Category Archives: Business Management

Productivity Myth

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We hear a lot about productivity these days and it’s impact on being competitive. I believe this to be a mistaken relationship. Or better stated, an incomplete relationship. I am not saying that productivity is not important. It is just that production is only half of the equation. The other half is production control.

Production and production control are balanced against each other. The idea is to produce products and services to a production control target. For example, a business can say they need to produce 100 units per hour, or they can say they need to produce 100 units per hour that meet 100% of the targeted customer critical to quality specifications.

The result is that you may take a production line that can produce 200 units per hour if quality is not a concern, and tune it to produce 100 units per hour with no waste, rework or negative customer impact. I know what you are saying here. “My productivity is half of what it was and my costs are higher.” 

Is this really the case? Out of the 200 units originally produced, how many met customer specifications? How many of the 200 units had to be scrapped or reworked? How many inspectors, rework, and scrap removal dollars have been spent? How much market share did you lose because customer expectations were not met? The lack of quality will never save you money. It will always cost you more.

The trick to staying viable in a difficult economy is to remember that shoppers buy based upon perceived quality. Especially when their financial resources are  limited. No one wants to waste their money on a cheap, but ineffective, purchase.

The way to business success is by managing both production and production control. That is, to measure a process’s production capability by its ability to produce “at quality”. This enables a business to make capital and human investment decisions based upon a process’s true “customer” capability.

Avoid Being a Commodity in the Sales World

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According to Wikipedia:
“A commodity is a good (product)…. which is supplied without qualitative differentiation across a market…. the market treats it as equivalent, or nearly so, no matter who produces it….one of the characteristics of a commodity good is that its price is determined as a function of its market as a whole.”

As you drive along looking for gasoline, and you see multiple gas stations, how do you choose which service to use? Most people chose the least expensive, thereby treating gasoline as a commodity. Quality is considered equal across the suppliers and, as a result, is not a part of the shopper’s decision making process.
No matter what you are selling, you don’t want your product or service to be treated like a commodity. Without differentiation, you are like driftwood and have no control over your sales. Product or service differentiation is what gives you control over the market.

The best way to differentiate yourself, and what you are selling, is to begin with the awareness that the shopper is looking for a solution, not a price. The shopper cannot evaluate prices without first understanding the solution options.

Consider the game show “The Price is Right”. A contestant has to choose between Door Number 1 or Door Number 2, without knowing what is behind the doors. The decision is a hard one if the only thing you have to work with is price. This is why it is not a good idea to start any sales pitch with price. You are forcing the shopper to think commodity.

When you start by trying to understand the need and present a solution that fits that need, the shopper is now focused on differentiation. What you are trying to get to is relevancy. When the shopper can say “yes” to what you are saying (even if silently in their mind) you are moving toward a closing opportunity because you are in tune with them.

Next, understand that the solution and the price are related. Once the solution options are understood, the price becomes relevant. For example, if I say that I can sell you a calculator for $100.00, your first question is what kind of calculator is it and what can it do. You are not in a closing situation. If I tell you that I can sell you a calculator that can evaluate and trade stocks with a single key stroke based upon an algorithm used by Warren Buffet, and it only costs $100.00, you are in a closing situation.

Here is the formula to avoid being a commodity. Find out what the shopper needs, offer them a solution that fits their need, then price the solution accordingly. Always be pricing is a bad strategy. Always be closing is a good strategy.

Six Sigma and Business Acumen

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A common mantra in Six Sigma is to “make decisions based on data”. This is a flawed strategy that probably comes from Six Sigma’s dependence on statistical experts instead of business experts. A Six Sigma Black Belt or Master Black Belt is only as good as their business leadership skills. This is why a form test for Six Sigma certification will not work. A form test cannot measure leadership skills or business acumen. You need the full package to be effective. This is why so many Six Sigma initiatives fail. There is too much emphasis on math skills and not enough on business acumen and leadership.

Good business decisions take both data and business acumen. Data by itself can tell you what is happening, if you have measured the right things. Business acumen will enable you to measure the right things and help you to understand the “why” behind the data. Business leadership is used to lead change.
There is also the question of significance. Data can tell you statistical significance, but business acumen is required to understand practical significance. For example, a process change can produce a statistical significant shift in a product or service that is insignificant to the customer or business from a practical point of view.

