Granot Group

Saving money or Making money?

Mickey Granot — Mon, 18 Oct 2021 09:36:22 +0000

As a management consultant working with top management worldwide for many years, I constantly meet management teams that are immersed with the quest of reducing cost. It is common for top management to have a yearly goal of cost reduction and for all levels of management to be investing effort in finding ways for meeting these targets.

When I ask the top management why is it that they invest so much management attention on this matter, I usually get two types of answers:

We are constantly under pressure (from the market) to reduce our prices
We are constantly under pressure (from our share holders) to increase our profits and profitability.

I usually follow with another question – why is it that the major way for satisfying the above two needs is through cost reduction? I am not suggesting that cost savings opportunities are to be ignored, however I am wondering if there are no better ways of fighting the price pressure and increasing profits and profitability?

My personal overwhelming sensation is that focusing on cost reduction has many negatives, that outweigh dramatically the potential benefits:

Management attention is limited. Successful cost reduction initiative can at best reduce cost by no more than 100% of the organization’s cost. So, the potential benefit is limited. On the other hand growth is unlimited. So, where do you invest limited attention – at something that, at best, can deliver limited results, or at something that at best, can deliver unlimited results?
Cost reduction programs are usually planned and executed locally (meaning at a function level) and often times are blind to the dependency between the function where the cost reduction takes place and the overall performance of the organization. As a result too often the local cost reduction achievements do not result with a global performance improvement.
Cost reduction programs tend to lead to lay-offs, salary reductions, benefits trimming etc. This type of changes cannot be expected to be well accepted by employees. Thus, they provoke resistance not only to the cost cutting initiatives but to any initiative as all of them seem to be different names to the same objective.
Cost reduction programs often times call for cutting prices payed to suppliers, changing suppliers or splitting what is being purchased between a few suppliers. This type of changes cannot be expected to be well accepted by suppliers. Thus, supplier loyalty and commitment cannot be expected and as a result suppliers tend to believe that any approach to them is done with one purpose, and other type of improvement initiatives with then are treated with huge disbelief.

The evidence shows clearly that in spite of the immense effort invested in cost reduction, rarely do organization succeed in reducing their overall costs. The explanation is always – “external circumstances’ and “if we had not made this investment in cost reduction, we would not pass through these external circumstances”.

However, these are intuitive arguments and not fact driven arguments. The truth is that the cost cutting initiatives are rarely delivering bottom line results (in spite of the fact that they may deliver local results). Their biggest attributes that enables the continuous investment in this futile effort are that it is measurable and seems to be totally under control.

On the other hand building a competitive advantage that will clearly lead to the ability to continuously increase revenues, profits and profitability is much less measurable and more than that, seems to be much less under control. It is even perceived to be impossible (why do we think cost reduction is possible?). So, yes organizations do invest effort in growth but with disbelief that they stand a meaningful chance of outperforming their markets. And hence, we are back to the cost cutting initiative. If we cannot outperform our market, we must make sure our costs are as low as possible.

If we invest the same amount of effort and attention that we invest in cost cutting in the creation of a meaningful differentiation in the market I am certain (and there are a few excellent examples) companies can find ways to outperform their competition to the extent they can be confident that profits and profitability are exceptional. And now, if there are clear cost saving opportunities we “bump” into, by all means we should exploit them. But, we do not need to waste precious management attention in active pursuit of them and then business performance excellence can become a reality.

The post Saving money or Making money? appeared first on Granot Group.

Managerial Decisions making then and Today

Mickey Granot — Mon, 20 Jul 2020 07:16:20 +0000

Mickey Granot, Global Managing partner, Next-Era-Consulting

Recently I had a discussion with a group of business leaders that were exploring ways to improve the performance of their companies. I had given a presentation and following the presentation we had a talk. The discussion took off from the content of the presentation but took a “life of its own” leading what seemed to be valuable learnings to all.

The question that triggered this “deviation” was “Mickey, what is your perspective about the evolution of managerial decision-making processes for management of companies?”. Interesting question I thought, I was not sure how it came about, but I had some ideas how I can answer and still stick to the core of my presentation, or so I thought.

