Introduction into Control Point Management

INTRODUCTION
The response to our newsletters has been terrific and I appreciate all the kind words and feedback. It appears that many readers are getting valuable ideas about how to think about their business and I hope to keep the string of interesting topics going with this month’s focus on Control Point Management (CPM).

CPM is grounded in the work of international guru leader Dr. Eli Goldratt, and his method which he calls “theory of constraints”. There are many insights which can be uncovered by exploring CPM, but I would like to highlight just one: The more complex the system, the simpler the solution must be.

IDEAS
For the purpose of clarity and consistency, let me define some terms which I will be using. First, by ‘complex systems’ I am referring to any organization – business or otherwise – or, in fact, any situation where multiple elements affect each other. In a business, for example, there is production, sales, marketing, management, human resources, customers, suppliers, etc. etc. No matter how big or how small the business is (even one person shops), business is a complex system. The next term is ‘control point’. A control point is that aspect of the business that most limits the business’ ability to make money. There are two generic flavors of control point – internal and external. Simply stated, if a control point is internal, then the business has more work than it can handle. Conversely, if the control point is external, then the limiting factor is the market, meaning that the business has more capacity than demand. Let’s see what insights these concepts can have for a business…

Simple Solutions for Complex Problems
This is not a misprint. In working with business leaders all over the US and Europe, I am amazed at how diligent business owners are at looking for and creating complex solutions to problems.

Here’s the problem: Complex solutions are more difficult to develop, more expensive, are far more likely to have flaws and take a great deal more time to implement. And yet, we tend to default to complexity. Why? Because we tend to look at problems in isolation, rather than as a whole. What does this mean?

Taking the “Global View”
This is one of those takeaways that can give any business owner insight about how their business works. By global, I am not referring to international, but rather to looking at how the major problems, issues and concerns relate to one another across the whole business. This is called looking at the business ‘globally’. Problems very seldom occur in isolation. Almost always, there is a cause-effect relationship to them. A very simple example is a company that has the following problems:
 There is an increasing number of quality problems
 Sales are decreasing
 Customer complaints are increasing
 Employee turnover is going up
 Profit margins are shrinking
 There is an increasing number of late deliveries (or service time is getting slower)

Because problems don’t hit us all at once, we tend to take each one and address it. So, for example, to address the quality problems an owner might retrain people, install measures and hold weekly meetings to review quality performance. To increase sales, the owner might offer discounts or hold a ‘sale’. To offset customer complaints, the owner might offer some type of compensation for the problem. And so on.

But if we analyze these problems as a whole and look for the relationship to each other, we might get some insights about where to focus first.

* Decreasing Profits
* Decreasing Sales
* Customer Complaints
* Quality
* Late Deliveries
* Employee Turnover

In this analysis (note that a different company with the same problems may come to a different conclusion) the owner realized that the high turnover meant that there were few experienced employees left who knew how to take care of the customers in the way that they were accustomed. Because of this, it took longer to do the work and there were more errors. The result of slower service and poorer quality led unavoidably to more customer complaints. Therefore, customers began going to competitors, resulting in lower sales. And because the quality problems created additional cost and the loss of sales, the net result was a reduction in profits.

If the owner tried to solve each problem in isolation, they would have spent a great deal of time, effort, energy and money with very poor results. By understanding that the core problem was employee turnover, the owner could focus on things like training, retention, hiring, etc. And by doing so, have an impact on ALL the other problems that the business is facing. This is a “control point”: One aspect that affects many others. Rather than trying to improve them all at once, focusing initially on the control point will help accelerate the problem solving and improvement process.

To be clear – addressing a problem and solving it are two very different things. Obviously, we repair a poor quality product, or do what we need to do to address a specific customer complaint and so on immediately. But when we settle on ensuring that the problem does not repeat itself, then we are solving the problem and it is here that taking the global view is most effective.