To continue to be relevant to the business world, Six Sigma will have to become more business acumen and leadership focused.

Content vs Context

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Whether you are involved in a Six Sigma Project or just talking with friends we are bombarded with information that has two components.  These are content and context. One is raw information about the “what” and the other is supporting information about the “why”.

Here is an example. A young man from Philadelphia shot and killed another man about a year ago.  This is content. The fact that he did this, as a soldier, in a fire fight in Afghanistan is context.  Content, as mentioned above, gives you the raw information and context helps you interpret the content.

When you grasp the importance of the relationship between content and context, you also begin to understand why listening skills are so important. As content information reaches your brain, contextual data is telling you how to interpret it.  As good listener will be critically analyzing the information to determine its believability, relative importance, the deliverer’s purpose, the meaning behind the words and what information is missing.

Marketers use contextual information to try to spin your interpretation of content information on everything from products and services to politics. Knowledge that this is happening and dealing with it appropriately is key to your personal success. Do you remember the Ivory Soap by line that stated that their soap was “99 % Pure”?  This is context without content. The question you should ask is 99% pure what?

In a Six Sigma project, contextual data is critical to drilling down to root causes. For example, simply pointing out that there is an increase in the defect rate of a manufacturing process is the content. Finding out that the defect rate spikes on the midnight shift when it is raining is the context. The drill down process can be represented mathematically as y=f(x)+f(x)+f(x)… . The progression from f(x) to f(x) is accomplished through the use of contextual information.

In sales, content information might be described as what product or service a shopper wants to purchase. Contextual information would be the shopper’s story, their buying motivation, budget and important product or service requirements. What this means is that as a business, you differentiate yourself from your competitors by way of context. The shopper can get the “what” from other sources. Context determines why they should get the product or service from you.

Management by News Flash

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This is a guest post from James Lawther of www.squawkpoint.com

 

I read a Hodding Carter quote the other day.

“TV news is like a lightening flash. It makes a loud noise, lights up everything around it, leaves everything else in darkness and then is suddenly gone.”

The quote reminded me of an organisation I used to work for where they managed by the TV News (they called it bullet points, but it was a very similar thing).

  • Every Thursday I would ask my team for their weekly bullets, things that had gone well, good news stories and concerns.
  • I would have a quick flick through these, and then in turn distill out the interesting things, the bits worthy of note and pass them up the line to my boss.
  • He did exactly the same thing, and so it went, thousands of activity bullets every week, each one being sorted, filtered, shined and passed on up the chain.

Then, once a week at the executive meeting they would come together and be reviewed by the great and the good, pawed over, questions asked, challenges given, decisions made.   It was the back bone of how the business was run.

In principle it seems like a good idea, percolate up all the important stuff, sort the wheat from the chaff, update the executive board every week on everything that is going on in the business that they really ought to know about.

Unfortunately it didn’t quite work like that, the reality was more like this:

  • Once a week everybody groaned at the thought of big brother looking over their shoulder.
  • They would think of the good things that they had done, beautify them and send them in as bullets.
  • Managers would sift through the bullets, looking for the golden nuggets.  If there weren’t any, the managers would invent something about what was urgent to them at the time and send it up.
  • Senior managers would then also spend time, creating a “strategic context” for their bullets, massaging the message some more and then sending them on.

By the time the senior executive team received their bullet points, hours and hours had gone into their preparation, good news had been built up, bad news had been muted down and the bullets were as accurate a representation of what was going on in the organisation as the TV News is of life on Earth.   (With one slight difference, bullets always emphasise the positive, the news always emphasises the negative, it is called giving your audience what they want).

Of course the problem with the News is it doesn’t give you any sense of perspective, so there is a better way:

  1. Work out what is really important to the running of your business.
  2. Arrange to receive a weekly report about that, showing if performance is improving or worsening (there is no substitute for a trend).
  3. If things aren’t going the way you expect, go and look for yourself, talk to people, understand what is going on.  Don’t rely on third hand news.

Finally, if noise and events become a distraction, always ask yourself “Is this really important?  Or just a news flash?”

