The Casual Relationship of Lean Sales

In a recent podcast, Scenario Thinking the Next Big Thing, with George Wright, co-author of Scenario Thinking: Practical Approaches to the Future, I asked, “When we are looking at different alternatives to the future, we paint a picture with scenarios? 

George:

Yes, the scenarios are descriptions of the future often constructed by management teams. They usually rough out about four scenarios of the future. They are all very qualitative. Their absolutely, pictures of the way the future might be. But, they are casually linked components in the scenarios. For instance, Martians land from outer space with ray guns and start shooting us, the scenario tends to be much more logical steps from now into the future may be 10,15, 20, 30 years. Hence, the scenarios are portal pen pictures of the future that are plausible to the people who constructed them. People say, “I can see this series of events starting to happen.” You can go out in that way like dominos swarming in one direction or you can go out in a different way. If they are all plausible futures, than they are futures we need to be concerned with, without occurring major investments. Scenario thinking is an approach that first started out with capture intensive industries like the airlines, the oil industry where major investment has to be made now. It has to work well against a range of futures. That’s the scenario approach, getting these robust decisions that work well no matter what.

About George Wright: George is currently Professor of Management at Durham Business School, University of Durham, UK. He has consulted and provided management development programs on scenario thinking and decision making with organizations such as Bayer, EADS, Petronas, Scottish Power, Thales, United Utilities, and national and local government in the UK.

One of the key items, I found in George discussion is the issue of causality. In scenario planning, we seek for, not one, but several casual causes. When you think of a sales process, it reminds me of a mini-scenario planning effort. Seldom are decisions within an organization made by one or two people. More often, they are being done by committee. The committee often evolves depending on the circumstances. In this scenario, sorry for the pun, how do sales and marketers understand the process? How do they determine, who has the most influence on the committee and who influences that person?

This blog post, Lean Sales and Marketing: Outcome Based Mapping, contains my thoughts and several additional links.

What are the benefits of BPM?

My podcast guest next week, Theodore Panagacos is a former Management Consultant with Booz & Company and has years of experience helping organizations design and implement business models that improve its service to customers. His book, The Ultimate Guide to Business Process Management: Everything you need to know and how to apply it to your organization has become an Amazon top seller in its category Business Process Management.

I asked in the podcast one of the most basic questions, “What are the benefits of Business Process Management? What do we get out of it?”  Theodore’s answer was simple, to the point and best of all, answered the question.

BPM is all about identifying what you do-do and what you don't do within a business. BPM helps managers identify the day to day activities that the business runs in a visual representation. Having that sort of information allows managers to make more informed decision about again, the day-to-day operation of their business.

When you go down to the improvement level and the actual level analysis level, you can then start looking at time and cost improvements. For example, how many FTE (Full-Time Equivalent) employees are associated with a particular event or task? How long does it take them to execute that task? When you have that insight and information, you can run certain scenarios that allow you to optimize those processes so that your business is running again at optimum efficiency.

You have other potential benefits like ensuring that you adhere to a regulatory compliance. A lot of industries such as the mining industry and even the banking industry, they have tight laws that govern what they can and can't do and more often than not, there are regulatory bodies that govern these laws. They want to know that the bank has their processes documented particularly if you are dealing with sensitive information like people's bank accounts. There are a couple of things here; I mean regulatory, process optimization and manager's insight into how the business is run.

Disrupter or Savior for the Lean Enterprise

I see statements from the Lean Startup^TM folks that The Lean Startup is changing everything. I think that is rather silly because it is not The Lean Startup that is causing the change. The Lean Startup is just adapting to the way the world is changing.

Lean works well for groups that do not rely on an external environment to function, ones that can be self-reflective and internally focused on improvement. However, that business model is getting smaller and smaller. The rapid expansion of knowledge is decreasing the advantages of past proprietary offerings in product/service and in operations. What is left is a complex web of internal and external activities that I use Service Dominant Logic to describe.

If we have learned anything from The Lean Startup, it should be Steve Blank’s mantra of “Get out of the Building” has surpassed the outdated Voice of Customer Model. The instrument of Gemba Walks should no longer be only thought of as an internal practice on the shop floor, rather an external practice at the customer point of use of your product/service offering, not at the point of transaction. Customers are now being redefined as users. It is in this concept that we must build our structure around, reaching out past the user to find new synergies, new connections at the fringes which will result in new ways to create value.