“Well, historically organizations exist since the beginning of times. Businesses exist for ages, and obviously all type of other organizations. Since ever, organizations had a goal, and since ever they needed to make decisions towards achieving their goal. And human nature guarantees that whatever we get, will never be enough. So, in addition organizations were always seeking to get more of whatever their goal was, and thus always engaged in searching for ways to become better, to improve. Therefore, since the dawn of times organizations needed to make decisions in two critical areas: delivering to the existing commitments and becoming better. Initially, when organizations are very small, they intuitively make good decisions, as a holistic view of the system is obvious. Then, when organizations successfully grow, more and more entities such as employees, suppliers, customers, subcontractors, investors etc., are joining the system and the holistic view of the system becomes more and more challenging until it totally disappears. However, the fact we can no longer see the system as a whole does not mean we do not need to make decisions which are good for the system as a whole. And the natural way to do that, was to break the large, obscure, and difficult to manage system into smaller, clearer and easier to manage sub-systems. Once these sub-systems are clear, we can push the decision making into these systems demanding the each one of the will optimize its performance in the two critical areas: delivering to the existing commitments and becoming better. It is true it is more manageable this way, but it has one major deficiency; it assumes that if all sub-systems perform as best as they can on both areas, than the system as a whole is performing the best as it can on both. Over and above that, some decisions could have not been made holistically, even if we wanted too, as they either demanded too much time such as deciding how much inventory to hold in each stock keeping location, or too complicated to perform such as exploding the bill of material in production.

It is not difficult to understand that these compromises are exactly that, compromises and as such not only do not lead to the system as a whole meeting its commitments in the best possible way while becoming better, but that it can easily negatively affect and the system as a whole. And I do believe, people, at least intuitively, know that. But were willing to accept these compromises as there was practically no other option.

As a result, decision making processes, tools and practices have evolved to be mostly focused on the sub-system performances and making it easier to make the decisions. And until today the managerial decision-making is based on these fundamentals. Look at things like; product pricing that assumes that the price of product is the sum of accumulated costs in producing it, resource efficiencies that assumes that if all resources are efficient the system as a whole is efficient, product grouping in supply chain and many more such examples. Did I answer your question?” I asked.

“Yes, you did.” Before he had a chance to say anything else, one of the other participants jumped in and asked “This is all very nice, but the reasons that have led to this evolution, are still here today. Even more than in the past; the organizations are larger, have more entities participating, the geographical spread is larger, the governments involvement grew as well. So, even if it is a compromise, it is still the best way to make decisions. Isn’t it?”

“I very much understand why it looks that way, and I think we need to approach answering this question in two separate parts; the first relating to the common approach of breaking the system to parts, and the second to the complexity of the decisions. Let us start with the first. Historically, the evolution of the decision-making process was done based on the assumption that the performance of the system, equals the sum of the performances of its sub-systems. As I said earlier, I do believe people, at least intuitively knew it is not the case. But we human beings we have another trait, which mostly works well for us, still at times not so well. It is the natural tendency of laziness. Our brain is designed to save energy and thus the minute we identify a solution, we tend to stop searching and stick to it.

Even historically, when it became clear that the holistic view if the system is lost, breaking the system down to sub-systems was not the only way. There was one hidden assumption that no one challenged, the assumption that it is impossible to create a holistic view for complex systems. What if this assumption is wrong to start with? What if it is possible to create such a view? And what if it is even easier to operate with such a view versus the sub-system approach? And it is possible.

If we accept that the system performance is not equal to the sum of performances of its sub-systems but rather is a result of their synchronization. It becomes easy to understand that not too many of the sub-systems govern the effectiveness of this synchronization. Which will indicate that focusing on these few sub-systems in both delivering to commitments as well as improvement will guarantee that the whole system enjoys the benefits. It also much easier than the common multi-sub-system management approach as we only need to focus on a few. This was always true, and unfortunately, we stopped searching after bumping on the first solution, and to make things worse then came cost accounting and just rooted these practices into the decision-making systems making the alternative almost impossible to see, or adopt.

As a summary for this part, it is much easier than we think to obtain a holistic view of complex systems, in fact the more complex the system is the easier it is to achieve that. The human tendency of inertia coupled with cost accounting makes the alternative until these days almost impossible.”

I was ready to move on, when I got this question from one of the participants “Why do you blame cost accounting for that?”

“Are you a cost accountant?” I asked, I could see them smile. “Cost accounting had a very important job – allowing the external world to evaluate the performance of the company in the (recent) past. The practices, tools and procedures of cost accounting were developed for that purpose. Not, for decision-making. When you freeze a system in the past, you can do whatever manipulations on the data of the system at that time. Even manipulations that have no ability to really exist in the present, such as what is the cost of providing a service to a specific customer. You can only do that about the past, and even then, some of it will be a guess. One of the things you can do when you look at the past is to answer the question – what was the total cost of operating the system at that time? And now you can take this answer and divide it with any parameter you would like to, for example, the number of units you produced. The result will be a number you would call – the cost of producing a unit. This is only relevant for the past. The big issue now, is that management take this artificial number, from the past and make present decisions about pricing, discounts, deals and product viability. Cost accounting, as it measures the past can easily prove that the system performance is the sum of sub-system performances. It is only true because of the “freeze in the past” and not because it is true. Management today is so based on cost accounting considerations, that I do see cost accounting as responsible for the fact that organizations are not only under-performing, but that their performance is totally random. And before you ask, yes there is a much saner alternative. We should leave cost accounting to do its job – provide the external world with evaluation of the company’s performance in the past and adopt alternative for decision-making. By the way, the alternative becomes pretty obvious if you accept the previous conclusion about the holistic view of the system as a whole.”