 

James Lawther gets upset by operations that don’t work and apoplectic about poor customer service. You can read more about service improvement on his web site www.squawkpoint.com

 

Basic Marketing

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Marketing is one of those subjects that can be discussed at the “inch deep/mile wide” or “mile deep/inch wide” levels with reasonable efficacy. This will be one of the inch deep/mile wide versions.
In this post I am breaking marketing down into four questions that lead to action by you the marketer.

1. What are the target markets?
Look at what you are trying to sell and match that to the markets that have the greatest potential to produce customers. Using the shotgun or “if I build it they will come” approach is a waste of time and money. Instead target those markets where you could have a productive conversation about your product or service.

2. Who are the players/mavens in the target markets?
Once you know what markets to target, research is needed to determine who the players and mavens are in each market. This would include what associations, network groups, etc. operate there? Google is a great place to start. To be successful you need the name and contact information for high potential individuals and organizations.

3. Build a collaterals tool set.
Some may call this a Press Kit or Marketing Kit. No matter what the name, it is simply a set of documents, mailers, email templates, and ticklers that you can give to potential customers.
The kit can either be generic enough to fit all needed markets or adaptable for specific markets. This decision is really product or service specific, with an eye on what will catch the attention of prospects in the specific market. I would recommend:
• A one page value proposition piece that is glossy on heavy stock. The template for this can also be an email piece.
• You and your business’s resume. This needs to be professionally done on good stock. Not fancy, but solidly professional.
• A document containing reviews and testimonials.
• A tickler that is useful to your prospect after you leave. Ink pens and note pads are good.
• A document that describes specifically how your product or service can be of value to the prospect.

4. Delivery
You only get one chance to make a good impression. Don’t waste it by not being prepared. You need to look like your prospect’s vision of professionalism, understand your prospect’s business and why your product or service is valuable to them, and don’t try to sell them anything…Yep, that’s what I said. No one likes to be sold, but everyone likes to buy. With that knowledge in mind, seek to help your prospect and the sale will come.

Conventions of Convenience

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We have a habit of making two dimensional categories to describe people. I call these categories “conventions of convenience”. We give each category a name and start separating people into one group or the other. This is the problem. Thinking about people or issues in this way makes the world seem all one way or the other. It tends to heighten the divisiveness in our culture. Below are some examples.
Conservative verses Liberal
If you use the definition of these terms, a minority of the US population is truly conservative and a minority of the population is truly liberal. The majority are a mixture the two categories. For example, I consider myself a social liberal/fiscal conservative. You might say that this makes me an independent voter. The problem is that no one ever calls me an “independent”. My liberal friends call me a conservative and my conservative friends call me a liberal. Both are wrong.
People are a mixed bag of beliefs and values. This is why congress rarely has a confidence rating of more than 25%. Extremists are always pulling the dialog away from the middle where the majority of us live.
Religion verses Religion
Do you believe in god or are you an atheist? Are you Christian or Muslim? Are you Catholic or Protestant? Even though the above conventions of convenience have been the cause of great pain and strife in the world, the majority of people involved do not totally buy in to all the belief and behavior requirements of any of these religious groups. There is a great deal of belief and behavior overlap among these groups that is ignored by a few extremists in order to accentuate the differences.
When left to their own devises, the vast majority of people can get along just fine with persons from other belief groups. The problem comes from situations where extremists begin to control the dialog.
Race verses Race
I heard a story recently where a magistrate was telling an African American defendant that the charge of possession of marijuana would affect his ability to keep his subsidized housing arrangement in the projects. The problem was that the man in question was a middle manager in a large company who owned a $200,000 home in the suburbs. Conversely, I know of a situation where a young white male was told by a magistrate that his possession of marijuana was an embarrassment to his family. The problem was that both his parents were drug users who had been in and out of jail multiple times.
The truth is that we are more alike than we are different. Regardless of race, we all pretty much want the same things out of life. The categories don’t fit the vast majority of us. Only extremists worry about the differences.
How can we cope with a society where we go to such great effort to categorize everyone into polar-opposite categories? We can start by spending more energy looking at how we are similar to each other and less energy looking at our differences. We can also try to move the dialog away from the extremists to the middle.
Let me leave you with this. During World War II, one allied Chaplain observed that both sides of the conflict prayed to the same god for victory. How stupid are we to assume that God, or anyone else, is ever going to reward us for our conventions of convenience?

