making more money: simple strategies for improving cash flow and profitability
DESCRIPTION
Improvement is about helping you make more money—it’s not about change for the sake of change. Many organizations try to apply the tools of improvement to things that don’t make a difference—like shuffling deck chairs on a sinking ship. Real improvement gets to the root of organizational problems and addresses those problems with lasting solutions. The principles of improvement apply to every kind of organization—regardless of size or structure. There is no organization anywhere which can’t benefit from improvement. As my late friend and mentor Bill Conway used to wryly say, “The normal state of everything is all screwed up.” This statement is axiomatically true because we tend to accept “screwed up” as the normal state of things. But it doesn’t have to be that way. Finding waste usually involves a significant change in mindset—and a willingness to question the way we do things now. To paraphrase a famous quote from Einstein, we can’t solve our problems without first changing the way we think. Or to use Bill Conway’s expression, we can’t do improvement unless we “get our squash right.” With that in mind, the exercises in this workbook are designed to help you uncover areas where significant improvement is not only possible, but absolutely necessary. You may find opportunity in places you never would have expected.TRANSCRIPT
Making More Money
Simple Strategies for Improving Cash Flow and Profitability
Making More Money
Presented to:
The Woodland Park Chamber of Commerce
May 1, 2014
J.R. Dickens
Woodland Park Research Group, LLC
© 2014 Woodland Park Research Group, LLC. All Rights Reserved.
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Put on your thinking caps
• Ideas, not answers
• After-class exercises apply to your current business situation
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Money Drives Business
• Simple concept: make more than you spend
• Reality: competition, slow growth
• More reality: seasonality, interruptions
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Getting Better
• Improvement is the key
• Improvement is a strategy with tools, not a tool to tack on to your strategy
• Opportunity is everywhere, but improvement is not spontaneous
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Three Keys
• What does it take to succeed?
• Excellence
• Integrity
• Innovation
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Excellence means...
• Doing the right thing at the right time, and doing it right the first time
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What is excellence worth?
• Errors, defects, and rework can easily consume 30% of your time and cost
• Lost opportunity can’t be measured
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Integrity means...
• Building trust by serving others
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What is integrity worth?
• Ask the question a different way:
• What will a lack of integrity cost?
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Innovation means...
• Anticipating and embracing change
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What is innovation worth?
• Ask companies that died of obsolescence
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Three Keys
• What does it take to succeed?
• Excellence
• Integrity
• Innovation
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Excellence
• Consider two areas:
• defects/errors
• speed
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Defects/Errors
• Defect is anything that fails to meet customer expectations
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Defecst/ErerRs
• Do it over again
• rework
• Catch it before the customer does
• test/inspection
• When all else fails…
• damage control© 2014 Woodland Park Research Group, LLC.
All Rights Reserved.16
Defects/Errors
• What is the cost?
• more labor
• more materials
• more time
• more capital
• lower productivity
• lost goodwill
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Defects/Errors
• Fix the process
• Prevention, not inspection
• Root cause—address the source—improve the process
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Defects/Errors
• Clue: problem always has a human source
• e.g., process design, equipment selection, maintenance, procedures, training, etc.
• Ignorance—we don’t understand the process
• Disorder is the norm—stuff doesn’t fix itself and it doesn’t want to stay fixed
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Defects/Errors
• Ideal:
• everything right the first time
• no defects/errors, no rework
• with proper control, no need for inspection
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Speed
• Speed is how quickly you generate sales from products/services
• time lag between expense and revenue
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Speed
• Timing is as critical as quality
• Right product/service at wrong time is the wrong product/service
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Speed
• “Productivity” is often the problem
• How are you measuring efficiency?
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Speed
• Typical problem:• too much
• too early
• Additional problem:• too little
• too late
• Too late is probably worse than not at all© 2014 Woodland Park Research Group, LLC.
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Speed
• Right product/service too soon:
• slows you down
• increases cost
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Speed
• Slower speed because:
• making more than you need to meet current demand
• excess goes into inventory
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Speed
• Higher cost because:
• takes more money to make more stuff
• materials, labor, etc.
• costs money to store and manage excess
• carrying cost of inventory (~25%/yr)
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Speed
• Ideal:
• right product/service at the right time
• speed/flexibility opens the door for customization
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Excellence
• Tip of the iceberg
• Conversation has revolved around product/service at the customer interface
• Same principles apply to internal processes
• e.g., HR, scheduling, production, inventory, accounting, etc.