“Can you tell us something about this alternative?”

“I can. Briefly.” I said, “If we understand and agree that we have to look at the system as a whole, then it stands to reason that only system measures are important. There are a few key system measures; naturally we would like to look at sales but the truth is that the money that any company makes is not the sales, but rather sales minus what the company is paying to the external world for making these sales. So, the first system measure is the money we make equaling to the money collected from sales to the external world minus the money paid to the external world for making these sales. This measure is called Throughput. All the rest of the company’s expenses are the next global measure. Called operating expenses. Cost accounting treats this cost as variable, which is true but not as cost accounting treats it. It is not varying by the unit produced/ serviced but more in a step function. So, for some changes in quantity this cost will stay fixed. And lastly, we look at the total investment in the company. Now it is easy to make decisions, as all that is required is to ask what the effect of the decision on Throughput, operating expenses and investment will be. Knowing which few sub-systems govern the performance of the system as a whole makes this evaluation easy.”

“Let me now relate to the second aspect of the decision making, the complexity. In the past, in production companies, for example, there was a very large production-planning department. It was needed as customer tend to order fully ready finished goods and are not that interested in ordering based on the components that are used to produce it. Nor do they care about the production process, and lead times. Accordingly, this department would convert customer orders (and/or forecasted orders) to purchasing orders for raw materials, components, sub-contracting, and packages as well as to a production plan. This was a tedious mathematical procedure that needed to be done in cycles until converging into a doable plan. The mathematics were not complicated, the procedure very. So, one compromise was to make all these calculations only once a month. As a result, the minimum supply time to a customer was on month. Even when the company’s production can be completed in a day, or a week. But, to enable such a performance the production planning department would need to be so big, making its cost totally unacceptable.

This challenge had a solution the day the first MRP system appeared. As now, all these complex calculations are done by the computer, that does not make mistakes, can perform the same calculations as many times as needed, and can do it rapidly. You would expect that as a result, the performance to the market will improve. But mostly this did not happen. You know why? Because companies, after huge investments in hardware and software, ran the MRP system once a month. There are companies, that even today still run it once a month.

Similar to that, there are many other complex decisions we used to make compromises on. Basically, because there was no technology that could have done this rapidly, repeatedly, accurately. The thing is that today we have extremely capable technologies which are circumcised by coding into them the decision-making rules that were invented to cope with the fact that such systems did not exist. What do you expect the result to be?”

“Can you give us some examples?” I was asked. “Of course.” I answered, “Take for example product grouping in supply chain management. In the past a company with a large number of SKU’s and stock keeping location could have not handle the multitude of decisions needed if they had to be made for each SKU individually. So, we grouped them reducing the number of decisions to the number of groups. Today, computer systems have no problem in making the decisions for each SKU at each location individually, but we still group them – in the computer system.

In the past to decide on purchasing orders, a team of people worked on collecting and analyzing the data, making an order had a cost. To control this cost, orders were accumulated until the overall value of the order justified the cost. As a result, companies ordered infrequently, and held large inventories. Now, there is virtually no cost to making an order, but the systems continue to accumulate orders to justify the non-existing cost.

There are many other such examples. The sad thing is that we have the technology that eliminated all (or at least most) of the reasons to compromise on our decision-making, but we implement these systems while coding into them the old decision-making rules. This in effect, guarantees that the value gained out of implementing these systems is miniscule.”

“As we are running out of time let me summarize the key points: Compromises are, or at least seem to be, at time unavoidable. But we need to remember that compromises always mean that we also compromise on our goals. Managerial decision-making is sadly based on two such compromises; the compromise on the holistic view through viewing systems via their sub-systems, and the compromise on the quality of the decisions through sticking to decision-making rules that were invented to cope with the fact that we did not have technologies that can make all the necessary calculations accurately and cost-effectively.

Both compromises are not needed, the first was never needed as it is not too difficult to obtain and operate in light of a holistic view, and the second is no longer needed as the computer systems of today can easily provide the needed abilities. And shifting from compromising on your goal, to not makes all the difference.”

