination of the sales team? The Lean Edge is where invited Lean Experts are posed a question and respond with advice about it. I am thrilled to see Lean Sales and Marketing conversations starting to take place.

A recap and my interpretation of what was said is below and indented. These are not quotes; I encourage you to read the entire thread. I would like to mention that the people in this thread know more about Lean in their little finger than I do in my entire body. However, their comments I think accurately points out why Lean has not captured the heart and soul of the sales and marketing community.

In Joel’s comment, he accurately points out that “the most alluring promise of Lean is to boost sales, delivering ever higher variable contribution margins while delighting customers and winning in the marketplace. Yet, the language of Lean to unlock the growth engine of the company rarely enters the sales vernacular, and in general, sales professionals are far less likely to have participated in Kaizen.”

Orry Fiume responded with “Get field sales people to participate in shop floor kaizens!” He mentioned at Wiremold they insisted that all field sales people had to participate in shop floor kaizens. In this way, they could see the disruption that they caused by encouraging customers to order in big batches while at the same time they began to recognize how shorter lead times (from weeks to days) would enhance their ability to meet customers’ needs.”

Pascal Dennis emphasis similar thoughts but brings out the point that we focus too much on the making and not enough on the selling. He compliments the Wiremold successes.

Art Byrne answered the question from a CEO perspective, that is what he was and a damned good one, I might add. He said is it is a lack of understanding Lean as a business system. He correctly states it is simply about providing more value than your competitor.

I agree with Jean Cunnigham more than anyone else on the thread, scary thought for Jean. She says the fault is not with the sales team, but in our ability to translate lean concepts to the core of the sales process.

Jeff Liker accurately states that Lean should be most often started in operations where there is a template for success. He discusses delivery of product and services.

This is traditional Lean thinking that leads us to focus our efforts of continuous improvement internally versus externally. We are constantly trying to improve internal processes making them more and more efficient. What I believe the comments are missing is that there has been a significant shift in the marketplace and at the moment the customer is in control. Supply exceeds demands. However, Lean seems to be still on the wrong side of the fulcrum, the internal processes. Very often we can assist sales and marketing by providing Lean concepts to make their task more effective and efficient. There is no question about it. However, at the heart of the process that Lean experts never address is DEMAND in an economy of excess supply. They still believe that you can drive demand through operational efficiency. Businesses can no longer sell and market with a mindset that demand exceeds supply. In this day and age, for the vast majority of products and services supply exceeds demand. As a result, the supply-side thinking of better, faster, cheaper in the market place is a fallacy. If it is still true in your market, hold on to your seat because it is changing and at a pace that only through the iterative process such as PDCA will we compete (aka: Lean startup, Design Thinking, Service Design, Agile). The Lean mindset is simply stuck in product (Goods) dominant thinking or GD-Logic. Additional information is available on this page, Service Dominant Logic (SD-Logic). There are a few notable exceptions that I believe understand this view (not saying they agree with my thoughts) to include Dan Jones, Stephen Parry and Steve Bell, but it is rare to find SD-Logic thinking within the Lean community. Most people look at the sales and marketing process through an internal lens (GD-Logic). They focus on delivery. Instead, you must focus on how the customer uses your product, as described so often in Clayton M. Christensen Jobs to be done approach (Do You Know the Right Job For Your Products?). You may have to take a step further than that to find demand. Demand is found on the edges where opportunities exist. Most of us believe that means taking our products and spreading our marketing funnel horizontally or from a process point of view, becoming more effective and efficient within the funnel. Instead, we should be in the customer’s environment (playground) and finding the edges there. Those are the unexplored areas that create demand. Apple’s demand has not increased because of more features and benefits. It has increased because of more ways to use the product, apps for example. Amazon has not grown and prospered because of more features and benefits but through customer use of their core services. 37 signals did not grow and prosper because of Ruby on the Rails rather through the proliferation of simple highly focused cloud products that facilitated at first only software developers. Rolls Royce did not capture market share by building better, faster, cheaper aircraft engines. They did it through developing a leasing and service system for those engines. It was on the edges of the customer’s playground that demand was developed. I often use the original Toyota Supplier hierarchy depicted by Liker and Meier in The Toyota Way Fieldbook in explaining the application of Lean in the sales and marketing process. This 7 step hierarchy is where I first saw the opportunity to apply Lean to sales and marketing. If I was marketing to Toyota (The 7 step Lean Process of Marketing to Toyota), I would be seeking to climb the supply chain as a vendor. I have written a great deal on this but what it comes down to is improving my value proposition with my customer and the marketplace. At a micro-level the value proposition is nothing more than a promise that I make in every sales conversation. The conversation may start with check (CAPD) described in my post, Looking and Listening first is not all that Bad of an Idea, Eventually it just turns into PDCA or Kaizen with the customer. It is this knowledge building exercise, this learning cycle that sales people need to be trained in. This PDCA cycle is what creates the pull. Our customer becomes our Sensei. With product-dominant thinking companies (GD-Logic), we do not think that way. It is in service dominant thinking companies such as Amazon, Rolls-Royce and Apple. Without going into a flown blown discussion about SD-Logic, it is the mindset that you co-create value with your customer. Your product/service are only enablers of the use of product. Many of us in the internal world of Lean think we understand value. In the world of Customer Relationship Management, User Experience and Customer Experience they view Lean as process methodology that has a very limited scope in understanding value. As Michael Balle once told me, "Toyota did not become number one in the world by building better cars. They became number one by building cars people wanted." The conversation on the Lean Edge missed the heart and soul of the sales and marketing process. They never stated what people wanted, how to create demand. The pull in Lean at the macro-level is knowledge and understanding of the markets our customers participate in. It is not enough to listen to the voice of the customer or even voice of market. It is the ability to co-create value through PDCA or continuous improvement with the customer. At the micro level it is the conversation. It is building that understanding on what the customer needs (Sales and Service Planning with PDCA). At the Macro or Micro levels, you are not looking to deliver latent knowledge, what you're doing is looking to develop knowledge, and that new developed knowledge, that new learned knowledge, from the act of PDCA is really the pull. This is the highest level a vendor can achieve with Toyota according to Dr. Liker. Lean captured the heart and soul of operations by reducing waste. The heart soul of sales and marketing is creating demand. To look at Lean as an enterprise we must capture the heart and soul of the sales and marketing community. The only way to do that is to address demand and a better understanding of customer value. It is no longer a product dominant world. SD-Logic allows for us to address the value proposition on the demand side. What it lacks is the processes and the rest of the enterprise’s understanding to get this accomplished. Lean offers SD-Logic the gateway to the enterprise. SD-Logic offers Lean the gateway to sales and marketing and the understanding of customer value. It is through the use of the product/service that demand is created. Lean is the best methodology to explore these opportunities through learning PDCA cycles with customers, the 7th step in the Toyota Supplier Hierarchy. What step are you at with your customer? Picture derived from the The Toyota Way Fieldbook.

