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2010

[Continuation]

 

As you and your management team will realize as you work through the Thinking Processes (TPs), this approach to achieving breakthrough thinking recognizes that each challenge you and your organization faces requires a unique approach and a unique solution. Unlike other methods of problem-solving, applying the TPs recognizes the distinct needs, interests, abilities, limitations and power of all of the stakeholders. This capability of the process helps achieve breakthroughs by maximizing the quality and the effectiveness of the solution. Furthermore, the fact the solution will be invented by you and your management team, the likelihood of full implementation is increased. After all, people seldom work against their own inventions.
Discovering the transitional steps

 

One of the dangers of adopting or adapting a solution from a previous effort or somewhere or someone else is that, in doing so, the “easy answer” too frequently leads your team to also accept an “easy implementation” in which the transitional requirements are never fully understood. Warning! If the transitional steps are not understood – and usually not even clearly articulated – then the transitional steps are never fully developed for implementation.

 

What your management team may have previously understood as “the problem” and “the solution” have usually been nothing more than cryptic images shrouded in a fog of language leading to lots of action but seldom (if ever) a real breakthrough in improvement. However, if you have undertaken to build and understand the Current Reality Tree (CRT), then you have in your hands a document that depicts clearly and logically what is constraining your organization from making more money tomorrow than you are making today. Chances are that, as a result, you and your managers have a clearer understanding of your organization as a whole than you have ever had previously. You may be feeling a sense of empowerment – a renewed sense of being in control – that you have been lacking as manager for years now.

 

However, the Thinking Processes have more to offer than helping you clearly understand the “root” of your problem – the one thing (or very small number of things) that is your bottleneck (constraint) to achieving more of the goal. The CRT you have built has helped you answer a critical question for good management: What needs to change?

 

But two additional questions need to be answered, as well: What should the change look like? And, How do we effect the change? Fortunately, the Thinking Processes supply powerful tools to help your team discover and clearly articulate answers to these questions.

 

By building a Transition Tree (TrT), your management team will go through a Thinking Process that will help you apply sound logic to determining the transitional steps necessary to move from your organization’s Current Reality to your intended Future Reality. When you are done, your team should have three Thinking Process logical “trees” – a Current Reality Tree, a Transition Tree, and a Future Reality Tree. These three documents represent answers to the three critical questions to which your management team needs sound answers:

 

1.       Current Reality Tree – What needs to change?

 

2.       Future Reality Tree – What should the change look like?

 

3.       Transition Tree – How do we effect the change?

 

Note that the TrT should become your “road map” to change. This document, you will find, should clearly define the necessary steps to achieving the desired change right along with the rationale for taking these steps. Without such a map it is easy to get lost or lose focus on the breakthrough your team has calculated for achieving more of the goal.
Don’t get derailed

 

Chances are, while you and your management team are building the Transition Tree, that there will be some that will step forward say, “We won’t be able to do that because….” There are a couple of important points to consider when this happens.

 

First, keep your focus on what happens most in making more money for your organization. If you can increase Throughput on 97% of your transactions, do not let the unpredictable 3% of exceptions keep you from achieving the breakthrough change for the vast majority of circumstances. Paying too much attention to these exceptions will likely distort your solution.

 

However, if there is an objection raised that needs to be evaluated and where it could have an impact on effecting the overall change anticipated by the FRT, then there is a Thinking Process for this, as well. Under such circumstance, you and your team should consider what Eliyahu Goldratt called “Negative Branches.” These are smaller logic trees that supply answers to questions such as: “What will we do if…?”


Don’t get stuck

Sometimes – in fact, with some frequency – management teams such as yours get caught on the horns of a dilemma. They find that there appear to be rational arguments for two mutually exclusive paths to the same interim objective in their Transition Tree development.

 

For example: A manufacturing manager is measured and rewarded on two different metrics – defect rates and equipment maintenance expenses. Of course, he wants to be a good manager and to be rewarded properly for being a good manager, so he wants simultaneously produce quality parts and hold-down the equipment maintenance expenses. He knows that he can reduce maintenance expenses by doing on-demand maintenance only. He also knows that he can achieve lower defect rates if he applies routine preventive maintenance on the equipment under his management. Which of the two approaches to equipment maintenance should he choose?

 

Fortunately, the Thinking Processes have an answer for this situation, too. The tool is called the Evaporating Cloud and is critical to actually achieving breakthrough solutions.

 

Summary

 

To my knowledge, no for-profit organization in the world has ever achieved ascendency in its industry through “cost-cutting” efforts. Companies that grow and gain market share are more likely to be those that have achieved breakthroughs.

 

There are three basic ways to reach a breakthrough in your organization’s thinking:

 

1.       By chance

 

2.       By hiring people who are intuitively breakthrough thinkers

 

3.       By finding and applying a tool that is proven in drawing out breakthrough thinking from ordinary executives and managers – like the Thinking Processes

 

Which will your organization choose?

 

©2010 Richard D. Cushing

[Continuation]


Thinking should be a process
Now that your management team is has identified a goal and they have a theory by which to consider the data they might collect, they are far better situated to determine what information might be valuable to them. If your team is focused on gathering relevant information where the goal is making more money, and the framework or theory tells us that there must be at least one bottleneck or constraint in our system (the whole enterprise), your team now knows the very first question to ask and answer. That question is: “What is our constraint or bottleneck to making more money tomorrow than we are making today?”

 

While we might find some hints in the data stored within your existing ERP database and other computer systems, it is far more likely that what is really valuable in finding the answer to this critical question is presently being held in the minds of your own firm’s managers and leaders all across the organization. We call this kind of undocumented information consciously or subconsciously filed away by the organization’s people day by day “tribal knowledge.” Tribal knowledge is what they have learned through facts and circumstances accompanied by their subjective intuition about what they have garnered objectively.

 

The relatively limited amount of information that is required to soundly answer the key question we have identified is actually better defined from probing the staffs’ intuitions – tribal knowledge – regarding the context of the organization, the uniqueness found in it and its products, and how it works or does not work in delivering value to its customers.

In almost every problem, the value of the factual details pales in significance when compared to the framework and setting in which the details transpire. Breakthrough thinking comes from the application of intuition that gives meaning and cohesiveness to the observations made.

 

Traditional information-gathering efforts focus on the past (historical data captured in computer systems or elsewhere) or the present failings. Unfortunately, since these cannot – by their nature – be an effective guide for the future, the real breakthroughs emerge from the intuition of those closest to the workings of the “system” – the organization taken as a whole.

 

You and your management team might begin by gathering a cross-functional team of staff whom you deem to be trustworthy and experienced in their functions within your enterprise. Then, simply commence by asking this simple question: “What small handful of things do each of you see as keeping our firm from making more money tomorrow than we are making today?”