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Changing Value Perception

Mickey Granot — Mon, 15 Jun 2020 11:26:24 +0000

Mickey Granot, Managing Partner Next-Era Consulting

I’ve been working with a customer for a while now on an assignment designed to grow sales and profitability. It started with reorganizing the manufacturing and within a short while the company realized a meaningful jump in their performance; production lead time went down from 28 days to 10, and reliability from about 70% to consistent 100% on time delivery. Now it was time to convert this new ability to a market advantage.

A new value proposal was designed, target market identified and a rigor pipeline management process introduced resulting in a constant stream of incoming opportunities, some better than others. In parallel the sales team went through training, sales process defined and sales aids created. Still, some skepticism stayed with the sales team.

When sales meetings started, conversion rates were far from meeting expectations. Of course, this can be a result of; poorly chosen targets (did happen), inappropriate value proposition and/or inadequate execution of the sales process. Clearly the sales people would like to believe that the reason is the first and/or the second. And, of course it is not an unlikely hypothesis. Still, my natural tendency is to believe that if we did do a good analysis of the market, identified a meaningful enough problem we can solve for the market and designed a robust enough sales process it is more likely that the reason is the latter. Thus, we decided to make a test; to prepare thoroughly to a specific meeting, have a “cheat sheet” on the table (luckily the Corona situation forces video call meetings) and stick to the process at all cost so that we can validate.

And that way, on a nice Wednesday afternoon the sales person – Dan, was sitting on side of the computer and John the strategic purchaser and Linda the purchasing manager of the prospected customer on the other side. The meeting started:

Dan greeted, “Hello John and Linda, it is a pleasure to see you today and thank you for taking the time to meet us. Let me start by a quick introduction. Global Manufacturing Services – GMS is in the business of service manufacturing of processed steel products. We provide an array of services from engineering, through variety of steel processing capabilities, through painting, assembling and packaging. We’re in business for more than twenty years and have been working with some of leading companies globally. I assume you saw our presentation, or website so please allow me to ask you to make a short presentation of your business.”

Linda answered “Thank you for the introduction, Troplex is in the business of industrial equipment that we build to specific designs we make for our customers for variety of usages. We’ve been in business for more than thirty years, have a factory in Denmark and sales presence across the globe. We did review both your presentation and website and we do purchase such services today from some existing suppliers. I would like to emphasize that we are pleased with our existing suppliers and we are most likely going to consider adding another supplier only if price wise it’ll be justified”

“Thank you” Dan said, “I do understand your price consideration, nevertheless, now that we know a bit more on each other, I would like to focus on you. We have been investing a lot of time, effort and thought into trying to design a service for our customers that provides them with exceptional and surprising value and in order for us to be able to tailor it to you, I would like to ask you some questions., Would that be acceptable to you?”

“Of course,” Answered Linda

“Very good. Could you please give an estimate of your annual value of purchasing our type of services? It’ll help me in making sure I can provide you with the offering most suitable to your needs.”

“This is, clearly not information we can share, but as you asked for an estimate what I can tell you is that we purchase between €600K to €1M a year.”

“It is important for us to understand your operational model. When you purchase from your existing suppliers are you purchasing to stock, meaning that you receive products to a defined inventory target, then consume from your inventory as needed, and finally reorder when needed. Or, you only place orders upon your suppliers when you have a specific order from your own customers?”

“We do not hold inventory; our products are customized to customer needs and as such inventory is not an option for us. We place orders upon all of our suppliers in synch with the orders we get from our customers.”

“I understand that you currently are working with some suppliers in our domain, I am sure that they are good suppliers. And the questions I am going to ask are not asked in order to suggest otherwise. I am interested however to know a few things about the current services as you are experiencing them. Commonly, what is the supply lead time you are getting from your suppliers?”

“Our agreement with all of our suppliers in this area is for a four-week delivery time, plus transportation from their locations to our factory warehouse. The transportation time, obviously varies according to the location of the supplier from 1 week to 4 weeks.”

“Interestingly, our delivery times to our customers are also four weeks, and it has been our promise to the market for ever. As you already know, we have been in the business for more than twenty years, and I can say that sadly, in most of these years we did not always sand up to our four-week delivery promise. Sometimes, we delivered later, sometimes the quantity was not the full quantity and even sometimes the quality was not the quality promised. Do you ever experience such occurrences with your suppliers?”

“Of course, we do. It is life. No supplier is perfect. We accept this as an unavoidable reality. “

“it sure does seem to be unavoidable. Can we try and understand how this reality affects you?”

“What do you mean? It is definitely not positive.”

“True, but with your permission, let us try to get a grasp of to what extent it is not positive. So, for example; When a shipment due at a given date is not present at your factory on that date. How it affects your production?”

“As we plan our production in cycles of two weeks, when a shipment is not available it means we cannot execute our production plan. When this happens, we need to reschedule our production immediately, find materials we can work with or it even happens that we need to totally stop some of our production while we expedite the late shipment, or an alternative to it.”