One of the great benefits of the CPM approach is that you do not need to affect everything in order to have an overall impact on the business. By understanding how each problem relates to all the others, a business owner can minimize time and effort and maximize benefits by looking for the core problem and addressing that first.

~~~~~~~~~~~~~~~
Being in business is hard work.
Why not maximize your results?

QUESTIONS TO CONSIDER
As you read this short discussion, consider how your company stacks up:
 What are the key problems or issues that your business faces?
 Are these the most important, most pressing problems that the business is facing? Why do you think so?
 Have you analyzed how they affect each other?
 How do these impact the business’ ability to perform?
 How do these limit your ability to make money?

We’ll see you next month with a new entry.

Until then, go out and make some money!

The QRS of Value

INTRODUCTION
I like writing articles that can make my clients more profitable. From that perspective, this month’s issue is a real jewel.

One of our core business philosophies at Success Force is that customers are buying more than the mere product or service being offered for sale. They are buying value. And, if you understand the value that you bring to your customers, you can charge them not only for the product or service, but also for the value that they are getting from it.

I will admit that every time I put this concept forward in workshops, seminars or presentations, there are a number of seasoned business owners who want to challenge me. “You don’t know how competitive my market it.” “If I tried to do that, my customers would run to my competitors.” “It would be nice if it worked, but none of my competitors do it and so I can’t either.” “We tried something like that. It doesn’t work.” Despite their experience, most of them appreciate the impact that selling value can have on their profitability enough to consider the possibility. Here is what I tell them…

IDEAS
Selling value, while not a novel concept, is one that the vast majority of businesses, large or small, have not done well. I would suggest that this true because:
 They assume that what they are selling is what the customer is buying
 They believe that they know their customers better than they do
 They see the customer as part of their process rather than seeing themselves as part of the customer’s process

Let’s take them one at a time:

Understanding What Your Customer Is Buying
Your customer has a need – that is why they are requesting your product or service. It might be subtle, it might be a desire, it might be a necessity. But they want something that you can provide. It does not matter what it is. [I refer you to eBay’s new TV advertisement about selling ‘it’. It doesn’t matter what ‘it’ is to eBay and it does not matter here.] There are at least three aspects of your product or service that are important to them. I call them the QRS of Value: Quality, Reliability, Speed.

Quality means that your product or service solves their problem or meets their need. Reliability means that it does it every time. Speed relates to your ability to deliver ‘it’ faster than anyone else. I claim that these are value aspects of every product or service. I guarantee that to the degree that you can provide better quality, greater reliability and/or speedier availability, you will absolutely be able to charge more for it. The best part of this is that, assuming you have developed a stable process to support the delivery of your product or service, between 80-100% of the increased price goes directly to the bottom line.

I help business owners double or triple their profits without a corresponding increase in expenses or sales volume. How is this possible? One key way is to sell value. And, while QRS are elements of almost every product or service, they are seldom the only aspects of value that is purchased by the customer.

I submit for your consideration one of my favorite examples. Why is it that when someone goes to the grocery store to buy ice cream, they cringe at the high priced brands that sell for (say) $6.99/half gallon? And yet, after a special event (baseball game, recital, etc), they go to an ice cream stand and readily pay $14.00 for a fraction of the ice cream in the carton at home? Why not go home for the less expensive stuff if price were the only factor? What was different? The experience of going out was better than just going home. In a word, value.

Understanding Value from the Customers’ Perspective
Why don’t more business owners position their product or service to sell value? Most often I found that they do not realize what value they are providing and they do not understand how they provide it. In fact, it is not unusual that they will give their value away!

For example, most business owners have a very strong work ethic. They strive every day to give their customers their best. And they do; they just fail to charge for it. This most often happens with ‘speed’. It is not unusual to hear of situations where the business moved ‘heaven and earth’ to get something done for a customer in need. And then just charged the normal price or only increased the price to cover expenses related to the fast delivery. Probably every reader has done this for a customer. And while they believe that the customer appreciated their effort (which is not true as often as one might think) the truth is, the customer would have paid more – sometimes much more – to have that product or service in the shorter timeframe.

Often owners tell me that they think that this is ‘taking advantage’ of the situation. With all due respect – hogwash! The difference between the customers feeling taken advantage of instead of having a feeling of gratitude when paying more for value, is that they must know about the increased cost BEFORE they have the need. In this way, they know how much it will cost BEFORE they make the buying decision and are often grateful to have the option.

There are many other ways that products or services provide value. Most owners don’t know what their customers are buying for one simple reason… they never asked. This takes more thought than it might seem. You can’t just go up to a customer and ask them, “What value are you buying?” You have to think about what you want to know and what the best questions are to ask to get an understanding of how your customers make buying decisions. One way to do that is to change your perspective about how (not what) your customer thinks about you in general.

Whose Process Is It, Anyway?
This leads us to the final thought of this topic: Are your customers part of your process or are you part of theirs? OK… no secret here – it’s both. But, if you want to understand value – from their perspective, you’d better understand how you fit into their process. What need do they have? How do they make the decision to come to you? What problems does the way you do business create for them? Under what circumstances do they choose a competitor? With these few sample questions, you get the idea.

John Guaspari wrote a book twenty years ago that was entitled, I know it when I see it. It was one of those great 45 minute reads about quality. The essence of it was that customers can’t tell you what quality means, but… they know it when they see it. I have found this to be true about value in general. Customers cannot always tell you what they want, but they return time and time again because they get it from you… whatever it is. Once you find out what ‘it’ is, you can charge for it. And the increased revenue drops right to the bottom line.