 

Give each of them several three-by-five cards or large stick-notes and ask them to jot down these factors for you. Before they begin writing, give them the following guidelines:

 

[  ] State each thought as clearly as possible

 

[  ] Include an “actor,” as in “Our vendors provide us with too many defective components for Product Line A.”

 

[  ] Do not include assumed cause-and-effect statements. For example, do not say “Competition is driving prices down, so our salespeople offer too many discounts to make sales.” Instead, make each of these comments stand on their own if you believe them to be true. Write them as separate items thus: “Our competitors are driving prices down,” and “Our salespeople offer too many discounts in order to make sales.”

 

[  ] Put each statement on a separate card or sticky-note.

 

You should refer to these as undesirable effects or UDEs (pronounced: YOU-dee-ees) as did Eli Goldratt when he first promulgated the Thinking Processes. Naturally, some of the participants will have more ideas to jot down than others. Your object in this part of the exercise is to come up with roughly 20 unique UDEs with which to begin creating your organization’s Current Reality Tree – a logical tree that will depict what is not working – what is keeping your organization from making more money tomorrow than it is making today.

 

You can learn more about Eliyahu Goldratt and the Thinking Processes, including Current Reality Trees by doing an Internet search on any or all of these terms, or review this and related Wikipedia articles. You will also find additional references and application of the Thinking Processes right here at GeeWhiz to R.O.I.

 

Every problem is unique and is likely to require a unique solution
A wise man once said, “No man crosses the same river twice: for both the man and the river have changed with each crossing.” The must be said in the realm of business problem-solving.


One of the most frequently occurring and devastating errors executives and managers make in problem-solving and planning is that one problem or situation is identical to another. Fads in management come and go, but no fad or prior experience can take into account fully the differences in time, place, people involved, surrounding conditions, and the present purpose of reaching a breakthrough. The Thinking Processes, however, are able to leverage the “tribal knowledge” and intuition available within your organization to discover unique responses to unique situations even when they may appear (on the surface) to be “just like” what you faced last month or last year.

 

Furthermore, the Thinking Processes are able to decipher and disarm cultural differences and conflicting values within your organization without compromise – which is nothing more than accepting the best of the worst options and blending it with the worst of the best solutions.

 

Far too many managers and executives go out of the way to draw comparisons between their present reality and some other situation believed to be similar. These similarities may be expounded to great length even though the two situations may be separated by miles, years and even involve entirely different companies and personnel. This propensity stems from a desire to reach an “efficient” solution while feeling some satisfaction about being “objective,” as well. It also reduces or eliminates much of the requirement for actually thinking about the uniqueness of the organizations present situation. The Thinking Processes’ Current Reality Tree (CRT) simplifies that while providing management with a truly objective and rational view of what is keeping the “system” from achieving more of its goal.

 

[To be continued]

 

©2010 Richard D. Cushing

If there is one thing you need to survive and thrive during a recession, it is a competitive advantage. And if there is one thing that can help you and your organization discover and secure a sustainable competitive advantage, it is breakthrough thinking. But how do you and your management team go about conjuring up a breakthrough? After all, the very word "breakthrough" indicates that there is a barrier between you and "the other side" of the breakthrough. How will you break through?

 

Become an expert on "the solution," not "the problem"

Over my career of more than 25 years in consulting and senior management, I have met lots of executives and managers that believe that "data" is central to improving a company. They did not have this same thought before computers became widely available to small-to-mid-sized business enterprises (SMEs). It seems that as PC-based computing and storage became faster and cheaper, managers' and executives' hunger for data grew. If some data was helpful, then (it seems they reasoned) all the data would make them infallible in their management actions.

 

The data are not right

What many of these executives and managers fail to understand, however, is that it is impossible for the data they collect to be right all of the time. To paraphrase P.T. Barnum: Some of the data will be right all of the time, and all of the data will be right some of the time; but, all of the data will never be right all of the time.

 

You will never possess all of the data

Of course, we need to add to that the fact that no one will ever possess all of the data in any given situation, if for no other reason than that there are hundreds of data elements affecting any given situation that are not quantifiable and cannot be reduced to empirical data points in a computer.

 

The data are not objective or impartial

Even the data that is collected may not be objective. How the data is collected, the programming that went into the computer application that collects it, the operator who enters it, the people making the measurements, and even the staff that categorize, select and report on the data are all potential influencers of the end result. The reports, dashboards or presentations that many executives will consider as being "neutral," "objective," and "impartial" really may have none of these attributes.

 

You are wasting time, energy and moneyFor all of these reasons and more, executives and managers that seek to amass volumes of data in order to solve problems are wasting the three things most companies can least afford to use unwisely: time, energy and money. Not only so, but too much data is more often a hindrance than a benefit to breakthrough problem-solving. The executives seeking a solution are more often than not simply buried in the minutia - much of it being unmanageable and irrelevant to the underlying core problem. The result is "paralysis by analysis."

 

Data-gathering is not accomplishment

Sadly, far too many executives and managers equate information gathering with actually accomplishing something that benefits the organization even though the act cannot be linked to increasing Throughput, reducing Inventories or demand for new Investment, and/or cutting or holding the line on Operating Expenses while sustaining significant growth. This approach to problem-solving frequently reports "progress" without any real accomplishment leading to improvement - short-term or otherwise.

 

Missing the goal and a frameworkIn management's misplaced attempt to become an expert on "the problem" through data-collection, they have already taken a wrong turn. Management should not be in the business of becoming expert on "the problem." They should be seeking to become expert on "the solution." However, their mistaken belief is that the data will lead them to a solution. This, however, is highly unlikely.

 

Data is nothing more than documented experience - the organization's history having been captured as data. However, as W. Edwards Deming told us so clearly:

 

  •     "Information is not knowledge. Knowledge comes from theory."
  •     "You should not ask questions without knowledge."
  •     "There is no knowledge without theory."
  •     "Experience teaches nothing without theory."
  •     "If you do not know how to ask the right question, you discover nothing."

 

Managers busy amassing and combing through data frequently have neither a goal nor a theory in mind. They are, as Deming would say, "Asking questions without knowledge." They are seeking to be "taught" by the firm's experience (as captured in the data) without a theory about what the data should be showing them.

 

Begin with a goal

It is the awareness of a goal or purpose that will enable managers to determine what data might really be relevant to achieving a breakthrough.

 

Firefighting does not qualify as a goal

Firefighting might be a requirement, but it cannot qualify as "a goal." I say this because - like real, honest-to-goodness firefighting - the most it can do is minimize damage and restore the "normal condition" of "no fire." It cannot bring progress, let alone lead to breakthrough thinking and competitive advantage for your company.