Will Lean Startup thinking work at GE?

“I make all our managers read The Lean Startup,” says a Wall Street Journal ad quoting Jeffrey Immell the CEO General Electric for Eric Reis’s book. Well, Mr. Immell, I would recommend that unless you change structurally, it is likely that your managers have just read a fiction book. It will not help.

It is for the same reasons that most Lean Transformation or all types of new processes, bold new ideas and other change initiatives succeed at first and then just return to where they were before. You have seen it:

• Hire a new manager with all the power to change things around. Six Months later is there any difference?
• We bring a consultant team in and they help us develop new procedures but a year later, there is little difference.
• We diet for 3 months and 6 months later we weigh more than what we did before the diet.
• What about a football team? They have an offensive minded head coach and it never fails when he is replaced, we find a defensive minded individual.
• Kennedy, Johnson, Nixon(Ford), Carter, Reagan, Busch, Clinton, Busch, OBama. Or should I say Democrat, Republican, Democrat… A few exceptions along the way but for the most part we switch back and forth.

The structure of the company wins. In politics, Washington wins. It is called structural conflict and most of us have little knowledge of it or choose to put the effort into adjusting for it. In Lean, we just say it is Leadership not staying the course. However, unless we change the structure, any methodology, any new type of thinking will eventually just return to where it was before. The closest understanding of this thought process in the Lean world is Mike Rother in his book, Toyota Kata: Managing People for Improvement, Adaptiveness and Superior Results. He describes a process of tension needed for improvement. In Robert Fritz’s book, The Path of Least Resistance for Managers, the author also discusses structural conflict, the opposite of tension and the patterns of oscillation that occur in organization. Robert also guides us on what needs to change for success to take place. A brief outline from the book on structure:

Structure and Structural Laws

• A structure is an entity made up of individual elements that impact one another by the relationships they form.
• Organizations follow the path of least resistance through inescapable structural laws.
• Understanding these laws will enable us to understand why organizations behave the way they do and how we can redesign them to perform the way we want.

Organizational Advancement and Oscillation

1. Organizations either oscillate or advance. Advancement means moving from where we are to where we want to be. Oscillation means moving from where we are toward where we want to be, but then moving back to the original position.
2. In organizations that oscillate, success is neutralized. In ones that advance, success succeeds. When success succeeds, one success breeds a chain of further successes. When success is neutralized, success is short term or ephemeral. Since oscillating movement can take place over a long period of time, and some of that time the organization is moving in the direction it wants to go, oscillating patterns are often hard to see.
3. Understanding the nature of structure is essential for an organization to redesign itself so that it can change the path of least resistance from oscillation to advancement. If the organization's structure remains unchanged, the organization's behavior will revert to its previous behavior.
4. A change of structure leads to a change of the organization's behavior.

In my blog post, Your Structure needs to Change before You Create Demand, I discuss this and compare with David Gray’s Connected Company thoughts. Dave was my podcast guest, What happens if we think of the Company not as a Machine… and Fritz’s podcast will take place next week. They are back to back for a reason.

Dave’s book The Connected Company discusses his view on how a company needs to adapt and conform to become an innovative, Lean Startup type company. I am not trying to say Dave’s model is correct or even doable for you. It is just an example, well thought  with plenty of case studies. What point I am trying to make, is that structure must change to allow innovation to happen. This is why think tanks and those separate little cultures at AT&T or Xerox for example were developed. Most of those great ideas it seemed never made it through the structure of the parent companies. They were spawned and realized their greatness in the structures that developed as a result of the idea.