The 5 Deadly Sins of Management

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The Know It All

The “Know It All” supervisor routinely challenges and overturns subordinate’s decisions. This approach to management will de-motivate others in the group, making them not want to make decisions or to make them behind the supervisor’s back. Supervisors that work this way will willingly take over decision making and, as a result, sub-optimize the work group.
I have had a supervisor that would always decide opposite my own decisions. It got so ridiculous that I began to present my own opinions opposite of what I really wanted in order to get him to decide the way I wanted him to. This creates a toxic work environment.

The Critic

This supervisor does not know what they want, but are quick criticize other people’s work. The work place culture, in this case, takes on an unsafe feel. Employees are not willing to act on their own initiative, thereby avoiding criticism. In the end the subordinates begin to avoid work that can wind up in the supervisor’s hands or go behind the supervisor’s back. Communication is compromised and the work group is sub-optimized.
A good example is when a supervisor asks a subordinate to write a memo and then precedes to wordsmith it. The memo, which should only take a few minutes to write, winds up taking hours. The memo gets bounced between the supervisor and the subordinate multiple times and becomes something written by committee. I once experienced a situation where, after I incorporated my supervisor’s comments, he began to edit and criticize his own work. When I pointed this out, he denied asking for the edits. After a few of these experiences, I made him give me bullet points or write the first draft himself. This worked pretty well.

Introduction of Politics or Religion

In our current political environment there are many employees voicing their political and religious opinions. As long as this is kept “off line” and separate from the work effort there are few problems. When a supervisor introduces these opinions in an “on line” fashion, the work place is made to feel unsafe or maybe even hostile to persons who disagree. The result is employee withdraw from interaction, resentment or arguments.
Managers cannot allow the mass distribution of political or religious email, signage, or dialog in forced attendance venues. The work place will become politically or religiously charged and use up emotional and intellectual bandwidth that is better used in completing work.
When explaining this to my staff I simply tell them that this type of communication is based upon two or more idiots talking about other idiots they know nothing about. A total waste of time when on the job.

Manipulation

Quid pro quo, lying, withholding information (also lying) are forms of manipulation. Supervisors who manage this way have moved the focus of the work effort away from the customer. The work group begins to work to support these side agreements or misinformation instead of producing a quality product or service.
An example would be using quotas to pay bonuses. I consulted with a steel mill that had a product quality issue. What I found was that the production, inspection, and shipping work groups all had the same quota based bonus system. Everything was tied to volume. In order to get a bonus, the production group would tell the inspection group what product to not inspect. The inspection group complied because their bonus was tied with the same criteria (volume) that rewarded the production group. The shipping group would see bad product and ship it anyway for the same reason. This is a great example of teamwork gone bad.

Serial Entrepreneur

This supervisor has a new idea every five minutes and is trying to implement them just as fast. This creates a reactive work space where the focus is on implementing change without analysis. This usually happens when the line between a business’s owners (or senior management) and its operations management become blurred.
The result is operational processes that are not in control. No one knows what change created what result or what impact. Changes or experiments get piggy backed upon each other creating a confusion.
The fix is to document the ideas and plan experiments to test their usefulness. This way, everyone knows what is going on, and the baseline process flow is predictable and the customer is protected.

Making a Point or a Difference

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Telling someone they are wrong does not inspire them to do right. Instead, it usually creates an atmosphere of conflict. The problem has two faces. First, conflict tends to entrench people into their positions, even if they realize that they are probably wrong. Nothing constructive can come from a conflictive environment because people quit trying to find solutions and start trying to save face. Second, it is quit possible, and maybe even probable, that the person accused of being wrong may actually be right.

The point is that making a point is not the same as making a difference. If the truth be told, most of us would rather win the argument than make a difference. This is the sad truth within our culture. We vote and behave as if the processes of our lives were a game where the point was to score points and win, even if no progress is being made.