 

If your executive team is going to achieve breakthrough thinking, then the breakthrough better be about something more important to your organization's success than how to put out - or even prevent - the next fire in department X. Your thinking had better be focused on the critical matters of achieving more of your goal - and, in a for-profit enterprise, that goal should be how to make more money tomorrow than you are making today. Any other goal is short-sighted: improving quality, improving customer service, and even making happier, more satisfied employees are require making money if they are to be done well and for very long.

 

So, if the goal is making more money tomorrow than you are making today, what are the right questions to ask and what is the theory (or framework) in which to ask those questions in order that you and your management team might come away with real and practical knowledge leading to breakthrough improvements?

 

The theory and the goal

Let us begin with this hypothesis: Every for-profit organization has at least one constraint to making more money. Of course, the evidence supporting this hypothesis is that if at least one for-profit organization existed with no constraint, its profits would be approaching infinity. The resulting theory - set forth by Eliyahu Goldratt more than 25 years ago - is called the theory of constraints, or TOC.

 

There are many nuances to understanding all of the implications of this theory and it is beyond the scope of this present writing to discuss them all. However, it seems simple enough as a concept: the organization - the "system" - is, in a for-profit situation, nothing more than a "money-making" or "profit-making" machine. Therefore, the following two statements should be considered:

 

   1. The "system" - the entire organization - should be considered as a whole and not managed piecemeal by department and function. It is the "system" that produces profit, not the individual products, processes, departments or functions. The constraint is - or constraints are - related to the "system" and should be addressed in the context of the "system."

 

   2. In order for the "system" to make more money tomorrow than it is making today, it is important that the following occur:

 

1. IDENTIFY the constraint(s)

2. EXPLOIT the constraint(s) - i.e., take steps to get the most Throughput available under the current constraint(s)

3. SUBORDINATE to the constraint(s) - i.e., subordinate all other decision-making across the organization to the governing factors surrounding the constraint(s)

4. ELEVATE the constraint(s) - i.e., take steps to expand the capacity(ies) of capacity-constrained resources (CCRs)

5. CHECK to see if the constraint has moved - i.e., see if you now have a different constraint or set of constraint(s)

6. GO BACK to the first step - do not let inertia set in; enter into a POOGI (process of ongoing improvement)

 

Now you can start thinking - wisely

Now, with a theory in-hand (the theory of constraints) and a goal in mind (making more money tomorrow than you are making today), you and your management team are actually ready to begin "thinking" toward a breakthrough.

 

 

[To be continued]

 

 

©2010 Richard D. Cushing

RDCushing

The New ERP - Part 41

Posted by RDCushing Aug 20, 2010

We are wrapping up our discussion of Sue Bergamo's article entitled "Is Your Implementation in Trouble?" Bergamo listed seven "high level categories [in troubled ERP implementations]…. in the order from the highest to lowest number of responses" from her informal LinkedIn survey. Here is her list:

 

   1. A misconception of business expectations
   2. The lack of top level leadership involvement in the project
   3. Business processes were not correctly redefined and continued to be inefficient
   4. The impact of the organizational change was not addressed properly and caused a major upheaval in the company
   5. The vendor wasn't managed correctly and over-promised, then under delivered [sic]
   6. Project management was weak and over-customizations lead to increased scope and time
   7. The integration of diverse applications was harder than anyone expected
      (Bergamo 2010)

 

In the process of our review we are drilling-down on Bergamo's symptoms list and setting them in the context of the New ERP – Extended Readiness for Profit while contrasting them with traditional ERP – Everything Replacement Projects to see if using the New ERP approach would have mitigated the failures.


6. Project management was weak and over-customizations lead to increased scope and time

 

This is another no-brainer when it comes to traditional ERP – Everything Replacement Projects versus the New ERP – Extended Readiness for Profit. One simple reason is this: the amount of "real estate" to customize.

 

Think about it. If your organization is going through an Everything Replacement Project there are dozens – if not hundreds – of places in the new technology that could become a target for customizations. However, in a New ERP – Extended Readiness for Profit project, the effort is so targeted and so narrow in scope that there is just not much opportunity for "scope creep."

 

But, there is another reason as well.

 

If you will take time to go back (to prior portions in this series), you will discover that the vendor selection and "proof of concept" portions leading up to an implementation under the New ERP approach are likely to expose an requirements for customization early in the process. In fact, such customization or modification necessities will probably be revealed before the purchase agreement is consummated. This is as it should be.

 


7. The integration of diverse applications was harder than anyone expected

 

Even though this is where the New ERP – Extended Readiness for Profit should be most vulnerable, this issue is where the New ERP really shines unlike every other approach.

 

Why?

 

This is simply because the New ERP approach takes as its number one priority the matter of EAI (enterprise application integration). EAI is fundamental to the New ERP.

 

Since, under the New ERP scenario, your organization will not be tearing out the central technology engine (core accounting and related modules) and trying to re-integrate several – or even dozens – of necessary applications across the enterprise, the challenge becomes much less complex. The effort you undertake will be concentrated. Your resources will not be diluted. And the work can be planned and accomplished expeditiously.

 

Furthermore, looking again to the solution and vendor selection process (see earlier posts in this series), the question of integration of the targeted solutions being brought to bear through the New ERP approach – its ease or difficulty – should be and would be addressed prior to making a final decision on the solution(s) and vendor(s) to be employed.
In summary

 

In this series we have compared and contrasted traditional ERP – Everything Replacement Projects with the New ERP – Extended Readiness for Profit in addressing seven factors that have lead many organizations to failure or dissatisfaction with their ERP system and implementation as reported by Sue Bergamo in her article "CIO Update: Is Your ERP Implementation in Trouble?"

 

It should be clear to you and your management team now the many advantaged afforded you by applying the New ERP methods. This is a great way to avoid troubled ERP implementations.

 

©2010 Richard D. Cushing

 

Works Cited

 

Bergamo, Sue. CIO Update: Is Your ERP Implementation in Trouble? Feb 01, 2010. http://www.cioupdate.com/features/article.php/3862056/Is-Your-ERP-Implementation-in-Trouble.htm (accessed Feb 02, 2010).

RDCushing

The New ERP - Part 40

Posted by RDCushing Aug 18, 2010

We are continuing our discussion of Sue Bergamo's article entitled "Is Your Implementation in Trouble?" Bergamo listed seven "high level categories [in troubled ERP implementations]…. in the order from the highest to lowest number of responses" from her informal LinkedIn survey. Here is her list:

 

   1. A misconception of business expectations
   2. The lack of top level leadership involvement in the project
   3. Business processes were not correctly redefined and continued to be inefficient
   4. The impact of the organizational change was not addressed properly and caused a major upheaval in the company
   5. The vendor wasn't managed correctly and over-promised, then under delivered [sic]
   6. Project management was weak and over-customizations lead to increased scope and time
   7. The integration of diverse applications was harder than anyone expected
      (Bergamo 2010)

 

In the process of our reveiw we are drilling-down on Bergamo's symptoms list and setting them in the context of the New ERP – Extended Readiness for Profit while contrasting them with traditional ERP – Everything Replacement Projects to see if using the New ERP approach would have mitigated the failures.