The closest model I have found to implement or maybe the better word for it would be to identify the structure needed is Alex Osterwalder and Yves Pigneur’s Business Model Generation’s Canvas. It identifies nine building blocks required for the business model. Now, this still falls short in what is needed throughout the company but it is a starting point to see what underlying structure is required to institute change for an innovation.

Overcoming Sales Resistance with SOAR

The traditional marketing funnel built on a theory of manipulation is gone (Kill the Sales and Marketing Funnel). In this recent blog post, I discussed the Lean Marketing: 2-Step Marketing Funnel and how you are either marketing or selling. Evidence enough that it is becoming widely accepted that 70% of the customer decision is already formed before you are invited into the customer’s decision process. This fact gets quoted so much; some people are tired of talking about it! Does that make selling outdated, in my opinion, it has never been more important. The difference is that it has changed.

In this blog post, I am going to concentrate on after the invitation has been received. You are fortunate to be one of the selected few to participate. There only really two different scenarios, you are either the preferred choice or you have been selected to re-confirm the preferred choice. These two choices break down into an immediate purchase environment which I will call the micro-level or the macro-level where it may be a large sale or a B2B environment, or my be better defined by a longer sales cycle.

On a micro-level, if you have been selected, you may be thinking that when you are invited that it is time to prepare your position and be ready to give it your best shot. Even in a short sales cycle, you may have to develop trust before someone buys from you. The definition that I use is from Covey (Taken from one of my favorite sales books: Let's Get Real or Let's Not Play: Transforming the Buyer/Seller Relationship ) that states Trust = Intent + Expertise. If we lead with our expertise first, which most of us do, we typically end up creating a low-level of trust. So solidifying your intent is something that you must do as a salesperson.

At the macro-level (not just for one purchase) it is looking at the opportunity to develop a relationship, more often seen in B2B sales. By asking a few questions you can often tell if you are the favorite going in. The importance is not selling but discovering the true intention and any undiscovered needs the client may have. It is not a matter of just finding out their needs because if you are not the favorite that will just confirm the original choice.

If you try to problem solve, it is much more difficult to develop trust. Often times, even the customer will accelerate the conversation to a solution. Don’t try to change them; it is a very difficult to do and you may not have the time to do it. A more attractive method is through the use of Appreciative Inquiry and more specifically leading with SOAR. It is a strength-based approach. SOAR allows you to lead with the positive side of the issues and many times you will often discover more. The SOAR framework outlined:

• Strengths: External and Internal to organization; what can be built on? How are present strengths used to get results? How do these strengths fit with realities?
• Opportunities: What are the external and internal stakeholders asking for? What existing skills exist to deliver?
• Aspirations: What do external and internal stakeholders care about most? What is the most compelling aspiration?
• Results: How will success be measured? What resources can be utilized? What are the best rewards?

Recommended Book: The Thin Book of SOAR; Building Strengths-Based Strategy

I think you will find a strength-based approach when you are not the preferred choice; quite a differentiator. The “intent” is to help them prioritize what is important. If it plays into your wheelhouse, you are in luck.

If you are the preferred choice, your mission would be to move the decision along. Besides competitors, there are many other internal and even external influences that could postpone or eliminate the purchase. I am not saying to force the decision but to make sure that you remove the barriers preventing the decision to take place.

In the book, Conversations That Win the Complex Sale , they show a Venn diagram that discusses the value parity and ask you to focus on where you are different from your competitor. I sort of agree with them. However, I believe the value differentiation is getting smaller and smaller for companies. The process methodology thinking of Faster, Better, Cheaper has become so commonplace it is no longer a game changer. It is value parity. Most of us recognize the game changer as innovation.

Or is it? Can we out innovate all the competition? How long does an innovation keep us ahead of the curve? Does our customer always want the latest and greatest? I would imagine all of our customers are not early adaptors; I would imagine most of them are in the middle part of the curve.

Everyone is Faster, Better; Cheaper and Innovation has less of an effect on the decision.

Tomorrow’s Blog Post: Sales to the rescue!

The Lean Marketing version of Lean 3P

Designing your Value Proposition

Lean 3Ps of Marketing: Purposes, Practices and People

The  Competing Values Framework is used to organize an approach to leadership and management development. An excerpt from a paper (download the entire paper) by the author of Competing Values Leadership: Creating Value in Organizations (New Horizons in Management).

These dimensions form four quadrants, each representing a distinct set of organizational and individual factors. They identify, for example, the criteria of effectiveness that must be pursued by organizations, the leadership and managerial competencies that are most effective, the underlying culture of organizations, and so on. What is notable about these four core values is that they represent opposite or competing assumptions.

In the blog post, Lean Sales and Marketing Productivity – Applying SMED, I discussed the importance of being able to break down and/or bundle your product and services to match the customer needs or the job to be done. In the blog post and Infographic, Lean Marketing meets Service Dominant Logic; I discuss the roles that we must take to deliver on the value proposition that was created from the product/services. Both are viewing the process from the inside – out. One of my standard lines that I have a tendency to wear out is that it is no longer marketing’s job to get the message out, rather it is marketing’s job to get the message in, Outside – In thinking.

How much of our time, do we spend evaluating the existing customer’s value framework? Do we understand or ask the right questions to understand their decision making process? The Competing Values Framework can be used as a way of training your sales force on understanding that process. It is a way of aligning behaviors and practices to desired results. It is not only important to understand what drives your customer and your organization purposes, practices and people (PDF on the subject) but equally important to understand how that affects your communication to each other. It is a great asset for aligning Value Stream Teams to the appropriate customer and a great aid in responding to proposals.   