Hoshin Kanri is the traditional Lean practice for building strategy and vision. It is a Lean Leadership tool for communication. What fails process is the faulty assumption that we can still rely on data gathering and Voice of Customer techniques. It is not the concept of Voice of Customer rather the tools we use to gather this information. Surveys and Focus Groups need to be replaced with senior leadership actively participating with client-facing techniques that resemble a good old-fashioned discussion. Discussions of this sort lead to discovery. Ask any Lean Startup that has tried a Problem Interview or a Solution Interview. For a description of a Lean Startup interview process, I recommend Ash Maurya’s book, Running Lean

Lean needs to adapt its thinking and seek new ways to engage the users in their learning cycles. The methods of SDCA-PDCA-EDCA are well suited for this new environment. The practice of Hoshin Kanri lends itself for adaption of this new thinking throughout the organization. However, it will take a change in thinking of many established Lean Enterprises and Organizations if Lean is to continue to flourish.

Other process methodologies of the 90s are floundering; Lean is flourishing because it has been the most adaptable. It has spread to many disciplines through an internal focus on improvement. However, it may be ripe for disruption as the external forces of the marketplace take hold. Will the Lean Startup be an instrument of disruption or a savior for its Lean counterpart?

P.S. This blog post is an extension of my recent posts, Is Lean Playing to Win? Part 1 of 2 and Is Lean Playing to Win? Part 2 of 2. The posts are my reactions to this LinkedIn thread, What do we have to do to have Lean survive a leadership change?,

The Competitive Advantage of Simplification

For decades, Irene Etzkorn and Alan Siegel have championed simplicity as a competitive advantage and a consumer right. Consulting with businesses and organizations around the world to streamline products, services, processes, and communications, they have achieved dramatic results. Simple is a groundbreaking and invaluable guide to achieving the three fundamental principles of simplicity: clarity, transparency, and empathy. It lays the foundation for organizations that want to enhance the customer experience as a way to drive business results.

Irene, my guest next week on the Business901 podcast, is a worldwide authority on simplicity, built the Simplification practice of Siegel+Gale. As executive director of Simplification, her clients include the nation’s top banks, brokerage firms, insurance companies, utilities, and health care providers.

I enjoyed the book,Simple: Conquering the Crisis of Complexity, and the podcast. Below is a brief excerpt from the upcoming podcast.

Joe: What are the secrets to simplification? Is there something that when you walk in that guides you towards complexity? Is there a secret to understanding how to look at things with simple eyes?

Irene: Yes, there is and I think it lies in the fact that clarity is best achieved through an intuitive structure of information. Most often, we find people who have a complicated topic or complicated communication want to begin by re-writing and/or re-designing. Those are two ingredients and important skills and certainly ones that we advocate. They are not the place to begin. It is necessary to begin and look at the process. What is the data, the content? What do you know about this customer? For example, if you already know what state they live in, you don't have to include a lot of "if-then" clauses that say "if you're in Michigan", "if you are in New York", etcetera and have the person deal with all that. Instead, you can push out to them a customized communication. Starting further up the chain and providing a summary to a more detailed approach. Can you answer likely questions for 80% or 90% of the readers or the users upfront? People who have further questions can continue on in the communication, but you haven't created an introductory barrier for the majority of people. In actions, a lot of simplification is about intuitive organization and structure.

Another example of that is insurance policy. Property casualty insurance, people do not read their insurance policy, for some, they are novel. They read them usually at the time of need when they have a claim. Putting what to do if you have a claim as the first item in a policy is much more customer focused. That is a reflection of the organization of the company that's producing it. It is a more meaningful document for the consumer.

Joe: I think you made the great example there because it's amazing how many times the redundancy is built in and I think of health care right away where I am asked the same question so many times that I feel that I probably had to have answered it wrong along the way.

Irene: Absolutely and that's a good example because one of the 3 key principles that we've talked about in the book to achieve simplicity, one of them is empathy and emphasizing with the circumstance of the communication or the interaction is really important. When you mention health care, that's a great example, not only are you sometimes being asked for the same information repeatedly, you may be in a state where half the time you are drugged or you’re ill. Obviously, for some reason, you're seeking health care. It's not your finest moment probably in terms of clarity of thought and emotional state etcetera etcetera. It's a good example where even more so in that circumstance, you would want things to be accessible, clear and not redundant certainly.