5. The vendor wasn't managed correctly and over-promised, then under delivered

 

This exposes another important advantage of the New ERP – Extended Readiness for Profit over traditional ERP – Everything Replacement Projects: namely, that the New ERP takes several specific steps to minimize such an occurrence –

 

Traditional ERP – Everything Replacement Project

The New ERP – Extended Readiness for Profit

Since the vendor in a traditional ERP project  is going to touch so many facets and functions in the enterprise, this  fact allows the vendor great latitude to make promises about the  benefits and gains to be made without ever declaring the specifics about  those gains. The benefits to the organization are frequently stated so  broadly as to remain essentially without a corresponding metric for  evaluation.

The New ERP,  in contrast, requires that the executive and management team of the  organization determine in advance the three critical matters we have  already mentioned several times:

  1. What needs to change – That is, to identify what very specific functions in the enterprise  are keeping the firm from achieving its goal of making more money  tomorrow than it is making today.
  2. What the change should look like – The management team must determine in advance what the changes in the specific functions (identified in item 1 above)  should look like in order to assure that, after the change is made, the  enterprise will, in fact – or with a very high probability – make more  money tomorrow than it is making today. This should be measurable in  some manner. We have previously used the example (see earlier portions  in this series) of an increase in the number of orders that could be  picked, packed and shipped with the same number of personnel working in  the warehouse.
  3. How to effect the change –  This is the one area in which the technology vendor may play a part.  They may offer suggestions about which technologies to apply and how  these technologies should deployed to achieve the greatest effect.

 

 

Note that if this approach is taken, the management team of the buying organization is setting the specific performance standards expected. This leaves little room for the vendor  to exercise his "bragging rights" and thus "over-promise." The vendor  either can meet (or exceed) the stated standard or performance, or it  cannot. It is as simple as that.

In most cases where traditional ERP is undertaken, there is no up-front establishment of performance  standards with the vendor. And, of course, in the absence of a specific  and measurable standard, how can one effectively "manage" the vendor. By  what measure are you managing them?

 

 

If the traditional "project success" standards are applied (i.e.,  on-time, within the budget, and of acceptable quality) then, I suppose,  you can count your project a success. However, if that "success" does  not result in your company's ability to make more money tomorrow than it  is making today – if there is no measurable R.O.I. (return on investment), then that is a hollow victory indeed.

Since the New ERP
begins with the executive management team establishing and articulating clearly to the vendors the measurable results expected from them, then "good management" of the vendors means  achieving those results that have been predetermined to deliver increased Throughput, reduced Inventories or demands for new investment, and/or lower Operating Expenses while sustaining significant growth.

 

 

Such an approach greatly reduces the likelihood that a vendor will be incorrectly managed.

Most traditional ERP projects include "demonstrations" of the software. In many cases, such  demonstrations are even carefully scripted. However, if you look at the  section of this series that references product demonstrations, you will  see that product demonstrations rarely constitute proof of concept tightly focused around metrics correlated to critical functionality.

On the other hand, the New ERP required participating vendors provide, not only proof of concept,  but also a budget to achieve that proof of concept in the production  environment. Furthermore, that budget is compared by your executive  management team with the estimated benefits (changes in Throughput and  Operating Expenses) to help assure that the projects planned ROI is likely to be attained as a result.

 

 

This side-by-side comparison of traditional ERP with the New ERP should make it abundantly clear that the "incorrectly managed vendor" failing is far less likely to occur when organizations adopt the New ERP as their method for evaluating both improvement projects and the vendors they hire to supply and implement technologies for them.

 

[To be continued]

 

©2010 Richard D. Cushing

 

Works Cited

 

Bergamo, Sue. CIO Update: Is Your ERP Implementation in Trouble? Feb 01, 2010. http://www.cioupdate.com/features/article.php/3862056/Is-Your-ERP-Implementation-in-Trouble.htm (accessed Feb 02, 2010).

RDCushing

The New ERP - Part 39

Posted by RDCushing Aug 16, 2010

We are continuing our discussion of Sue Bergamo's article entitled "Is Your Implementation in Trouble?" She listed seven "high level categories [in troubled ERP implementations]…. in the order from the highest to lowest number of responses" from her informal LinkedIn survey. Here is the list:

 

   1. A misconception of business expectations
   2. The lack of top level leadership involvement in the project
   3. Business processes were not correctly redefined and continued to be inefficient
   4. The impact of the organizational change was not addressed properly and caused a major upheaval in the company
   5. The vendor wasn't managed correctly and over-promised, then under delivered [sic]
   6. Project management was weak and over-customizations lead to increased scope and time
   7. The integration of diverse applications was harder than anyone expected
      (Bergamo 2010)

 

In this process we are drilling-down on Bergamo's symptoms list and setting them in the context of the New ERP – Extended Readiness for Profit while contrasting them with traditional ERP – Everything Replacement Projects to see if using the New ERP approach would have mitigated the failures.


2. The lack of top level leadership involvement in the project


This is a no-brainer for the New ERP – Extended Readiness for Profit, and the reason is simple: "Top level leadership" are always interested and involved in those things that are going to lead to increasing profit. They are less likely to be interested and involved in "housekeeping" and "maintenance" matters.

 

For better or worse, top-level executives frequently consider IT either "a necessary evil" – like paying the janitorial staff; or they see it a "necessity that no longer delivers a business advantage" – like maintenance on well-worn manufacturing equipment on the shop floor. It may have been a competitive advantage when it was purchased (several years ago), but now it is only an "expense."

 

If top-level leadership had begun their search by looking for improvement leading to a competitive advantage, or improvement leading to significant increases in Throughput they would be "involved" in the project. Not only so, but if they had followed the New ERP – Extended Readiness for Profit approach, their application of the Thinking Processes (see prior posts) would have led executives and managers to uncover the answers to the three critical questions we have so frequently reiterated:

 

   1. What needs to change (Current Reality Tree)
   2. What should the change look like (Future Reality Tree)
   3. How to effect the change (Transition Tree)

 

What could be simpler or more effective in gaining top-level leaderships involvement with the project at hand?