Does your sales force understand your different value propositions and how they can be delivered?

How often do they receive training on new uses of your value propositions?

Lean 3P Process to drive Effective Change

More than a Design Tool

When we think of Lean 3P are minds drift automatically  to Lean Design and Lean Product Development. That is the purpose of it; Production, Preparation, Process. As a result, we deliver not only a better product/service to the customer but also to our own internal organization. However, unbeknownst to me, I encountered a Lean 3P Evangelist when interviewing, Dan McDonnell, co-author of Unleashing the Power of 3P: The Key to Breakthrough Improvement. Dan expands the use of Lean 3P into other areas, or as he would anywhere to drive effective change.  He was so convincing that after the podcast, I started reviewing a few of my own methods of driving change.

An excerpt from the podcast, when I asked Dan to sum up, Lean 3P:

I've been driving Lean or a student of Lean and learning since 1988. In some cases, I feel like a poor student, but I'll tell you what, I've become a true believer in this thing called the 3P process. I've come to believe that this can be an absolute game changer for companies, to the point where I can't even imagine why anybody would think about driving a major change program without doing it the 3P way, to the point where I've become almost evangelic about it in my own company and through the community.

 

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About Dan: Dan McDonnell began his career at a small high-tech firm in Canada, where he initially practiced Lean through a myriad of manufacturing assignments to the level of VP Operations. He spent 14 years with General Electric Company, where he served as a Plant Manager, and eventually as a Manufacturing GM, for 11 different factories over that period. He served for three years as the Manager of the Lean Initiative for GE Transportation where his deep experience with 3P really began. Dan is currently the Vice President of Operational Excellence for Ingersoll Rand.

Collaboration thru Technology

In a recent podcast I had the pleasure of interviewing Liz Guthridge, the founder of Connect Consulting Group. We discussed Lean, Smart Mobs, Peer to Peer Networks and Crowdsourcing. A lot of ground in thirty minutes. Below is a transcription of the podcast, Relationship Building thru Technology

At Connect Consulting Group, Liz helps leaders implement high-risk strategic initiatives in their organizations. She has expertise in employee communications, research and change leadership. She also serves as a community expert volunteer for Powernoodle, and has facilitated multiple sessions over the past year.

ASQ Lean Enterprise Division will host the Lean Service Design Program

(ASQ)  Lean Enterprise Division will host the webinar Lean Service Design: Closing the Gaps between Perception and Reality on Tuesday, January 8, 2013 12:00 PM - 1:00 PM CST.

80% of Companies believe they deliver a Superior Service, only 8% of their Customers agree

Lean Service Design changes the way you think about business. No longer can companies focus their efforts on process improvements. Instead, they must engage the customer in use of their product/service rather than analyzing tasks for improvement. We must change our mindset from thinking about design at the end of the supply chain to make it look good and add a few appealing features. Instead, we must move design and the user themselves to co-create or co-produce the desired experience to the beginning.

We typically think of Service as a verb or an activity that is consumed by our customers. We think of Service in forms of organizational functions such as Engineering, Purchasing, Shipping, Marketing, Accounting, IT, Human Resources. When we set out to improve one of these functions, we look at how we do the work. We focus on our own activity. The carryover of product thinking that better, faster, cheaper wins is a total misnomer. The focus on our own activity encourages internal thinking and misplaces our priorities. While addressing services from this viewpoint may seem to be productive and worthwhile, it misses the point in design. If we intend to make services profitable, we must accept that customers do not care how we do our work. They might not even care that we are incompetent at certain functions. Customers want us to provide a service to help them achieve a desired outcome. However, have we designed our services to demonstrate that value?

Lean Service Design Trilogy teaches us how to…
·       Think of services as products or deliverables.
·       Close the performance gap between customers and your organization.
·       Create services that can be part of a package.
·       Create services that are not only supporting but also self-supporting.  
·       Create services that are cost leaders not cost losers.
·       Create opportunities through services.
·       Create revenue through services

American Society of Quality (ASQ)
ASQ’s Vision: By making quality a global priority, an organizational imperative, and a personal ethic, ASQ becomes the community for everyone who seeks quality concepts, technology, or tools to improve themselves and their world.
ASQ’s Mission: To increase the use and impact of quality in response to the diverse needs of the world.

(ASQ) Lean Enterprise Division is a global network of professionals helping individuals and organizations apply proven and leading edge Lean principles and practices to achieve dramatic results for your personal and organizational success.

If you can’t wait for the webinar, you can always sign up for the workshop!

Lean Sales and Marketing Productivity – Applying SMED

Yesterday, I discussed why we must concentrate on the quality of the leads versus automation and increasing input. Many organizations choose to spend most of their time and dollars on increasing the input, creating more opportunities more fresh bodies, instead of looking at their work in process. I have always believed that inventory is a bad thing, from my previous blog post, Work in Process is Wasteful even in Sales and Marketing. However, just as accountant looks at WIP as an asset so does marketing looks at WIP as a good sign in marketing. Flooding yourself with increased prospects is bad. WIP lowers productivity and does not create more business and even less of the right business. We end up doing all these things that may or may not be good for us. Have you noticed that you seem to be building specials or that sales are bringing you the off-beaten request? It is because your input variables are too high.