Joe: You mentioned empathy, what are the other 2 key principles?

Tune in next week to the podcast for the answer or if you cannot wait buy the book,Simple: Conquering the Crisis of Complexity.

About Siegel+Gale: (www.siegelgale.com) Simplicity is the centerpiece of the strategies they develop that reveal the unique truths of an organization, the engaging stories they create that connect brands with their audiences and the meaningful experiences they deliver that are both unexpectedly fresh and remarkably clear. Since 1969, Siegel+Gale has championed simplicity for leading corporations, nonprofits and government organizations worldwide.

The Budget is truly the fuel for Growth

If you are not a financial type person – I encourage you to seek not only professional advice but to become a numbers person. CEO, Founders or anyone in charge of growth needs to understand the numbers. If you presently are not part of the leadership team, and want to be at that table, learn your numbers. Feel comfortable with talking the language of business, money.

Having a strong foundation is the key to growth. Many companies move prematurely to a growth strategy. They look at growth at the savior to their financial woes. They will disguise cash-flow problems by growth. This, often time, is hidden by increased inventories that are rapidly obsoleting as you grow. The day of recognition will come when growth stops or slows down. If you have closed down a division or a company, you understand how much your inventory is worth. My rule thumb has always been; if there is dust on it, don’t count it.

Starbucks plans their growth in a unique way. When they open stores, they expect to take 25% of their business away from the adjacent store. This way they create cash flow and that famous line of people waiting to get a Starbucks. They were not developing new customers. They take existing customers and influence others with them. Think about Apple, did they take a certain portion of iPod users away with the iPhone, the same attributes were repeated with the iPad. All products contained an overlap of features and benefits making it a smooth transition between products for Apple, the customer and developer.

This type of growth can be viewed as a progression between the iPod and the development of an eco-system to support it. The next improvement was the iPhone followed by the less than spectacular iTouch, followed by the iPad. All of them were not exactly out-of-the box thinking. Rather, a continuous improvement effort (PDCA) that improved the entire Apple eco-system. They developed the products/services from the core. Apple, Starbucks and many other franchises are developed that way. It is one of the most inexpensive ways to fund growth.

Companies with good ROIC (Return on Investment Capital) typically develop products with high ROIC. It is imperative that you are making money with what you have before moving forward. We are always looking for the silver bullet in the next product, next market, but there is a high cost associated with taking market share away - others are firmly entrenched. How many times do you look at your existing product and think that another market can use it. It makes sense for them. What we forget is that the market is already being served by someone else and more than likely as you move away from your core your product or market, it is not as disruptive as you may think.

When you view most budgets they are almost always cost-related with little identification for resources that clearly set aside for growth. How do companies stop being innovative? Why do companies stop growing? Many simply stop planning and budgeting for it. The budget is truly the fuel for growth and innovation.

The Truth about Performance

In this enlightening podcast, N. Dean Myer discusses his new book, Internal Market Economics. Don Tapscott said it was “essential reading for executives interested in maximizing shareholder value or in running effective shared-services organizations.” Dean offers a fresh vision of empowered, entrepreneurial organizations, and practical solutions to a host of pressing financial and management challenges.

Dean Meyer is one of the original proponents of running shared-services organizations within companies as businesses within a business, where every managerial group is an entrepreneurship funded to produce products and services for customers. Dean is the author of seven books. He invented FullCost, a business and budget planning process based on an internal product/service costing solution. He researched the science of organizational structure, captured in his Structural Cybernetics framework and reorganization process.

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I first came across Norm several years ago reading two other books,The Building Blocks Approach to Organization Charts and Decentralization: Fantasies, Failings, and Fundamentals. I had re-read them due to my recent foray into those two subjects.  I wanted to corner Dean about his thoughts and he responded by sending me his latest book. I started out the podcast asking about Internal Market Economics and never did get around to the other subjects for 30 minutes. As a result, a second podcast on Decentralization and Organization Structure will take place next week.

Dean’s websites are ndma.com or FullCost at http://ndma.com/resources/fc-.htm.