 


3. Business processes were not correctly redefined and continued to be inefficient


This is another problem easily created when traditional ERP – Everything Replacement Project methods are employed and even more easily avoided when taking the New ERP – Extended Readiness for Profit approach. Here is why:

 

If the executive management team has discovered what needs to change, then they have already automatically "correctly defined" the business processes involved. They know exactly what specific business processes are acting as a constraint or bottleneck to making more money. By using the Thinking Processes' CRT (Current Reality Tree), the firm's leadership has already unlocked and decoded tribal knowledge so as to precisely what business process should be improved.

 

And, if they are following the New ERP methods, then their next step likely would be (depending on certain factors) the creation of a Future Reality Tree (FRT) or a Transition Tree (TrT). Either of these logical trees would help them understand what the change should look like and how to effect the change. Specifically, the FRT would define for them what their business processes should look like after the proposed change, and the TrT would become the management team's roadmap for change management. [Note: For Theory of Constraints purists, there are other portions of the Thinking Processes that might become a part of this (e.g., Negative branches, Prerequisite Trees) that I have left out of this discussion for the sake of simplicity.]

 

I think you can see from this that, by employing the New ERP methods, there is simply no way to leave behind "inefficient processes" that remain unchanged. Fundamental to the Thinking Processes and the planning that results from the logic of the trees is the inherent roadmap to changing whatever it is that was defined in "what needs to change" (the CRT).

 

In the traditional ERP – Everything Replacement Project so much change is happening all across the organization, it is no surprise that all that some processes get overlooked and remain unchanged and, as a result, inefficient as well.

 


4. The impact of organizational change was not addressed properly and caused a major upheaval in the company


This cause sounds sort of redundant, does it not? This is a symptom that has its roots in the whole philosophy of traditional ERP – Everything Replacement Projects. After all, it is really hard to avoid a "major upheaval in the company" when your approach is to "replace everything" in their core IT systems.

 

That is precisely why the New ERP – Extended Readiness for Profit is not only vastly more likely to provide a sound and significant return on investment (ROI), it is also likely to produce an ROI at lightning speed. Many traditional ERP projects take years to produce a return and, sadly, some never do.

 

[To be continued]

 

©2010 Richard D. Cushing

 

Works Cited

 

Bergamo, Sue. CIO Update: Is Your ERP Implementation in Trouble? Feb 01, 2010. http://www.cioupdate.com/features/article.php/3862056/Is-Your-ERP-Implementation-in-Trouble.htm (accessed Feb 02, 2010).

RDCushing

The New ERP - Part 38

Posted by RDCushing Aug 14, 2010

Yet another "Why ERP implementations fail"

 

Sue Bergamo, former CIO at Aramark's WearGuard & Galls companies, recently posted an article entitled "Is Your Implementation in Trouble?" (Bergamo 2010) In her writing, she listed seven "high level categories…. in the order from the highest to lowest number of responses" from her informal LinkedIn survey. Here is how the list shaped up:

 

   1. A misconception of business expectations
   2. The lack of top level leadership involvement in the project
   3. Business processes were not correctly redefined and continued to be inefficient
   4. The impact of the organizational change was not addressed properly and caused a major upheaval in the company
   5. The vendor wasn't managed correctly and over-promised, then under delivered [sic]
   6. Project management was weak and over-customizations lead to increased scope and time
   7. The integration of diverse applications was harder than anyone expected
      (Bergamo 2010)

 

We are going to drill-down on these and put them into the context of the New ERP – Extended Readiness for Profit, contrasting them with traditional ERP – Everything Replacement Projects to see if using the New ERP approach would have mitigated the failures.

 


1. Misconceptions of business expectations


Ms. Bergamo does not explain in her short article precisely who had the misconceptions of business expectations. We do not know whether, in the Bergamo survey, the misconceptions were held by all or part of the management team involved in the ERP acquisition, by the vendors and resellers involved, and/or by third-party consultants that may also have been a part of the ERP project. My experience tells me, however, that if persons were involved in a traditional ERP Everything Replacement Project the likelihood is very high they had and held "misconceptions of business expectations."

 

Why do I say this so boldly?

 

Because, unfortunately, most organizations do not begin their search for traditional ERP with clarity on the three critical factors we have discussed earlier in this series:

 

Management Factor Number 1: What needs to change

 

If executives and managers applied rational tools to determine precisely – not vaguely – what needs to change so that the business could make more money tomorrow than it is making today, the "business expectations" would be clear.

 

Sadly, many organizations today still pour in traditional ERP like some kind of "miracle-working additive" that is supposed to make their whole enterprise run smoother, cleaner, faster and, as a result, produce more profit. It seems that 20 or 30 years of experience with ERP not delivering its supposed miracle-working power in so many implementations is not yet enough to convince some. Such executives continue to drink the proverbial Kool-Aid offered by ERP software vendors and VARs just as if the hundreds of bad experiences being reported are only mirages and the same could not and would not happen to their firm.

 

I have walked into dozens of traditional ERP projects where, if asked, no one in executive management could tell me what measurable improvements were expected when the implementation was complete. If they were able to reply at all, their answers sounded more like they were drawn from a séance than from a the mouth of an executive. They might sound something like these:

 

"We expect that this new ERP system will enable us to grow while holding down our operating expenses."

 

"We are counting on this new system to help us ship more efficiently."

 

"Our ERP vendor told us that this new system should help us reduce our inventories without sacrificing customer service. Plus, it will help us build 'best practices' into our back-office."

 

Now, I have no problem with "We expect that this new ERP system will enable us to grow…" provided that statement is followed by specifics like:

 

    * How much is it likely to "help us to grow"?
    * What specific changes will the new ERP system bring about that will lead to the expected growth?

 

In the absence of specifics, how can those who complained in Ms. Bergamo's study even complain that they had a "misconception of business expectations"? Was their expectation that they would mystically grow, but they did not, in fact, achieve their concept of mystical growth? Did they expect that profits would mystically improve, but the mystical improvement in profits never appeared?

 

Just what were their "business expectations"?

 

If "business expectations" were not defined in clear cause-and-effect terms up front: if the executives and managers could not – in advance – link specific anticipated changes in the "system" (i.e., how the organization itself functions) to the anticipated and measurable improvement, then they have no one to blame for "misconceptions of business expectations" other than themselves. If they drank the vendor's or reseller's Kool-Aid about ROI (return on investment) and did not establish for themselves the metrics for specific and measurable change, they cannot blame the vendor or reseller. It is management's job to know these things and not to simply take a salesperson's (or even a consultant's) word on such matters.

 

Management Factor Number 2: What the change should look like

 

If executives and managers have proactively worked out rational cause-and-effect relationships, and have determined clearly and specifically what needs to change, the next step become relatively easy. That step is for the management team to establish what the change should look like.