I am not going to discuss Voice of Customer and Voice of Market in this post but if you are inclined to learn search for VOC and VOM in the search box. A quick overview is contained in these posts, Lean Marketing listens to the Voice of the Vital Few and Can Voice of Customer deliver? I am going to assume that you recognize the importance of the two.

Special Bulletin: A Process for removing Waste in your Marketing

The next step is to institute SMED in your sales and marketing process. Many of us understand SMED as single minute exchange of dies. In manufacturing this tool allows us to increase the flexibility of manufacturing and decrease lot size. Traditional manufacturing increased productivity by manufacturing in large lot sizes. This way, we rid ourselves of costly changeovers and were able to have inventory on hand for production. When Lean manufacturing came along we changed all that. We were able to institute SMED and as a result our lot sizes went down, inventory in all forms, raw material, work in process and finished goods went down. And we are still arguing with accountants about productivity.

In Lean Sales and Marketing, we can do the same thing. If we consider service dominant thinking and understand the concepts of the job to be done. This will mean that our thoughts are not limited to our existing services and products. It is our ability to build a value proposition around the customer’s job to be done. When we start viewing the value proposition from the customer standpoint, we realize that our offerings also take a different perspective. We can now think how our products/services can be utilized (value in use) by our customer in the most effective way. Using a SMED style thinking we can bundle or unbundle our offerings depending upon the customer needs. In this way, our strengths become more recognizable and our actions clearer. Our product/service applications do not become limiting but rather the tweaks that are needed are much more specific and can be handled much more efficiently. And since we have done our homework, with the CTQs (Critical to Quality issue found in VOC and VOM) we know when to apply adjustments and more add-ons that will result in longer-term value for the customers and markets we serve.

A Lean marketing perspective is that we must create interchangeable features. We must be willing to unbundle everything that we do and re-bundle them in an efficient manner. Think of how car manufacturers, including Toyota, drove many customizations down to the dealer level. Think how the dealers have numerous items to bundle with the car. You can think of many others along this line; it is not uncommon. Bundled services and contextual pricing are very commonplace. Would you think about buying a sub-sandwich that you could not design?

Improving productivity in sales and marketing is not a matter of volume of inputs. It is a matter of offering quality outputs that pull your inputs. It is a matter of having a defined value proposition relative to the market that you are offering it to. It is creating a conversation with the customer and allowing them to customize the offering and as a result strengthen your value proposition.

Your products/service offering should evolve through market penetration. Your value proposition will strengthen and as a result your inputs will be easily more identified.

Related Information:
Mapping Customer Pains to your Value Proposition
Jobs to be Done – Explained by Dr. Deming in 1950
Lean Marketing listens to the Voice of the Vital Few

Your Structure needs to Change before You Create Demand

In one of my favorite books,The Path of Least Resistance for Managers  author Robert Fritz states:

People are fond of saying, "Well, that's our culture." They seem to think that the cultural norms and habits of the organization are causal. But what creates the cultures? The underlying structures people are in.

In fact, it is the structure of the position that produces the consistent pattern of behavior, not the usual things people say that cause human motivation and behavior. Think of all the money that is wasted on Myers Briggs and other such personality profiling systems that assume it is one's personality type will predict his or her performance. The real cause of how well people will perform or not perform comes from the underlying structure they are in, no matter what their personality types.

But personality profiles are a telltale sign that people within organizations think situationally rather than
structurally. They think if they get the right personality type, they will succeed. They are completely unaware that whomever they engage, the underlying structure will determine the degree to which they will succeed or fail. If we change the structure of the position, the performance pattern will change. If we don't change the structure, no matter who attempts to succeed in that position, he or she will fail including the most competent people available who have what is said to be the most ideal personality profile.

This resembles the principles of Toyota Kata: Managing People for Improvement, Adaptiveness and Superior Results and the discussion of structures and resistance. But it brings to the forefront why I believe that the principles that I discsuss in my Marketing with Lean Book Series and most particularly in the Lean Engagement Team book. I highlight this in the blog post; Success is based on more than just luck.

We have to change the structure to create demand. Our organizations will not adopt without this change. Review Blog posts, When Efficiencies and Innovation no longer work, is Customer Centricity the answer? and The Uniqueness of Hoshin Kanri. In the former post, I discuss how catchball is used and is a great template for how we must engage not only internally but externally. It is that type of thinking that will accelerate our understanding or our customer and their customer needs. It is our structure not our people, not our products or services that need innovation.

One such description is by  Dave Gray through his recent book, The Connected Company. Dave is my podcast guest tomorrow and I asked him when we were talking about this subject, “How does that relate to the connected company?”

Dave:  I talked about, for lack of a better word, the industrial age company, which is a form of a company that most of us are familiar with today, that still most of us work in. It's a company that's based on this principle of division of labor. At a very fundamental level, these are divided companies. A connected company is, in many ways, the opposite of a divided company, so it's not based on the principle of division of labor. It's based, actually, on a principle that's more like the connection of labor. To put a little meat around that, you think about the way that we organize work today. We divide up the work, and different people have different parts of the work.

That works really well in a factory environment when you're producing a single thing, and you want to produce it at volume, that people can specialize on their little piece of the puzzle, "I'm the guy who puts the hubcaps on," or whatever. You can specialize on that little piece, and the work can be done very efficiently.