Lean 3P Design: More Humanistic by Going Back to Nature

In the Lean Design we use a process that is called Lean 3P. One of the most contentious part of 3P is this idea of looking to nature, to try to find solutions to the problems you're trying to solve. We begin by looking at all the value‑adding steps. Then for each of those value‑adding steps, we try to get the group to look at seven different alternatives that can be created to create that process step. They come from nature. This tends to be a very interesting part of the event, where a lot of people really love it. Other people really hate it.

Allan Colletta in a Business901 Podcast said about this process:

This part of the process attempts to expand the thinking beyond the common approaches we use within the industry. So, at a very minimum, I always say, "It's a great icebreaker to get the whole group just working well together and to get everything a little bit out of the box."

At its best, we've seen some really great examples, where this out of the box thinking from nature has pointed us in some alternative directions that we never would have considered otherwise. That's really the goal and that whole process doesn't take more than a couple of hours, normally.

From there, you go into taking those seven natural alternatives and you bring it into the realm of sort of industry‑proven approaches. So if you were rolling something along the thing, what mechanisms do we have for rolling things? Well, you could have a laboratory table. There are all kinds of ways from industry that people have used to do these different things.

You got all these different alternatives. Then once you get seven alternatives for every one of the process steps, then we start narrowing it down. And you're narrowing those down to three viable alternatives that you could actually do. While this is going on, you've got your teams that are pursuing these, investing, and trying to understand how viable these options are. So a lot of research being done, a lot of learning taking place. As you go through it, you converge on three that are very practical and your divide your group up into, typically three groups, and they go off and they build. They're actually, physically, trying to build the prototypes of whatever it is that they've been assigned.

At first, I felt this process of looking to nature was silly. It took some real effort to try it. However, I have found it  to be very eye-opening and challenging. Going back to nature, going back to the source makes it more humanistic, maybe.

Lean 3P Design: Podcast and Transcriptions

Have you ever seen a Comedian use a PowerPoint?

I will admit that I use a PowerPoint more often than not. It is not because I am trying to dazzle anyone, it is mostly for the sake of being my notes for the process. Seldom do I use a tremendous amount of wording on them, but I need a few key prompts to get me through most presentations. I blame this reliance on lack of preparation or procrastination; I am not sure which is more powerful or more to blame.

Recently, I was viewing a few George Carlin presentations on YouTube, and it reminded me, have I ever seen a comedian use a PowerPoint? If you study comedians, you will find them quite professional in their delivery. A list that I created with help from the Wikihow on How to be a Comedian:

1. Original Material
2. Ability to read an audience
3. Relate to the average person
4. Remember to walk the stage
5. Respectful attitude
6. Watch others and emulate one you like
7. Practice body language and timing
8. Practice in front of others and notice their reaction
9. Watch classic presenters like Steve Jobs, Johnny Carson, Jack Welch, Dr. Deming
10. It’s not a monologue
11. The single most important, PRACTICE (I might have said it twice) 

George Carlin Talks about “Stuff” (there may be some inappropriate language)

George Carlin's (Farewell George, 1937-2008) classic standup routine about the importance of 'Stuff' in our lives. This was from his appearance at Comic Relief in 1986.

Are you looking at growth strategies from a customer’s viewpoint?

We find our greatest growth opportunities on the edges of the use of our product/services. We must make a concentrated effort to identify and participate in relevant knowledge flows on the edge (EDCA). In the book The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion, the authors discuss the relationship between the core and the edge. In the excerpt below, think about the core being the standard work (SDCA) of your growth strategy. PDCA provides the bridge between the core (SDCA) and the edge (EDCA).

Knowledge flows naturally flourishes on the edge. Why? Because by definition, participants on these edges are wrestling with how to match unmet needs with unexploited capabilities and all the uncertainty that implies. Edge participants therefore focus on ways to innovate and create value by connecting unmet needs with unexploited capabilities and then scaling these opportunities as rapidly as possible. In the process, they create significant new knowledge.

Since much of the most relevant knowledge on the edge is tacit knowledge, edge participants naturally place a heavy emphasis on building diverse networks of relationships that will help them to collaborate more effectively with others in the creation of new knowledge. For this reason, gatherings where participants can share stories and experiences, learn from each other, and identify potential collaborators become particularly prominent on the edges.