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A Word About Value
• Value is the customer’s perception of your products/services in relation to cost
• Think in terms of the total customer experience
• Example: feeding giraffes at the zoo
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Integrity
• Success flows from people
• Customers
• Suppliers
• Employees
• Public
• In a word—relationships
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Integrity
• Relationships are built and sustained on trust
• What does it take to build/sustain trust?
• a willingness to serve the needs of others
• Relationships take time and effort
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Six Principles
• Respect• honoring authority
• Commitment• guarding relationships—confidentiality
• Charity• kindness, forgiveness
• Stewardship• caring for the property of others
• Honesty• truthfulness in all things
• Gratitude• contentment with your own circumstances
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Integrity
• Integrity is concrete, not mushy—principles never change
• Integrity is about personal character
• To be trusted, be trustworthy
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Customer Service
• Integrity applies to customer service
• Customer service is still a differentiator—most people don’t do it
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Customer Service
• Where does your business touch the customer?
• pre-sale
• point-of-sale
• post-sale
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Creating Engagement
• Make it friendly
• Gather information
• Find the customer’s “problem”
• Connect…
• …and reconnect
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What is the Message?
• Content is king
• Focus of client engagement is providing information
• Internet is the new sales funnel—where people go for answers
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Integrity
• We’ve applied integrity to customer relations
• Integrity applies to all relationships—professional and personal
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Innovation
• Innovation is about growth...
• ...and growth is not about getting bigger
• Think of the maturation process
• Growth may mean getting smaller
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Innovation
• Three premises:
• You tend to act according to your assumptions
• Your assumptions are often wrong (or incomplete)
• Opportunity hides behind wrong assumptions
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Innovation
• The key to innovation is challenging your assumptions
• Ask the right questions....
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Paradigm Paralysis is...
• The condition of not being able to see beyond your assumptions
• What are the symptoms?
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Paradigm Paralysis
• “This is the way we’ve always done it.”
• “We already have an SOP.”
• “This is a matter of company policy.”
• “No one is allowed to question that.”
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Paradigm Paralysis
• We tend to ignore or dismiss information we don’t like
• Reality doesn’t go away—so we might as well confront it
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Sacred Cows
• Sacred cow: something that no longer serves a useful purpose
• Worse: no one is allowed to question it
• Needless waste of resources
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Sacred Cows
• How to find them?
• Start from scratch—think like a beginner
• Ask, “Why?”
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Sacred Cows
• Thinking like a beginner means putting aside your assumptions
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Strategic View
• Look at your business from 10,000 feet (or 20,000 feet, if you live in WP)
• SWOT with an extra T• Strengths
• Weakness
• Opportunities
• Threats
• Trends© 2014 Woodland Park Research Group, LLC.
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SWOT/T
• Strengths—what you already do, well
• Weaknesses—what you already do, poorly
• Opportunities—what you could do, in the future
• Threats—conditions that pose an imminent danger
• Trends—the general direction of things that affect your business (good and bad)
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SWOT/T
• Helps you look inside and outside
• Helps you think strategically—where you are, where you’re going
• Reality check—not intended to be a feel-good exercise
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SWOT/T
• What do you do better than anyone else in the world?
• Differentiation
• Branding
• What can you get someone else to do for you?
• Ideal: you’re not the best, you’re the only one© 2014 Woodland Park Research Group, LLC.
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“The Paradigm Question”
• What fundamental change would put you out of business and/or turn your industry upside down?
• Don’t take success for granted—be prepared for change and/or anticipate it
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Summary
• We’ve highlighted the areas of Excellence, Integrity, and Innovation in relation to improving your financial success
• Next step: Workbook exercises• Brainstorm, prioritize, and attack
• Quantify opportunity in $$$ wherever possible
• Take ownership for change© 2014 Woodland Park Research Group, LLC.
All Rights Reserved.54
Suggested Reading
• Sacred Cows Make the Best Burgers (Kreigel)
• It’s Your Ship (Abrashoff)
• Paradigms: The Business of Discovering the Future (Barker)
• The Goal: A Process of Ongoing Improvement (Goldratt)
• The Quality Secret (Conway)
• The Seven Habits of Highly Effective People (Covey)
• The 21 Irrefutable Laws of Leadership (Maxwell)
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Woodland Park Research Group, LLC
PO Box 122, Woodland Park, Co 80866
(719) 687-4304
www.woodlandparkresearch.com
© 2014 Woodland Park Research Group, LLC. All Rights Reserved.
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