But, the same principles do not apply when you're delivering services. When you deliver a service, it's very important that you have a sense of the whole at all times. When you're in a manufacturing environment, it's OK to own a task, but a service experience is very different. If you're providing a service, you have to own the customer. You have to own the customer's problem, not just a task, and we all know what this feels like.

In the above mentioned book,The Path of Least Resistance for Managers (If you purchase my copy from me on Amazon (I must be the shipper), I will include the Marketing with Lean (Marketing with Lean Book Series on CDrom)

Lean Homebuilding = Better Product, Greater Return

These two guys, Scott Sedam is President of TrueNorth Development and Todd Hallett, AIA, President of TK Design & Associates, Inc. might rub the Lean purist out there the wrong way. If the truth be known, I do all the time. I think this is why I liked doing this podcast. So much, that it is a whopping 50 minutes long. I could have cut it in a few places and when you hear Scott describe Granny; you may wonder why I did not.

The discussion takes me back a few years to my construction equipment building days. Contractors always had a knack for keeping you in the moment to say it politely. They had a job to get done and how you facilitated that was the key to your success. Though many will argue about the importance of culture and the big picture, all of these things are ultimately made up of a lot of little pictures. The importance of that razor-like focus is an understanding, unlike any other profession that I have been associated with that contractors have.   

This podcast is not about all the intricacies and Japanese terms used in Lean. Scott and Todd do not ask their clients for any great leaps of faith. The only thing they ask is to put your foot in the water. This is a refreshing podcast that is simply about how you build a better product with a greater return. Or more simply, how you make money using Lean.

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Scott Sedam is President of TrueNorth Development, an internationally-known consulting and training firm focused exclusively on the building industry. Now in its fifteenth year with a staff of 6 field consultants, TrueNorth conducts consulting projects and training workshops with more than 200 builder, supplier & trade clients in the U.S., Canada, Australia and Mexico. During the recent industry downturn, TrueNorth’s LeanBuilding™ processes have saved clients more than $200 million, demonstrating clearly how to improve product, process and profit without compromising builder, supplier and trade relationships. Scott’s presentations are a popular feature at industry conferences and company meetings and he has published a monthly article in the industry for more than 15 years. Scott serves as contributing editor for Professional Builder Magazine.

Todd Hallett, AIA, President of TK Design & Associates, Inc. has been designing award winning homes for over 20 years. He spent 15 of those years working for a $50 million production building company. Todd designed all of their homes but also worked in every other aspect of the company, including purchasing, development, land acquisition, product development, and operations, and was President of the company for three years. Equipped with his vast building experience and fueled by his love for architecture, he left to form an architecture firm that is second to none in working cohesively with Builders. Todd specializes in Lean Design and works, alongside Scott, in the trenches with builders, suppliers, and trade contractors.

Read Scott Sedam and  Todd Hallett Weekly Lean Blogs on LEAN TUESDAY at HousingZone.com or follow the following links directly; Scott Sedam’s Lean Tuesday blog and Todd Hallett’s Lean Tuesday blog.

Lean Implementation: Use the Language of Industry

“Until these guys actually did it hands‑on, it just didn't register with them.” – Scott Sedam

Scott Sedam is President of TrueNorth Development and Todd Hallett, AIA, President of TK Design & Associates, Inc. are my guest this week on the Business901 podcast. These guys are at the forefront of Lean in the Homebuilding sector. Even more amazing is these guys talk the language of industry. They understand Lean but apply Lean by teaching it through doing. Great lesson for all of us to reflect on.

I will take exception with one thing Scott said below. His overall message is spot on. I stop short about agreeing about the belts and the specialist and believe it refers more to Six Sigma than it does Lean. This is an excerpt from the podcast, so it was said in a slightly different context. During the interview, I did not want to stop the flow of the conversation, so I left it pass without challenging.

However, the reason I use in an excerpt is to serve another purpose. With the rapid initiation of certification and the adoption of coach’s (which will probably lead to certification), I see a similar path that may be developing for Lean soon. Thoughts about certification:

1. It makes it an easier job for HR by specifying “credentials.”
2. People that pay for training (Bronze, Silver, Gold) receive a ROI.
3. Lean coaches can also receive recognition and differentiation.
4. Organizations can promote and offer certification (I wonder who certified them).

I can argue probably both ways about certification. My point is more directed at the thinking that we will achieve better outcomes as a result of certification. For example, with all the efforts to create belts, has Six Sigma create the results we wanted?

Our business models are changing to a more iterative process and our organizational structure needs to adapt accordingly. Providing additional hierarchy is not the answer. Can we certify and still drive continuous improvement to the lowest level? Or through certification do we create the quality departments of the past? I don’t have an answer, or making judgment. I am just voicing a concern.

An excerpt from the podcast:

Joe: I think it's very interesting your approach at applying Lean, because it's not about, "Here are these Lean tools. We need to apply 5S. We need to have a Kaizen." You seem to take it into the specific homebuilding sector and apply Lean and apply it in their language.

Scott: This has been a pet peeve of mine. You get the Lean Sensei, and there're a lot of great ones out there, but they're incredibly expensive. They'll come in. It's kind of a badge of honor for these guys to tell one of their clients, "Well, if..."