“Interesting, let me just summarize what I understood, possible effects of a late delivery are; production rescheduling, compromising on the product using substitute materials, production stop and expediting. Is that about correct?”

“Yes, it is. Now that we talk about it, it sounds worse than we treat in day-today.”

“I think it is worse. Can I ask you to try and make a rough estimate of the financial effect of these events? I mean, it costs money, isn’t it?”

“It definitely does, I cannot estimate it all, but I do know we pay about €50K a year on expediting shipments, and that we lose about 6% of our production capacity due to stoppages and rescheduling. So, all together possibly more than €100K a year.”

“I think this is not all. When items are missing, and as you mentioned earlier you work to specific customer orders. Does it ever effect your delivery to your customers?”

“It seems you are determined to push your finger to all pain point possible, don’t you? Yes, it does happen that we deliver later to our customers as a result of late deliveries of parts and components. And it annoys them. Sometimes to the extent that we must compensate them, and even lose them.”

“And, this also has a cost, doesn’t it? What do you estimate your compensation costs to be? Lost business?”

“We pay yearly about €300K for compensation, and I cannot give any number on lost business, but I am confident it is in higher numbers than that.”

“In that case, it seems to me that on annual basis, for parts and components that you purchase for €600K to €1M, you are accumulating negative financial effects to an extent greater than €400K a year. Isn’t it?”

“It sure does seem that way. I do not think we ever looked at it this way. It does not make me happy, but I am thankful for this insight. I am not clear however, where is it leading to? If you wanted to demonstrate how difficult purchasing job can be and how frustrating, you did a good job.”

“No, no. It is not what I want. I actually want to offer you a new service that will eliminate totally this €400K a year damage. Would you be interested in that?”

“Would I? I assume you are kidding. Still, as mentioned earlier, it is fact of life. All suppliers are like that. I guess that the €400K is the cost of doing business.”

“Maybe it is. However, you might change your mind as you hear our proposal. Still, before our proposal I would like for us to agree on the criteria you should be using to evaluate not only our proposal, but anyone’s proposal for a solution. I suggest that the if there is a solution, the solution must; Eliminate all the negatives related to late deliveries, enable building the confidence, do not increase (substantially) the buying cost, and do not require any additional hassle from your hand. Does this make sense to you?”

“Yes, it does. Sounds a bit unrealistic though. I have to say.”

“I understand that. As I mentioned earlier, over the last year GMS made substantial effort to change and improve its production. We shifted our production to a new system that is totally focused, measured and aligned with our due date commitment to our customers. During this period, we have been able to demonstrate and deliver, consistently almost 100% of the orders on time. Yes, it does happen to us that we fail, but less than 1% of the time. Please take a look at our On-Time-In-Full performance graph:”

“Impressive”, Linda said.

“It is, and this is why we feel very comfortable on giving you our proposal. What we are offering you is a guaranteed 4 weeks delivery time. What does that mean? Every time you will place an order with us, the order will leave our factory exactly in four weeks from the order date.”

“I have heard this from all of my suppliers. As we already seen earlier in our discussion, life is very much different than the promise.”

“You are absolutely correct. This is exactly why, we are committing to pay a self-imposed penalty of 10% of the order value, for every day we deliver later than promised.”

“10%? You are serious? This is a heavy commitment. If you are late, you can rapidly lose money, can’t you?”

“Yes, we can. Frankly, we are so confident in our system we do not think it is likely we will need to pay. But promising is easy. Now you can be confident that when you order from us, deliveries will always arrive on time. We will do whatever it takes not to need to pay a penalty. Other than that, we do not ask you to change anything in your procedures or practices of purchasing. And clearly, we can start with a pilot order so we can demonstrate our prices, quality and impeccable service. Would you be interested to try?”

“I most definitely am interested. If you can deliver, as promised I can envision moving most of our business in this area to you. Shall I send you a first drawing to start with?”

“looking forward to it”.

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Делать больше меньшими ресурсами

Mickey Granot — Sun, 31 May 2020 07:16:53 +0000

Микки Гранот, Управляющий партнер Next Era Consulting

Неделю назад мне посчастливилось побеседовать с коммерческим директором крупного производителя продуктов питания. Компания постоянно росла как органически, так и через сделки слияний и поглощений. В результате постоянно расширялся продуктовый портфель и росло количество категорий, управляемых коммерческой службой. Объем задач коммерческой функции также постоянно рос: ввод новых продуктов, проведение рекламных кампаний, оптимизация продуктового портфеля, взаимодействие с ритейлерами, активизация продаж через альтернативные каналы (дистрибьюторы / оптовики) и многое другое.
Неудивительно, что команда коммерческой службы постоянно пребывала в стрессе, была перегруженной, недоукомплектованной и теряла контроль над ситуацией. И вдобавок ко всему у команды сформировалось стойкое ощущение того, что достижение поставленных целей становится все более невыполнимой задачей в свете агрессивной стратегии роста компании.