~~~~~~~~~~~~~~~
Being in business is hard work.
Why not maximize your results?

QUESTIONS TO CONSIDER
As you read this short discussion, consider how your company stacks up:
 Can you define exactly what value your customers most appreciate in your product or service?
 Do you know how and when you provide it?
 Are you clear with your customers about what value you can offer and how much it will cost?
 Have you had any good conversations with your customers lately?
 Can you say for sure you understand their process and how your process supports and interacts with theirs?

Next Topic: An Introduction to Control Point Management

Until then, go out and make some money!

For more information go to, www.success-force.com or email, info@success-force.com

Benefits of “Speed of Work Flow”

INTRODUCTION
Hello to all our readers, new and old. Based on the comments, discussions and feedback thus far, it is clear that many of our readers are beginning to see the benefits of the core concepts that have been presented in these newsletters.

In this installment, I present one of the most fundamental of all the benefits of the previous topics: Speed of Work Flow (SWF). Earlier, I discussed the QRS of business – quality, reliability and speed. In this installment, we focus on the benefits of speed. Next quarter, we will outline several strategies to increase speed.

SWF
SWF simply means doing work as quickly as possible and finding ways to make it faster. It is applicable for any industry – manufacturing, service, distribution, retail, etc. This is a concept that applies to all. While this may seem to be a simple concept, I recommend that you do not dismiss it lightly.

Central to the concept of SWF is that delivering your products or services faster-than-expected does not create significant pain or cost for you. That is, your normal system is able to ‘speed up’ without impacting anything else (e.g. other orders in process), or without adding cost (e.g. overtime).

Any business that can master SWF in their industry, while maintaining quality and reliability, has a significant market advantage. Let’s explore just a few…

BENEFITS OF SWF
Four significant benefits of being among the best SWF providers in your industry or market are: Improved Customer Satisfaction; Increased Sales Velocity; Charging for Value; and Creating Competitive Advantage.

Improved Customer Satisfaction: More and more, customers are buying speed today. Speed sells. It is a major differentiator. While it is true that quality is important, the whole truth is that quality is no longer a differentiator, it is a requirement. If you are not delivering a quality product or service, then you’re behind right out of the gate.
Speed is not a requirement, but it is a satisfier. Most often, speed is important to your customers because you are covering for their mistake. Poor planning, bad decisions, unexpected problems are all covered if the solution (that is, your product or service) is available to them in time to meet their need. Customers become loyal to suppliers/vendors who get them out of trouble when they most need it.

Increased Sales Velocity: Velocity is the rate at which you produce revenue. Therefore, as your velocity goes up, so does your revenue. But, velocity does not necessarily translate into profit. This is why it is absolutely imperative that increasing your speed does not cost you more to produce or force you to make decisions about what you won’t be able to get done. If you can do this, then velocity does mean increased profit, which is the objective.

Charging for Value: Indeed, this is a common theme of many of the previous newsletters and (not surprisingly) shows up here as well. Speed is valuable and customers will pay for it. Again, (and now you see why this is so important) if increasing speed does not increase cost or have any impact on work already in process, then the increase in price goes right to the bottom line. Many business owners think that customers will not pay for speed. They will. The real problem is that most businesses give it away, typically as a favor. If they do charge extra, it is just to cover the increase in their costs. Customers will pay for speed – just ask FedEx.