You might ask how this applies to Lean Six Sigma process improvement teams. Let me explain. When working in a team environment, the team leader must always be focused on keeping a constructive dialog that is not based upon scoring points. The hardest part of process improvement is to “lead” change. To make a difference. When team members are committed to making a difference, they are not keeping score. When they are keeping score they are not making a difference.

I have had to remove individuals from process improvement teams because their “point making” attitude was distractive to the team’s mission to make a difference. This will obviously not make everyone happy, but that is OK. Being a change agent is not easy, nor is it for the faint of heart. When teaching Six Sigma Black Belts, I always instruct them to ” Leave them mad or leave them glad, but never leave them indifferent.”

Case Study: Automotive Control Module Repair and Remanufacturing

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When customers think of automotive control modules, what comes to mind are engine control modules, transmission control modules, and body control modules. Some people are genuinely surprised to find there can be as many as 80-120 different control modules functioning in their vehicle, controlling everything from power windows to drive train components. As everyone in the industry knows, as fuel economy, emissions and safety become more important to shoppers; control modules will become even more important to a smooth operating automobile.
At the same time, the ability of repair shops to diagnose and repair control module problems is being challenged. Many shops do not have the proper scan tools needed to see deeply enough into the vehicle’s control module network to determine what is really happening there. In these cases, the shop is forced to diagnose the vehicle with circumstantial information instead of with the actual observation of vehicle network data. This is equivalent to looking at a “boot print” of the problem instead of actually seeing the boot. This drives questions such as:
• How do I know that the module is really bad?
• If I replace the module, will the vehicle start working properly?
• What can cause the module to go bad?
This is both a challenge and an opportunity for repair shops and the replacement parts industry. Two aspects of customer satisfaction affect every business: satisfaction with the product and satisfaction with the service surrounding it. This is the premise underlying the processes we sat up for Automotive Electronic Solutions (AES) to use in its business of repairing and remanufacturing automotive control modules.
In the case of control modules, the “service surrounding the product” challenge is to understand that the shop first needs a quality diagnosis, before the subject of quality replacement parts can take place. For AES, this is a matter of determining what level of service best fits the customer’s problem. Specifically, AES will ask about trouble codes and symptoms to determine the best solution for the customer. If the trouble codes and symptoms do not clarify the level of service needed, the customer can ship the module to us for internal component evaluation. This evaluation will determine what, if anything, is wrong with the module, as well as determining whether it can be fixed. This is a low cost, overnight service. From there AES can return the module to them with diagnostic notes, repair their original module, or remanufacture a replacement module for them. This reduces a repair shop’s risk in servicing their customer and allows them to control the cost of the service.
From a product standpoint, when a remanufactured module is needed, AES works with recyclers around the country to obtain core modules to work with. These are then remanufactured. The recyclers are an integral player in this process because they know the history of the source vehicle, which avoids potential problems resulting from incorrect part numbers and security configuration. To leverage recycler domain knowledge and help recyclers become a quality supply chain player, AES developed Core Module Configuration and Quality Inspection criteria. As a result, both the recycler and AES operate with fewer mistakes. Recyclers benefit from the ability to sell control modules in a low risk venue.
When AES delivers a repaired or replacement part to the customer, service quality is in play again. Along with the part, the customer receives instructions as to what other parts might need to be replaced in order to protect the repaired or replacement module, and installation requirements to protect their investment in the part. This includes what on-board programming may be needed after installation. Getting out in front of potential problems is the best way to reduce or eliminate customer dissatisfaction issues.
ASE also hired ASE Certified Master Techs to help customers with the details of module replacement and diagnosis. The end result is that when a customer service issue arises, AES has the internal domain knowledge to deal with it. This is another aspect of the service surrounding the product.
Lastly, AES defined what they don’t do. This allows AES to work within the limits of proven service abilities. It also helped to define what R&D was needed to expand the scope of their service.
The main intellectual take away for AES is this. Whether you are a recycler, repair facility, or a remanufacturer of automotive control modules, you operate in a process based industry. To become truly customer focused, your customer must be a part of the process. From a sales perspective, customers want to know that you care about their success as much as you do your own. This is true whether the customer is an end user, shop or warehouse distributor.