 

If applying new technology in the organization (i.e., the system) will "increase Throughput by an estimated 12.5% over 12 months by providing improved market segmentation for Product Line C," then what the change should look like will be described in terms of the changes required to "improve market segmentation for Product Line C." That change might take the form of new market data collection techniques, new automated surveys, or some other form. Nevertheless, there should be no confusion in the management team members' minds as to what the change should look like when it has been implemented.

 

Similarly, the management team should understand the changes necessary to leverage "improved market segmentation" into "an estimated 12.5%" increase in Throughput over 12 months. The executives and managers should have a clear understanding of how the new market segmentation data will lead to new "offers" in the marketplace that will, in turn, lead to the anticipated growth.

 

Management Factor Number 3: How to effect the change

 

What we have described above are real and concrete "business expectations." There is no easy way to misconceive "business expectations" that are so clearly articulated. This kind of "expectation" can be the basis of concrete action. These kinds of "expectations" can become a guide for how to effect the change.

 

The meaningless séance-induced "business expectations" so frequently articulated by executives and managers surrounding traditional ERP hold little hope of functioning as a guiding light for concrete action on the part of anyone in the organization. It is no wonder that "expectations" are only met in so few traditional ERP implementations.

 

[To be continued]

 

©2010 Richard D. Cushing



Works Cited

 

Bergamo, Sue. CIO Update: Is Your ERP Implementation in Trouble? Feb 01, 2010. http://www.cioupdate.com/features/article.php/3862056/Is-Your-ERP-Implementation-in-Trouble.htm (accessed Feb 02, 2010).

In Part 2 of this series, we ended by say just how valuable it is to begin unlocking the "tribal knowledge" that is undoubtedly resident in the minds of the people you have working in your business enterprise.

Taking another look a the client's situation I have been referencing in this series, the client has a complex sales cycle that involved multiple individuals and organizations in the processes of funding and purchase decision-making. To refresh our collective memories, here's a list of the participants we have previously identified:

  •     > The school district, including administrators and, sometimes, board members
  •     > The school(s) and the school(s)'s administrators
  •     > Teacher(s)
  •     > The school(s) and/or school district's IT department
  •     > Government programs and associated bureaucrats
  •     > Not-for-profit or other sponsors


Now, it seems clear, each of these participants that may be involved in the process of a single sale to a school or district will likely have somewhat different motivations for buying the products offered by my client. For example, what excites a teacher about using the product in his or her classroom will probably have an influence on the school and school district's administrators. But in order to get the administrators to look upon the purchase favorably will involve other satisfactions and assurances than those required by the teacher alone. The same may be said for all of the potential parties involved.

 

Asking the right question to unlock "tribal knowledge"

 

While looking at current sales accompanied by geographic, demographic or even salesperson correlations may be helpful in seeing some patterns that can be leveraged to increase Throughput, if an organization is going to come up with real breakthrough offers – so-called "mafia" offers, because they are offers that can't be refused – will probably require more than that. It requires unlocking tribal knowledge so that the firm's mark can be segmented and the "offers" can be ever more targeted and effective.

 

When many companies begin this process, they begin by asking the wrong question (in my opinion). They ask their sales and marketing team something along this line: "Why do our customers buy from us?"

 

Of course, this makes sense, doesn't it? This question correlates to the data the management team looked at in Part 2 of this series. They looked at differences between Category A sales and Category E sales and now they want to know why so many customers in Category A bought from us.

 

The right question to ask, however, revolves around what is keeping the company from making more money tomorrow than they are making today, and that question would be: "Why did so many potential customers in Category E not buy from us?" After all, it is the lack of sales that is keeping the organization from increasing Throughput; therefore, it is essential to find out what is keeping sales from happening. In theory, all of the prospects have already been exposed to the factors that caused those who already purchased to decide favorably.
Unlocking "tribal knowledge" to identify patterns and constraints

 

If my client's team were to begin by sitting down with their sales team, they might put forward a challenge something along these lines to them:

 

"I want each of you to list the 5 top things – from your experience – that keep you from selling more (fill in the blank)." (The blank might be a product, a product line, in specific geographic areas, or in specific demographic categories.)

 

[Note: Ideally, it would be good to correlate the results of this into a Current Reality Tree to further unlock potential root causes, as there likely are some that should be addressed. However, let us leave that aside right now and just consider the matter with regard to "business intelligence."]

 

Discussions evolving from the resulting list of sales inhibitors – along with some provocations to think below the surface – might result in some fascinating factors emerging. The results might lead to understandings similar to this hypothetical list:

 

  • > It seems like it is easier to sell Product A into school districts where the administrator is younger and, therefore, more likely to be attuned to technology in education.

 

  • > It seems like it is easier to make a strong and effective ally of a teacher with more than 5 years in service, but fewer than 15 years. (This might be because the less experienced ones don't have the confidence to bring new ideas to their administration and the ones with more than 15 years in-service are "stuck" in their old ways.)

 

  • > It seems like it is more difficult to sell Product C into inner-city school districts with high populations (fill in the blank with an ethnicity).

 

  • > We have not yet discovered how to interest upper-class suburban school districts in our Product Line B.

 

Now, from the tribal knowledge the management team has just begun to unlock, there should be a two-pronged approach to moving forward:

 

   1. Statistical verification
   2. Development of new "mafia" offer concepts

 

Which portion of this two-pronged effort should receive the major emphasis should be guided by another tribal knowledge factor – intuition – which is right far more often than it is wrong. If the team intuitively senses a strong, "YES! We've hit on something that rings true." Then, the emphasis should probably be given to the development of breakthrough thinking for new "mafia" offers to overcome the constraint and in Throughput.

 

On the other hand, if the team is more reserved about an emerging concept – if they believe it has some validity, but would feel more comfortable if it could be further corroborated, then the team should put the emphasis on statistical verification.
Statistical verification

 

The process of statistical verification gets us back to "business intelligence" in an information technology sense. However, it is likely that the appropriate demographic data is not presently available to the firm at this moment. For example, school or school district administrators' and teachers' years in service is probably not a data point currently being collected.

 

In this scenario, if I were on the management team at this client, I would strongly suggest that we take two or three years of sales history and take a survey. If the firm presently has excess capacity, then take some of the excess capacity resources and put them to the task of calling these customers to gather the demographic data in question: "Years in service."

 

[Note: If the firm is going to have this done, there might be other demographic data that has come to light and may be of value as well, such as the inner-city ethnic composition of the schools and school districts. And, by the way, while this survey is being undertaken, I would add another element: Gather email addresses and permission to correspond with these parties electronically with occasional messages "including helpful news about technology applications in education and other valuable education insights."]

 

Similarly, even without formal data accessibility or a lot of detailed research (although much would probably readily accessible via the Web), the firm's team could probably add reasonably accurate demographic data regarding "inner-city" versus "upper-class suburban" schools and school districts that could be used for further analysis. These data may be refined and made more accurate as time and data availability allow.