Edge participants often reach out to participants in the core in an effort to build relationships and enhance knowledge flows. But those efforts are often frustrated or at best to marginalize because where participants are too busy concentrating on defensive strategies within the core, trying to protect their profits and position, to understand the true growth opportunities represented by relevant edges. Or participants tend to focus on transactions rather than investing in a long-term effort to build sustainable, trust-based relationships on the edge.

When we envision tomorrow’s best product or service being used in our customer’s future it creates far-reaching possibilities. Our most successful sales people are already thinking in these terms. Recently, I wrote a blog post, Lean Salespeople are Challengers, not Problem Solvers, about how The Challenger type salespeople are willing to challenge a customer’s thinking to create new opportunities through more effectiveness or innovative ways. It is this type of thinking of your customer’s business, the edges of their business that we must strive to achieve through the methods of SDCA, PDCA and EDCA.

Standards create the WOW in Business

Many people see Lean as another process methodology still mired down in the process thinking world of the eighties and nineties. The facts are that companies, such as Danaher, Toyota, Ingersol Rand and Amazon have embraced Lean thinking or similar concepts and have excelled in the new millennium. What makes these companies stand out? They have created repeatable business models with an emphasis on continuous improvement and adaptability. We can create numerous names for this model, but the Lean Business Model has proven to be the most resilient and consistent producer of results and of growth. Lean is introduced as a growth strategy through the processes of SDCA, PDCA and EDCA. This three step process for using Lean is defined in this way:

1. Standard Work (SDCA): Define core business and put the majority of company resources into the core until it achieves its full potential.
2. Continuous Improvement (PDCA): Most big ideas are made up of a series of successful smaller ideas driven by a simple and repeatable business model.
3. New Markets and Products (EDCA): Define what you cannot do and explore what you want to do?

If you are a Lean Startup^TM or an Entrepreneur with a new product, you have just completed an exercise that is called Product Market fit. You have gone through the EDCA (Explore-Do-Check-Act) stage and converted it to a hypothesis that is proven through PDCA (Plan-Do-Check-Act). Once proven, you standardize (SDCA) your product/service and build your first repeatable business model.

How do repeatable models succeed? In the books Repeatability: Build Enduring Businesses for a World of Constant Change and PProfit from the Core: A Return to Growth in Turbulent Times, the authors use studies from the Bain and Company to point out the three design principles (the parenthesized parts are mine) most associated with success.

1. What is the essence of success? A well-differentiated core (EDCA)
2. How do we make sure we keep improving and adapting? Closed-loop learning (PDCA)
3. How do we align our people to focus on our key strengths? Clear nonnegotiables (SDCA)

In the book, the authors distinguish three different growth strategies based on repeatable business models.

1. Individual business driving core growth (Examples of companies with a single core, simple structure: Vanguard, IKEA, Tetra Pak)
2. Businesses moving into adjacencies by modifying their model (Examples of companies with a single core, complex adjacency expansion: Nike, Apple, Olam)
3. Multicore business managing a portfolio (Examples of companies with a multicore, multi industry: Danaher, UTC, P & G)

The repeatable business models are very diverse. They are highly fluid but repeatable. I view SDCA or Standard Work in much the same way. When we have clear nonnegotiable standards, it allows the fringes of our businesses to operate effectively with little intervention.

Standards are what makes business models adaptable. In recent years, Alex Osterwalder and Yves Pigneur developed the Business Model Generation Canvas. It identifies nine building blocks required for the business model. It is an iterative approach to see what underlying structure is required to institute and develop change for innovation. A PDF download can be obtained here: Business Model Canvas. What this model does is provide clarity around the core value proposition. You may believe the model is too simple for larger companies. However, I believe that simplification is the point, and a simplified structure is in Lean terms, standards.

Standards are the most fundamental and misunderstood concept needed for growth. Your core values are the way you go about what you do and how you do it. It is what your customer understands and experiences. Standards create the WOW in your business. When an employee steps out of the box to do something remarkable, it is a result of having the clarification that this is what are standards (values) would encourage us to do.