I actually heard one of them say once to a president of a company, "If you expect results any sooner than a year, then you aren't serious." I'm going like, "Go try to sell that to a homebuilder, especially in the housing recession." The idea that we've got to put everybody through the training, three days of training, then we're going to have 20 green belts that take 15, 20 days of training, then we've got to have five black belts to take all the certification.

That's great that you can have a lot of it. But there's an interesting thing, a negative that can happen in a lot of these companies. Then the Lean work ‑it was very similar to the quality movement in the '70s, '80s, and '90s ‑‑ becomes the responsibility and the ownership is in all these specialists.

Where I saw a long time ago, and I go back before I got to Pulte Homes, I was at U.S. Steel way back in production, and then Motorola and where we did precursors to what it is we call Lean now. Then did the consulting work with a lot of great companies like Caterpillar and John Deere and Cummins Engine are examples.

At Pulte, applying this in homebuilding, what I saw was that there was actually as many negatives in terms of having a specialist focus on this within your company as there were positives. When you make it the responsibility of everyone as part of what they do, then its part of their job. It could be harder for them to focus and concentrate on all the parameters and negatives of that, but on the whole, we think you come out ahead.

You've got to be a pretty big organization in my mind to justify having a fulltime staff on this. As you look at most of the builders in America, after you get past the top 25 or so, it's rare that any of them has more than a couple hundred employees, and probably still the 80/20 rule, 80 percent of the homes are being built by 20 percent of the companies that will probably have...well, it'll actually be a little higher percentage than that.

The point is companies with 100, 115 people or less are probably building the percentage of homes in America still. It's different than being a Ford or Chrysler or somewhere like that.

Our idea is to get these people to understand how to do this themselves as part of their job and see it as, "This is a way to make my job easier and get what I want to get done," not as, "I've got to use this special tool here or there, and I've got to make sure I call it the right thing in order to get this done."

We're not averse at all to using things like 5S or a Gemba Walk or something like that, but we don't stress it at all. Even in our orientation sessions when we do our Leans, I used to try to teach the seven wastes, and I quit doing that, because I realized it was pretty well going in one ear and out the other.

Until these guys actually did it hands‑on, it just didn't register with them. But after they do a hands‑on then they get really interested in learning. We think the building industry is just getting to where there might be some appetite for the more formal official training in Lean, and we're ready to do that. But that's just coming along as it's coming out of the recession here.

Listen to the Voice of the Vital Few

One of the first inclinations people have about using Lean in Marketing is the term Voice of Customer.

From Wikipedia: Voice of Customer (VOC) is a term used in business and Information to describe the in-depth process of capturing a customer's expectations, preferences and aversions. Specifically, the Voice of the Customer is a market research technique that produces a detailed set of customer wants and needs, organized into a hierarchical structure, and then prioritized in terms of relative importance and satisfaction with current alternatives. Voice of the Customer studies typically consist of both qualitative and quantitative research steps. They are generally conducted at the start of any new product, process, or service design initiative in order to better understand the customer’s wants and needs, and as the key input for new product definition, Quality Function Deployment (QFD), and the setting of detailed design specifications.

VOC is a great tool but has limitations that are uniquely pointed out by Dr. Eric Reidenbach in his book, Listening to the Voice of the Market. In the book, he states that too often Voice of Customer has been internalized. For example, we use terms such as an internal customer. That may be fine for IT but for sales and marketing, there is only one customer, and you do not find them inside the organization. He goes on to say that VOC though excellent for customer retention severely limits us in customer acquisition. We must understand and use Voice of Market to increase market share. In my work with Dr. Reidenbach, we created a program 5Cs of Driving Market Share with two of the components being Customer Retention and Customer Acquisition that expand on these concepts.

The Vital Few and useful many is a term coined by Dr. Juran which he later named the Pareto Principle. In today’s marketing efforts, there is a mecca of tools and ways to access our customers. The problem is we typically do not have the time, money or skill to be in all places. For the most part, it is the cost of having the skill and the time to manage all the new tools people are using. It is too simple of an answer to just say, “You have to be there.” The problem is that we cannot market to the useful many. We must market to the vital few.

Most of you are now saying here comes that target marketing pitch and that is all fine and good, but I need new customers and without reaching out, how will I get them? We all know it is a risky and costly proposition to reach out and acquire new customers. There are many failures along the way. That is why retaining present customers is so important. However, you can distinguish from the useful many and reach out to the vital few; if you choose to do your homework. You can significantly reduce your acquisition cost.

This will be somewhat of a simplified exercise as the tools we use to do this can be relatively simple to elaborate depending on your situation and size of market.

1. The first step in determining the vital few is to understand your present value proposition for a particular value stream or as other may call it your product/market or service/market. This value proposition should be what attracts your present customer base. This is where the tools of VOC are important. Understanding what makes these customers loyal (which is value, not satisfaction) and the critical to quality (CTQs) components of that value proposition.
2. We must understand our competitors’ relative value propositions and what drives their loyalty base. This should not be an insurmountable task and typically, your sales and marketing people already have a pretty good idea of this.
3. Compare the performance gap, much like any other internal improvement effort. I recommend picking your closest competitor, which you know best and do this exercise. This gap which can be measured numerically hopefully is positive, which means you have a stronger value proposition than your competitor.
4. Do this for several value streams (product/markets or service/markets) and see where you have the largest advantage over your competition.
5. Look at markets, trends and other pertinent data to determine where the best opportunity for growth is for your strongest value streams relative to the competition which you obtained in step four.
6. Decide based on your budget and your capability which type of customer/prospect offers the best opportunity. The vital few you can acquire with the CTQs of your present value proposition.