 

Once the demographic data is collected, it will be a relatively simple matter to see if there is a real statistical correlation matching the team's intuitive sense regarding years in service for administrators and teachers.
Development of new "mafia" offers

 

As we said above, a "mafia" offer is simply an offer constructed in such a way that it is simply too good to be refused. This means understanding the motivations of the market segment you are approaching and, as the organization grows in its application of this powerful blend of tribal knowledge and business intelligence, its ability to segment its market into smaller and smaller elements will grow. This will tend to increase the firm's ability to offer even more targeted "mafia" offers.

 

Going back to some of the examples mentioned above, consider the following:

 

  • >> It seems like it is easier to make a strong and effective ally of a teacher with more than 5 years in service, but fewer than 15 years. (This might be because the less experienced ones don't have the confidence to bring new ideas to their administration and the ones with more than 15 years in-service are "stuck" in their old ways.)
        • > Example question to ask: How can we develop a "mafia" offer that will convince teachers with less experience to become a stronger and more effective ally in bringing out products to their superiors?
        • > "Mafia" offer concepts: This might involve a "hand-holding" offer with more direct involvement with the teacher in this process, or simply providing more effective "ammunition" so the teacher feels better equipped to address questions from his or her superiors in administration.

    • >> It seems like it is more difficult to sell Product C into inner-city school districts with high populations (fill in the blank with an ethnicity).
        • > Example questions to ask: What can we learn about the specific culture (ethnicity) so that we can construct "mafia" offers that will overthrow the reticence exhibited by this culture in adopting our products for education?

       

      • >> We have not yet discovered how to interest upper-class suburban school districts in our Product Line B.
          • > Example questions to ask: What are the objections raised by those in upper-class suburban school districts when approached regarding Product Line B? How can we develop new "offers" that overthrow these objections?

         

        Hopefully, if I have been clear, you are beginning to see how power the blending of tribal knowledge with computer-based, low-cost business intelligence could be to help your firm segment its market and create breakthrough "mafia" offers that should lead to increased Throughput.

         

        Contact me rcushing@geewhiz2roi.com if you have questions or would like assistance in applying these techniques effectively in your organization.

         

        ©2010 Richard D. Cushing

        In Part 1 of this series,  we were talking about a firm that had identified that the thing that  was keeping them from increasing Throughput – from making more money tomorrow than they were making today – was understanding their customers and the other participants in the  decision-making process better. I also pointed out that this firm  already had some data available to them that could be used to begin the  process of understanding their customers better. They had, of course,  their historical sales data. But this firm also had available to them an  independent database that contained some additional demographic data  about their customers and prospects that could be correlated with their  own sales data.

         

        I closed Part 1 by suggesting that they could employ these available data to begin exploring relationships such as:

        • > Sales by salesperson
        • > Sales by salesperson by geography (e.g., city, state, region)
        • > Sales by salesperson by demography (e.g., size of school or school district)
        • > Sales by product line by geography
        • > Sales by product line by demography
        • > Sales by salesperson by product line
        • > Sales by salesperson by product line by geography
        • > Sales by salesperson by product line by demography

         

        There are other data elements (dimensions)  available to virtually every firm that we are not including here. For  example, if you introduce the additional "time" dimension, it may be  easy to spot trends over time – e.g., salespersons, regions, or demographic groups where sales are growing or decreasing over time.

         

        This is an example of what business  intelligence practitioners call "cubing the data." The data is  summarized by various "dimension." In the example above, the sales data  is being summarized and the "dimensions" are:

        1. Salesperson
        2. Geography
          1. City
          2. State
          3. Region

           

        3. Demography
          1. Size of school (number of students)
          2. Size of school district (number of students)
          3. Teacher/student ratio

           

         

        As I  said, all of this can be done using low-cost tools available to almost  every small-to-mid-sized business and already on the desktop of almost  every computer. Microsoft Excel, especially Office 2007 and later  versions, is capable of digesting a large set of data within its own  operating context. However, if you or your firm has a Standard Query  Language (SQL) server and these data reside in a relational database  (such as Microsoft SQL Server, especially SQL Server 2005 and later),  you have even more relatively low-cost tools to manipulate and digest  even larger data sets. SQL Server 2005 and later is even capable of  calculating and summarizing data cubes on the fly. These pre-digested  data may then be presented to Excel as a presentation tool and  user-interface.

        Introducing "tribal knowledge"

        So  what is keeping companies from leveraging the data that they already  have in order to use the insights discovered through such analyses?  Generally, in small-to-mid-sized businesses I find the following factors  are holding them back:

        1. Uncertainties regarding the value – I have to put this one at  the very top of the list for one simple reason: If executives and  managers in the firms were convinced that discovering new factors about  their marketplace – market segmentation – would help them make more money tomorrow than they are making today, they would find a way to get it done.
        2. Uncertainties regarding the costs – Sadly, the business  intelligence community itself has much to do with making small  businesses wary of the costs moving into the realm of business  intelligence. Many who make their money by selling and implementing  business intelligence tools want you to believe that is not possible to  make real gains and reap significant business benefits without investing in expensive business intelligence software and spending lots of time, energy and  money to build expensive data warehouses and, perhaps, hundreds or even  thousands of "cubes." This is simply not the case, but it is frequently  the belief.
        3. Uncertainties about how to get started – Again, in part to the pseudo-mystique surrounding the world of "business intelligence," many executives and  managers do not feel that they "have what it takes" to get started  benefiting from understanding their customers and marketplace better by  leveraging the data they have been collecting in their ERP systems for  years. There are simple ways to get started and one can always make the  leap to more sophisticated business intelligence applications when  conditions warrant.

         

        But, wait!

         

        So  far in our discussions I have intentionally left a tacit implication on  the table. That implication is the one that drives far too many  executives and managers in companies of all sizes, and it is this: What  is valuable and can be leveraged in "business intelligence" is found in  our data systems and the data stored or collected.

         

        This is very far from true!

         

        Some  of the most important contributions to making computer-based "business  intelligence" valuable do not come from the data, nor from the software.  These valuable contributions come from the people that have worked in your enterprise year after year. Your people know things about your customers, your prospects, your products, your industry and your marketplace. I call this kind of knowledge held within a business enterprise "tribal knowledge."

         

        Now, tribal knowledge in every organization extends well beyond the examples I will suggest  in this series, but I think you will begin to see just how adding tribal knowledge into the blend with the data you have available to you extends the  power of business intelligence and may lead to truly valuable  breakthrough thinking.