Lean embellishes standards, not as a way of being restrictive. It embellishes standards as a way of clarity and focus providing agility, speed and relevance throughout not only to the organization but to the market. It makes growth more understandable for existing customers, new markets, and new products. When viewing the recent growth of Amazon, Apple or Google, most product/service successes occurred building upon their standards. When viewing the troubles, of Starbucks and Dell, it was a movement from their standards and the correction being a return to them.

Growth Principle: Standards create the WOW

therefore

Standards have to be at the center of your growth strategy.

For more information on SDCA, PDCA, EDCA, I would recommend you to browse through the Business901 training content located in the Lean Service Design Trilogy Training Section.

Growth is about People, not Process or Product

If you can build a culture of PDCA, a culture of learning, growth becomes part of everyone’s job. It is this aspect I believe that separates good companies from great companies.

There is not an internal factor that will be more limiting or more expansive than the people within the organization. Building a learning culture with a properly formed structure is the single most important role that leadership has but often the most difficult. In mature companies, you will hear about transforming to a Lean Culture and the difficulty of change. In startups, we discuss the transitional process that the founder must go through as the company matures. Both areas are significantly different, but the three components are relatively the same; Structure, Culture and Learning.

I was president of a company that tripled personnel one year from twelve to thirty-six people. All things went pretty well. The core group of twelve was an amazing group and several of them adapted to leadership roles well, we prospered. The next jump from thirty-six to sixty people did not quite go as well. Our organization structure contained to many generalist and we required a few specialist to be hired that just by the nature of the new structure were competing for authority with the generalist. Several of the generalist were no longer in the same positions of authority and, as a result, struggled with their new positions. We also experienced a few more personnel issues as a result of people not being trained and ready for leadership. It was a time that I developed a new sense of respect for line managers. I found out that the company strength and potential for future growth was limited to that last line of management.

What happens in mature companies is that they have an existing structure and frequently do an excellent job of developing people for leadership. Growth often times takes on a different form in this arena; it is a form of specialization within silos. Growth occurs because of this uniqueness and offering. However, the more specialized a silo is the more independent it becomes. This often does not fit with the existing culture and structure.

Structure is often considered a easy process of drawing an organizational chart and fitting existing people into those roles. We hire to fill the gaps or ask people to wear two hats. After all, we are all flexible. This may work on paper, but in reality it fails miserably. In Lean circles, you will hear Culture blamed for just about every Lean failure. You also hear the quote “Culture eats Strategy for Lunch”. I would like to add my own, “Structure eats Culture for Breakfast”.

Our processes are built as a result of the internal structures of our organization. It is how we get things done. If we do not change the structure, (Review: A New Approach to Lean – Robert Fritz) we will not be able to meet the demands our customers require. The proper structure is a combination of the typical organizational chart and a Venn diagram. The best model that I have found to do this is the Lean model of Leader Standard Work explained in David Mann’s book,  Creating a Lean Culture: Tools to Sustain Lean Conversions, Second Edition, Second Edition. For more information on Lean Standard Work review the Learning Lean Training Module on LSW.

The Lean practice of Hoshin Kanri allows us to consider what types of structural changes we need to make. This process not only allows for change, it actively seeks it. Change and restructuring become naturally motivated. As we progress, the organization becomes clear about the vision we share and joins together in making change work. For more information on Hoshin Kanri review the Learning Lean Training Module on Hoshin Kanri.

Another important aspect of growth is learning. I am not referring to additional schooling or conferences. My reference is learning from within and outside the organization. However, if you do not build an internal learning structure what you learn from vendors, customers and markets will go for nil.

What people forget about Lean is that it is the change agent for an organization. In its simplest form, you first go and see the current state. Second, you visualize your process. You make your process steps visible. You visualize things in a way that reveals your problems, not in a way to hide problems. If you understand what standards are how the process should work because it’s very clear, then whenever we see a variation from the process we react immediately. This allows you to choose one problem from the other and just solves them one by one. This is incredibly powerful, this vision we have with Lean systems of increasing our competency, increasing our training without having to take people off line, without having to get to classrooms, but by building it into the way we work. It is this empowering aspect that is not easy. However, it may be the only way an organization can master Lean.

If you can build a culture of PDCA, a culture of learning, growth becomes part of everyone’s job. It is this aspect I believe that separates good companies from great companies. For more information on PDCA review the Learning Lean Training Module on PDCA.