Когда мы начали беседу, я спросил Марка, коммерческого директора:
– Не могли бы вы определить цель коммерческой функции внутри компании? – Марк ответил:
– Продвигать продукты на рынке, повышая их доступность для потребителей.
– Говоря о “доступности продукции” что вы под этим подразумеваете, с учетом того, что вы возглавляете коммерческую организацию, а не функцию снабжения?
– Вы правы, я имею в виду не доступность на полках, а скорее разнообразие, которое предлагается конечному потребителю из всего нашего ассортимента продуктов. Возможно, стоить перефразировать цель как “увеличить разнообразие наших продуктов и категорий товаров в торговых точках”. Но такая формулировка тоже не исчерпывающая, т.к. мы также хотим увеличить долю наших категорий в общем объеме продаж ритейлера по аналогичным категориям. И я думаю, что в конце концов это нам это удастся сделать. Давайте, определим нашу цель так:

“Увеличение продаж нашей продукции за счет увеличения присутствия на рынке как “вширь”, так и “вглубь”. То есть как за счет увеличения количества магазинов с нашим присутствием, количества категорий и продуктов, так и за счет расширения нашей доли в продажах каждого магазина. И нам нужно делать это настолько эффективно, насколько возможно.”

– Теперь, когда у нас некоторая ясность относительно цели вашей системы, скажите, почему вы думаете, что вам нужна помощь?
– Потому что мы хотим развивать нашу организацию, нам важно понимать, чего мы можем достичь с текущими ресурсами, с существующими и новыми категориями. Мы не знаем, насколько эффективна наша организационная структура. И, наконец, мы чувствуем, что можем расти быстрее, но не знаем, как этого достичь.
– Насколько я понимаю, вы считаете, что что-то в текущем режиме работы блокирует вас от достижения бОльшего относительно вашей цели и не позволяет вам поддержать ожидаемое расширение портфеля продуктов. Правильно ли это?
– Да, именно так.
– И почему вы так думаете? – спросил я.
– Потому что наша операционка очень сложна, она стала результатом огромного количества процессов, которые мы выполняем, каждый из которых состоит из большого количества задач. Это умножается на количество категорий, которыми мы управляем, а затем умножается на количество каналов продаж.

Очень трудно все это контролировать, мои люди погребены под горами задач. И эти горы только продолжают расти. В результате коммерсанты часто вынуждены работать на выходных и праздниках, плодят массу переработок, пытаясь не отставать и выполнять в срок поставленные задачи. Не всегда при этом успешно, должен признать.