Creating Competitive Advantage: Part of winning at the game of business is to force your competitors to do things they are not equipped to do. Speed is the perfect competitive differentiator. Your customers value it and your competitors typically have to move ‘heaven and earth’ to try to achieve it. When they do, it costs them more money and affects their internal production system. This will make them less efficient and less profitable. More importantly, they will not be able to sustain such speed for very long. Like an engine running at 150% of its max capacity, it will soon burn out. The most likely result is that they will not advertise their ‘speed’ because they do not want that kind of work. But you will want it, you can advertise and attract it, and your competitors will just be standing by expecting that you will crash and burn. But, they will be waiting for a long time.

~~~~~~~~~~~~~~~
Being in business is hard work.
Why not maximize your results!

QUESTIONS TO CONSIDER
As you read this short discussion, consider how your company stacks up:
 How fast can you produce what you sell?
 Who is the fastest in your industry?
 What does it take for you to respond to a customer’s request for quicker delivery?
 How often do customers ask for faster delivery?

For more information: www.success-force.com or info@success-force.com

Focus: What is most Limiting Your Ability to Make More Money?

Introduction

The response to our blog has been terrific and I appreciate all the kind words and feedback. It appears that many readers are getting valuable ideas about how to think about their business and I hope to keep the string of interesting topics going with this month’s focus on Control Point Management (CPM).

CPM is grounded in the work of international guru leader Dr. Eli Goldratt, and his method which he calls “theory of constraints”. There are many insights which can be uncovered by exploring CPM, but I would like to highlight just one: The more complex the system, the simpler the solution must be.

Ideas

For the purpose of clarity and consistency, let me define some terms which I will be using. First, by ‘complex systems’ I am referring to any organization – business or otherwise – or, in fact, any situation where multiple elements affect each other. In a business, for example, there is production, sales, marketing, management, human resources, customers, suppliers, etc. etc. No matter how big or how small the business is (even one person shops), business is a complex system. The next term is ‘control point’. A control point is that aspect of the business that most limits the business’ ability to make money. There are two generic flavors of control point – internal and external. Simply stated, if a control point is internal, then the business has more work than it can handle. Conversely, if the control point is external, then the limiting factor is the market, meaning that the business has more capacity than demand. Let’s see what insights these concepts can have for a business…

Simple Solutions for Complex Problems

This is not a misprint. In working with business leaders all over the US and Europe, I am amazed at how diligent business owners are at looking for and creating complex solutions to problems.

Here’s the problem: Complex solutions are more difficult to develop, more expensive, are far more likely to have flaws and take a great deal more time to implement. And yet, we tend to default to complexity. Why? Because we tend to look at problems in isolation, rather than as a whole. What does this mean?

Taking the “Global View”

This is one of those takeaways that can give any business owner insight about how their business works. By global, I am not referring to international, but rather to looking at how the major problems, issues and concerns relate to one another across the whole business. This is called looking at the business ‘globally’. Problems very seldom occur in isolation. Almost always, there is a cause-effect relationship to them. A very simple example is a company that has the following problems:

• There is an increasing number of quality problems
• Sales are decreasing
• Customer complaints are increasing
• Employee turnover is going up
• Profit margins are shrinking
• There is an increasing number of late deliveries (or service time is getting slower)

Because problems don’t hit us all at once, we tend to take each one and address it. So, for example, to address the quality problems an owner might retrain people, install measures and hold weekly meetings to review quality performance. To increase sales, the owner might offer discounts or hold a ‘sale’. To offset customer complaints, the owner might offer some type of compensation for the problem. And so on.

But if we analyze these problems as a whole and look for the relationship to each other, we might get some insights about where to focus first.

	Decreasing Profits
	Decreasing Sales
	Customer Complaints
Quality		Late Deliveries
	Employee Turnover

In this analysis (note that a different company with the same problems may come to a different conclusion) the owner realized that the high turnover meant that there were few experienced employees left who knew how to take care of the customers in the way that they were accustomed. Because of this, it took longer to do the work and there were more errors. The result of slower service and poorer quality led unavoidably to more customer complaints. Therefore, customers began going to competitors, resulting in lower sales. And because the quality problems created additional cost and the loss of sales, the net result was a reduction in profits.

If the owner tried to solve each problem in isolation, they would have spent a great deal of time, effort, energy and money with very poor results. By understanding that the core problem was employee turnover, the owner could focus on things like training, retention, hiring, etc. And by doing so, have an impact on ALL the other problems that the business is facing. This is a “control point”: One aspect that affects many others. Rather than trying to improve them all at once, focusing initially on the control point will help accelerate the problem solving and improvement process.

To be clear – addressing a problem and solving it are two very different things. Obviously, we repair a poor quality product, or do what we need to do to address a specific customer complaint and so on immediately. But when we settle on ensuring that the problem does not repeat itself, then we are solving the problem and it is here that taking the global view is most effective.

One of the great benefits of the CPM approach is that you do not need to affect everything in order to have an overall impact on the business. By understanding how each problem relates to all the others, a business owner can minimize time and effort and maximize benefits by looking for the core problem and addressing that first.