This exercise is not as simple or as intuitive as one thinks. The gap is dynamic and should be monitored. You may find that you do not have the capability to widen the gap with a competitor. Or, your gap may be negative and in your present position, you will not be able to close it. You may find that it will take a complete product/service innovation to do it. However, the advantage that you now have is that to find these answers you will not have to research the useful many but only concentrate on the vital few that are most attracted to your present value proposition.

Related Information:
Follow Pareto not Wanamaker in Customer Retention
Deming was just simply wrong about variation…
Why Should 50% of your marketing should fail

The Pull in Lean Sales and Marketing via the Last Responsible Moment

The conversations below emphasize in a world with a high degree of uncertainty, that we must wait for the “Last Responsible Moment” before committing.

David Anderson author of Kanban: Successful Evolutionary Change for Your Technology Business says in an upcoming Business901 Podcast:

The whole Kanban thing really came about from the challenge of people resisting change. I was looking for ways of pinpointing root causes of problems. I found that introducing a pull system where we’re limiting the work in progress, was a way of addressing quite commonly occurring problems. Problems with committing on something too early, making commitments where there was a great deal of uncertainty.

So under conditions of uncertainty, people were committing too early, and a Kanban system was a way of deferring commitment until much later, Lean people might say, “the last responsible moment.” And also controlling a lot of the variability in the flow of work through the limiting of work in progress, the understanding of different types of work and different classes of service and setting capacity allocations for those, controlling interruptions and disruption.

A Personal Kanban tip that Jim Benson gave in a Business901 Podcast:

We basically create different projects, and those projects, aren’t atomized until the last possible minute. So we keep things in an aggregated form as long as we possibly can, which is a fancy way of saying that we procrastinate. But this is a good type of procrastination.

The other day I wrote and basically said; “You can put things off until the last responsible minute,“ which means that you’re waiting until you have to get it done, which seems like procrastination, but what it actually is, is you’re not doing something too soon.

So, lots of times we will start a task before we need to, and then as we’re doing the task, more information or more knowledge will come to us and we will figure out “Oh! I should have done it a different way!” Then we end up having waste in the work that we’ve just done, because we started the work too soon.

On the other hand, there’s the other type of procrastination, which is the “I’m going to ignore it, until it becomes a problem.” That’s not good. Nobody wants to do that.

Alan Mossman discussed his latest updates with me and in this PDF Last Planner® – 5 + 1 crucial & collaborative conversations for predictable design & construction delivery  and in a Business901 podcast, he said about the Last Planner®

It manages uncertainty. It deals with reality, rather than with somebody's fantasy about how things will work out at some point in the future, which we're now in. It's moving from working on the basis of what should happen, to working on the basis of what can happen.

One of the things that happens with the Last Planner system, is that the people who are responsible for doing the work on a day to day basis, are involved in making sure that what the plan says should happen, can happen. They're involved in removing constraints, systematically, week in; week out from the work that's coming down the pipe towards them, and are then involved in proposing the work that they will do next week on the basis of the work that they know can be done. Ideally, that's the work that should be done. But there's no point in putting into production, something that can't be done just because it should be done.

Uncertainty is the condition of doubt. Do you allow your salespeople to handle uncertainty? Or is everyone just good at reacting to problems when they are created? Lean is a structured but a highly iterative process that handles uncertainty. It does this through the application of SDCA, PDCA, EDCA that allows the workforce to make strategic and tactical decisions.

From a Sales and Marketing perspective:

1. When you think of a task to be done do you wait for the handoff to be requested?
2. Do you schedule task to be done when and only when everything is ready?
3. As a sales manager can you be confident that you understand the “trigger” points that you need to react to?
4. As a VP of Sales and Marketing are you confident that you will make your numbers?
5. Are you afraid to wait for Pull?
6. Can you apply Lean to your Sales and Marketing without pull?

When we think about Lean, we think about empowering the workforce. The workforce that I think about is not on the factory floor. It is the workforce that is eye to eye with the customer, Salespeople. It is where pull begins.

Taiichi Ohno said, “ The Toyota style is not to create results by working hard. It is a system that says there is no limit to people’s creativity. People don’t go to Toyota to “work” they go there to “think.”

Can you put things off until The Last Responsible Moment and

allow your Salespeople to think?

Lean Marketing meets SD-Logic

Lean Sales and Marketing is just not another extension of Lean into another area of business. if you think that way, you will be marred into product dominant thinking. You must recognize Lean as the pathway into  Service Dominant Logic Thinking (Vargo and Lusch (2006)). How that happens is through using Lean as the vehicle for effective and efficient value propositions that co-create value with the customer.

This infographic below is my humble attempt to start the discussion between Lean and Service Dominant Logic.

Considering taking the first step.

If you are a Sales and Marketing person: Lean Sales and Marketing Workshop

If you are Service provider:  Lean Service Design Trilogy Workshop

Considering taking the first step.

If you are a Sales and Marketing person: Lean Sales and Marketing Workshop

If you are Service provider: Lean Service Design Trilogy Workshop