Financial statements can support a broad assessment of a business’s general health, and even allow rudimentary predictions about its future viability. But they do not explain how exactly that business makes money.
Cost-plus pricing is based on the false idea that organizations set prices. We all know this is not true. Markets—via the unstructured interactions of buyers and sellers—set prices.
The most common justification for a branch network is the need to be “close to the customer.” But in reality, branches often achieve the opposite. Unless you have a retail counter, a branch is just a place for field engineers to luxuriate when they should be in a client’s plant. It’s time to stop confusing “local presence” with “local real estate” and start focusing on where the value is actually created.
I’m not here to tell you to delete your organization’s bonus plan. Truth is, it’s probably not doing much harm. So, if you have one—and if your team seems to like it—you should probably leave it in place. My message is that you shouldn’t have one. I’m here to question the reasoning that preceded the… “Why you shouldn’t have a bonus plan”
Your salespeople have finite capacity, and we should probably assume that they are consistently busy. This means that if we ask them to perform an activity, it will be performed in place of another activity. If we consider the pool of possible transactions upstream from your organization, this pool can be divided into two categories:… “Why a commitment to following up every quote is probably costing you money (and handicapping your growth)”
This claim is not wrong. But it’s not helpful either! I’ve spent a week at the nation’s leading distributor conference, listening to executive after executive proclaiming the criticality of local customer relationships, maintained by branch salespeople. Now, on the final day of the conference, McKinsey is presenting survey results, suggesting that customers value availability, price,… “Distributors claim that branch salespeople’s customer relationships are their key value driver.”
The directive to “minimize costs” is foolish. It demonstrates a lack of understanding of system dynamics. Practically, you can only maximize (or minimize) a single parameter in a system. (Imagine advising a competitor in the Tour de France that he should simultaneously ride as fast as possible and minimize energy consumption. This advice would have… “Why the directive to “minimize costs” in your industrial sales business is foolish”
A healthy business A healthy business has two value chains: Business as usual (generates operating profit) Growth (generates growth in operating profit) It should not be controversial to suggest that both chains should be optimized for speed. However, in most businesses, these two value chains do not exist in any meaningful sense. You have one… “An Introduction to the Speed-Based Operating System”
A viable alternative based on Goldratt’s Theory of Constraints Imagine you were to take over the management of a Formula One team, and rather than focusing on the car’s speed, you focused on reducing fuel consumption. That would be stupid, right? Idiotic, even! But this is the orthodox approach to business management. Not surprisingly, the… “Why a focus on cost makes organizations weaker, less profitable, and less competitive”
When we work with those manufacturers that sell via resellers of various types, we often encounter an instance of the Drunkard’s Search problem within the sales department. This article describes the problem, as well as a solution we devised around 15 years ago—but abandoned because we believed it was too complex to be practical. Our… “A breakthrough (?) approach to the management of dealers (and other reseller relationships)”