~~~~~~~~~~~~~~~

Being in business is hard work.

Why not maximize your results?

Questions to Consider

As you read this short discussion, consider how your company stacks up:

• What are the key problems or issues that your business faces?
• Are these the most important, most pressing problems that the business is facing? Why do you think so?
• Have you analyzed how they affect each other?
• How do these impact the business’ ability to perform?
• How do these limit your ability to make money?

Next month: Speed of Work Flow

Until then, go out and make some money!

-John P. Gaulin

President

For more information go to www.success-force.com

New Program Designed for Business Leaders

BUSINESS MANAGEMENT SYSTEM

PROGRAM OVERVIEW
The Business Management System (BMS) program is designed to provide business leaders, managers and supervisors with a structure system to manage, align and grow a business using simple tools and strategies that are easily learned and mastered.

Like all good systems, BMS is comprehensive, addressing the essential elements of running a business. The BMS strategies and tools enables business leaders to integrate all business functions, focusing on the essential elements such as goals, vision, market definition and strategy, people and people management, measures, priorities, issue/problem management, all leading to an effective daily business management protocol that aligns daily activity to the long term vision of the business.

OVERVIEW
BMS has three core components and one optional component:
a) An initial orientation session for the business leadership team to prepare them for the two day Business Focus Session, including the pre-work required to participate in that session

b) Business Focus Session is an intensive two-day session for business leadership teams. In this session, the leaders create a common understanding about those aspects of a business which define who the company is, how it competes and how it defines success. This is followed by

c) Weekly ½ day sessions that serves to move the process from concept-to-strategy-to-execution. The entire program is 10 weeks.

d) Optional: After that, quarterly full day sessions are recommended to ensure continued focus and alignment on the vision.

SESSION FLOW
• Orientation Session
– Introductions
– Facility/Process Tour
– Orientation to the business
– Review of the BMS goals, approach, process
– Overview of the Business Focus Session
– Pre-work
– Finalize logistics

• Business Focus Session:
– Discuss, define, agree to business values
– Develop Core Focus
– Define 10 year plan
– Define Market Strategy
– Define 3 year plan
– Define current plan
– Identify ‘What’s Stopping Us’
– Determine business priorities
– Agree to critical actions, project
– Agree to meeting plan (time, agenda)

• Weekly Sessions
– Focus on key elements of the business that must be built and aligned with all other essential elements, including:
 Measures
 People management
 Process management
 Key functional priorities
 Problem resolution process
 Organizational alignment

OUTCOMES
As a result of this work:
• The business will have established a management system that aligns the efforts of each element of the business – from the departmental to the individual level

• There will be a simple, but effective, method for ensuring accountability across the business, from the most senior to the most junior levels

• Priorities will be clear

• Projects will be managed to ensure that they are successfully completed and achieved the purpose for which they were engaged

• A method for continuous success management will be in place and functioning effectively

• The leadership team will develop the time and skill to effectively manage their BMS without assistance

BENEFITS
The benefits of this workshop for an organization cross many levels:
• For Leadership:
– Establishes clarity of purpose, alignment of resources, ability to develop plans which are executable and have a high probability of success
– Provides an ability to create accountability, reward successful contributions and assess performance
– Provides timely feedback and establishes a method for accelerated response and reduced time-to-cash

• For the staff:
– Provides a clear set of goals, guidelines and measures
– Enables them to see the link between their role and business success
– Establishes an effective way to participate and communicate to help improve the rate at which the business grows and prospers

• For the organization:
– Ensures solid method for growth
– Provides for clear path to profit, that is agreed and supported at all levels
– Establishes a specific focus, minimizing time consuming distractions and accelerating the success curve

For More Information
Call Tom Gaulin at 716-681-4434 or email info@success-force.com
Webesite: www.success-force.com

Rapid Performance Improvement Method

View what Success Force is working on now to help leaders get exposed to the best tools, techniques and approaches in building the future security of their business:

Our company has been exposed to the best business thinking from all over the world. We have spent the last five years refining the most successful approaches into a method that is cost effective and easy to implement in all business industries….and soon it will be done all on-line! We call it, Rapid Performance Improvement Method.

For more information go to www.success-force.com