– Понял – сказал я. – Итак, вы хотите сказать, что если будет найден какой-либо способ улучшить работу сотрудников коммерческой функции, то, с учетом этой трехмерной сложности – процессов, категорий и каналов продаж – вы сможете достичь бОльшего относительно своей цели? Получить больше продаж, больше точек присутствия, большее разнообразие продукции в каждом магазине и больше объемов продаж на каждый магазин. Правильно?
– Однозначно.
– Учитывая уверенность, с которой вы это утверждаете, могу ли я попросить вас оценить, как повлияет на вашу цель, если команда найдет способ стать более продуктивной?
– Трудно ответить точно. Но я уверен, что возврат на усилия будет мощным. Имею в виду, что на каждый один процент дополнительной производительности моей команды, мы будем давать эффект по достижению нашей цели гораздо бОльший, чем один процент.
– В таком случае, – сказал я, – что, если бы вы могли увеличить их производительность более чем на 30%?
– Я не верю, что это возможно без соответствующего добавления людей в команду. – отозвался Марк.
– Вы считаете, что люди работают настолько эффективно, что внутренние возможности для повышения производительности невелики? Я помню, мы начали нашу беседу с того, что вы указали на сильное общее ощущение, что работа выстроена неэффективно. Давайте, попробуем понять масштаб этой неэффективности. Для этого нам нужно ответить еще на несколько вопросов, если вы не возражаете.
– Да, давайте, даже 5%-ное улучшение будет хорошим результатом.
– Вы упомянули, что существует большое количество процессов, состоящих из множества различных задач, выполняемых командой коммерческого департамента. Объясните, пожалуйста, как структурирована их работа: все ли задачи (или большая часть задач) в процессе выполняются одним и тем же ресурсом, или же задачи процесса выполняются разными ресурсами, и процесс переходит от одного сотрудника к другому?
– Второй вариант, – сказал Марк, – все наши процессы вовлекают различные типы ресурсов, и работа переходит от одного специалиста к другому, пока не доберется до полевых торговых представителей.
– Хорошо – сказал я, – учитывая этот поток задач, есть ли какой-то один тип ресурсов, специалистов, где работа имеет тенденцию застревать в бОльших объемах и на более длительное время по сравнению с другими?
– Да, конечно, тут все известно. Работа, как правило, застревает у команды маркетинга и полевых торговых представителей.
– Про торговых представителей понятно, они, как вы упомянули, находятся в конце процесса. Поэтому вполне понятно, что все задержки по задачам всего процесса накапливаются у них, как у находящихся в самом конце цепочки. Я предположу, что команда маркетинга находится где-то в середине процесса, правильно? – уточнил я.
– Да, в целом, это так, – ответил Марк.
– Тогда, давайте, посмотрим на этот ресурс. Скажите, пожалуйста, если подсчитать количество задач во всех процессах, то сколько одновременных задач выполняет каждый ресурс?
– От двадцати до тридцати задач. Примерно так. – ответил Марк.
– Когда начинается новый процесс, является ли нормой начинать работать над ним немедленно?
– Конечно, – сказал Марк. – Правда, несмотря на это, у нас сохраняется тенденция заканчивать процессы в последнюю минуту, а то и позже.
– Вы когда-либо слышали от ваших сотрудников, что, несмотря на все свои переработки и авралы, они чувствуют, что в конце дня почти ничего не успели сделать?
– «Когда-либо»? – Марк улыбнулся, – я каждый день слышу что-то подобное.
– Как часто ресурсы вашего департамента оказываются в ситуациях, когда они вынуждены перескакивают с одной задачи, над которой работают и еще не завершили, на другую, а затем снова, по кругу?

– Постоянно. Постоянное переключение между заданиями стало нашей нормой. Приоритеты постоянно меняются, и нам приходится подстраиваться.

– То есть кто-то работает над задачей, останавливается, чтобы заняться другой задачей и через некоторое время возвращается к первой задаче. Это означает, что сотрудник какое-то время поработал над заданием, потом сделал перерыв, а потом вернулся, чтобы продолжить работу. Вы видите, что произошло с длительностью задачи в результате? – Короткая минута молчания, после которой Марк ответил:
– Продолжительность выполнения задач увеличится на время перерыва.
– А если перерывов будет больше одного, то длительность выполнения задач растягивается на сумму длительности всех перерывов, не так ли?
– Да, конечно, – ответил Марк с некоторой грустью в голосе.
– Вы упомянули, что процессы состоят из задач, выполняемых разными ресурсами. Каково влияние удлинения сроков выполнения задач на ресурсы, которые работают после других по цепочке?
– Очевидно, что они не могут начать выполнять свои задачи. Они будут испытывать задержки.
– Совершенно верно, – сказал я, – но это еще не вся история. Если бы это была просто задержка, вы бы увидели, что многие другие ресурсы время от времени бездействуют. Часто ли вы видите, чтобы ваши люди слонялись совсем без дела?
– Точно нет, все наши ресурсы очень перегружены. – в голосе Марка зазвучала надежда.
– Если задачи предшественника существенно задерживаются, то почему другие ресурсы не ждут? – спросил я. – Над чем же они тогда работают? – Марк, немного подумав, ответил:
– Они берут себе работу из перечня других заданий, так как все понимают, что, в целом, работы очень много. Это ведь адекватная практика, разве нет?
– Ну что ж, давайте, подумаем, – сказал я, – они берут работу из других заданий и начинают работать над ней, а потом прилетает отложенная ранее задача. Что они в этой ситуации сделают? – Голос Марка снова погрустнел:
– Они прекратят выполнение текущей задачи и перейдут к отложенной задаче. Это означает, что продолжительность их работы также удлиняется.
– Именно так. – сказал я, – И история на этом еще не заканчивается.
– Когда ресурс перестает работать над задачей и возвращается к ней через некоторое время, может ли он немедленно вернуться к той же самой производительности, которая была у него на момент, когда он бросил эту задачу?
– Черт… – сказал Марк. – Конечно, нет, им потребуется какое-то время, чтобы собраться с мыслями и вспомнить на чем они остановились. Т.е, не только время задачи удлиняется, но и производительность снижается, и удлинение времени выполнения задачи теперь будет больше, чем сумма длительности всех перерывов.
– Вы совершенно правы, – сказал я, – снижение производительности очень существенное, так как количество неправильно используемых ресурсов огромно. Что вы думаете сейчас о повышении производительности труда текущей команды на 30%? – Спросил я его.
– Неожиданным образом теперь мне это кажется вполне возможным. – Ответил Марк.
– Есть идеи с чего следует начать? – спросил я.
– Понятия не имею” – ответил Марк.
– Давайте, продолжим наши рассуждения. – предложил я. – Мы говорили про маркетинг. У каждого сотрудника отдела маркетинга есть большой объем своей работы, которую нужно выполнить. Откуда приходит эта работа?
– Это с подвохом вопрос? – спросил Марк. – Она приходит от ресурса, выполняющего предыдущее задание. Разве это не очевидно?”
– А откуда те ресурсы берут свои задачи?
– Вижу, к чему вы клоните, – сказал Марк. – Это приведет нас к началу цепочки, к самому первому шагу каждого процесса.
– Вы совершенно правы, – сказал я,