         

        Suppose  that in analyzing sales data currently available, they looked at the  data summarized in a certain way and the graph looked like the following  figure:


        The questions that ought to be asked when looking at such a data summarization should be along these lines:

            • >> Why are sales in category 'A' five times better than sales in category 'E'?
            • >> What can we learn from what we do to get the results in category 'A' in order to apply it to the other categories?

         

        Now, let me bring this down to more practical examples:

            • >> Categories are product lines: What factors make Product Line A  perform so well? Do we sell it differently than Product Line E? Do we  promote it differently? Do we sell it to different kinds of customers?  If so, what are the differences between the kinds of customers? How can  we apply what we know about how we sell Product Line A to improve  results for Product Line E?
            • >> Categories are salespersons: What does 'A' do to get results  that 'E' does not? Are these results simply differences by sales  territory? Are there demographic differences in 'A's customer list from  the customer lists of the other salespeople?

         

        Naturally,  this of questioning can go on and on, limited only by the management  team's ability to think of the "right" questions to ask. Some of the  questions can be answered using the data and re-summarizing it in a  different way. For example, to answer the question, "Are these  differences [between salesperson results] simply differences by sales  territory?" it may be necessary to re-summarize the data by sales  territory. However, if salespersons and sales territories are  synchronous and exclusive, then one might need to compare similar but  broader territorial results to see if a pattern exists. (For example, if  the salesperson assigned to Washington State is Category A, then one  might compare results for other West Coast states to see if they are  similarly high even though different salespersons are assigned to these  territories.)

         

        The  basic point, however, is that the people involved in your organization  are carrying about with them "tribal knowledge" that can help you and  your management team discover new ways to segment your market and  increase Throughput.

         

        [To be continued]

         

        ©2010 Richard D. Cushing


        Recently I was working with a client and, at the opening of the meeting, I asked the six members of their management team who were gathered around the table the following simple question: "What is keeping your from making more money tomorrow than you're making today?"

        Their responses were telling: (approximate quotations)

        1. "We don't understand our customers: Who is buying, why they buy, or how they go about the process of getting a purchase authorized."
        2. "The amount of time it takes us to respond to a lead or prospect. We might get 20 to 300 leads from a trade show, but it might takes us three weeks to six months to get back to them after the leads have gone through all the hands and processes in our organization."
        3. "We don't have a good way to turn the data we possess into information that would be valuable for decision-making."
        4. "We don't have a good way to classify accounts in our customer relationship management (CRM) software so we know how to best approach them regarding our products and services."
        5. "We don't understand the secondary participants involved in our sales process with a prospect."
        6. "Our customers lack the funds to buy our products."

         

        What is interesting about this is that, if we take number 2 out of the mix (this is clearly a policy constraint) the other five responses all have to do with "business intelligence." These folks needed to understand their customers better in virtually every aspect.

         

        Now, in their defense, this firm has a fairly complex sales cycle with, potentially, a number of different parties involved. Here's a brief description of the participants and their relationship to the sales process:

        • School District – Usually, it is the school district that will end up "owning" the product after purchase. Frequently it is at the district level, as well, that the purchase commitment must be authorized.
        • School(s) – The individual schools and school administrators may have an impact on the purchase decision. The school(s) must be willing to take on the product before the school district will authorize the purchase, even if the teacher may have convinced the district administrator and board that it is the right way to go.
        • Teacher(s) – Teachers function mostly as influencers and catalysts to the sale. The teachers often are sold on the product and then become an advocate to aid in getting the product approved at the school and district levels.
        • School District IT Department – Since the products generally involve technology, it is not uncommon for the schools' or the district's IT departments to have de facto veto power over any pending purchase of such technology.
        • Government Programs – Since most of the schools in the U.S. are publicly funded, the funding for many of the purchases flows directly or indirectly from some government program. Such programs often set requirements and seem to have a never-ending series of "hoops" that must be jumped through before funds are made accessible for specific purchases.
        • NFP or Other Sponsor – When the school districts' ability to access funds for a desired product purchase falls short, sometimes not-for-profit (NFP) organizations become a supplemental source of funds. Sometimes, it is even the NFP, seeking a place for its funds in community projects, that becomes the initiator of the whole process. Other times, the interested teacher may know that the school or school district have no money for the purchase, so he or she will seek aid from a NFP organization simultaneous with presenting the matter to the school and district decision-makers.

         

        As you can see, with all of these participants, and no single path for each approach, it is understandable that this organization is discovering some challenges in "understanding" their customers. Add to this the fact that their business itself was changing. They were diversifying from the product around which the business had originally been built – beginning to sell a broader range of related products into the same marketplace.

        Tools at their disposal

        Now, this firm does have some tools at their fingertips. They purchase the use of data made available from a data aggregator that provides a database of schools, school districts and related parties. Some demographic data is included.

         

        Now, I am not privy to exactly what demographic data is available to them – our discussions didn't go to that level. However, for the sake of this discussion, let us say that they have just the following data points for each school and district (in additional to standard data like addresses, phone numbers, and so forth):

        • > ZIP code
        • > Number of students
        • > Number of teachers

         

        Using a tool as rudimentary as Microsoft Excel's OLAP capabilities, it would be relatively easy to spot correlations in the data between product sales (by dollar or by units) and these demographic characteristics:

        • > Which regions of the country account for the most sales? The least sales? 
          • > Using the first digits in the ZIP Code gives you 10 regions automatically
          • > Using the first three digits in the ZIP Code gives you a breakdown by what the USPS call SCF (Sectional Center Facility)
        • > Which states account for the most sales? The least sales?
        • > Which cities account for the most sales? The least sales?
        • > Which districts produce the highest ratio of unit sales to students? Which ones have the lowest ratio? What about the unit-to-teacher ratio?

         

        My guess is, if they had graphs of these data – especially TOP and BOTTOM data – their sales and marketing personnel would immediately begin to see some patterns emerging.

         

        Likely, however, they have other data already in their possession that would give them additional insights as to sales patterns leading to a better understanding of their customers' behavior. Take the following examples:

        • > Which salespersons produced the highest sales in terms of dollars and units? Which ones produced the least?
        • > Within each salesperson's sales, are there significant differences by sales by geographical region or SCF?
        • > Are there correlations between salespersons' sales and the discounts offered? (This would be an indicator of price sensitivity and should be correlated by other factors, like geography or average sale size.)
        • > Do correlations exist between salespersons' sales results and the products or product configurations they sell most frequently?

         

        Little of this kind of analysis was being done in a formal way at this firm. However, it seemed that they already knew they needed to "understand their customer" better. They just had not yet thought about how to leverage what they already had in their hands in order to begin segmenting their market and understanding the factors leading to less success or more success (read: Throughput).

         

        We will talk more about this in the next post in this series.

         

        ©2010 Richard D. Cushing