– а этот первый шаг процесса следует практике, о которой вы упоминали ранее – начинать любой новый процесс как можно скорее. Видите ли вы теперь последствия подобной практики?

– Теперь вижу, – признался Марк, – это проталкивает несвоевременную работу в процесс, что приводит к ее накоплению во всей системе и создает груды такой работы…
– Точно, – сказал я, – и первое, что вам потребуется – это начать контролировать подобные вбросы заданий. Контролировать так, чтобы поток задач шел плавно, и чтобы вовремя предотвращались накопления работ.
– Разумно, и как это сделать? – спросил Марк.
– Ну, это не слишком сложно, – ответил я, – как часто бывает, конечно, дьявол кроется в деталях – ответил я. – Лучшим способом пойти дальше будет собрать команду и вместе с ними проверить каждое из сделанных нами предположений, погрузиться в детали, разработать решение и план его реализации и внедрить разработанное решение.
– Звучит разумно, – сказал Марк, – предлагаю провести еще одну встречу, чтобы полностью понять процесс и подходы”.
– Конечно, – ответил я.

The post Делать больше меньшими ресурсами appeared first on Granot Group.

Do more with less

Mickey Granot — Wed, 20 May 2020 13:39:10 +0000

Mickey Granot, Managing Partner Next-Era Consulting

A week ago, I had the privilege to chat with a commercial director of a large food producer. The company experienced a continuous growth both organic and through M&A’s. As a result, there is a constant growth in their product portfolio, and categories managed by the commercial team. The complexity of the situation increases when taking into account the multitude of tasks, a food producer, that is selling to retailer, needs to execute; introduction of new products, promotion campaigns, product portfolio enhancement, shop spread enhancement, accelerating growth through alternative channels (distributors/ wholesalers) and many more.

No wonder that the commercial team feels stressed, overloaded, under staffed, and losing control. And worse, feeling that meeting the goals is a challenge that is highly likely to be growing substantially in light of the aggressive growth strategy of the company.

As we started, I asked Mark, the commercial director, “Can you please define the goal of the commercial organization within the company?”
Mark answered “Place products in the market increasing their availability to the consumers”. “When you talk about availability, it is my understanding that you are heading the commercial organization, not the supply chain one. So, what do you mean by availability?”
“You are correct, I do not mean the on-shelf availability, but rather the variety that is offered to the end consumer, out of our total variety of products. Maybe a better way to verbalize the goal would be to increase the variety of our products and product categories within retail outlets. But, when I say this it is clearly partial, as we also want to increase our share of existing categories out of the retailer’s sales of that category. Well, at the end I think we can

Define our goal as:

Increasing sales of our products through increasing our presence in the market in terms of number of retail outlets, categories and products, and share. And, we need to be able to do it as efficiently as we possibly can.”

“Now that we have some clarity about the goal of your system, I am curious. Why were you interested in speaking with me? Why do you think you need help?”
“Because we want to develop our organization, understand what we can achieve with our existing capacity and existing categories and with the expected additional categories. We are not clear at how efficient is our organizational structure. And lastly, we feel we can grow faster, but are not clear at how to achieve that.”

“I understand that what you are actually saying is that you believe that something in the current mode you’re working blocks you from getting more of your goal, and challenges your ability to support the anticipated increase in product portfolio. Is this correct?”
“Yes, exactly.” “And, why do you think that?” I asked. “Because we have an incredibly high complexity in our operations. Complexity that is a result of the huge number of processes we execute, each one made of multitude of tasks. This is multiplied by the number of categories we manage and then again by the number of sales channels.

It is very difficult to keep control with this complexity, and our people are buried under mountains of tasks. And these mountains keep growing. As a result, people here work endlessly, tons of extra hours, weekends and holidays trying to keep up and complete the tasks.

Not always successfully, I must admit.”

“I understand.” I said. “So, what you are saying is that if there is a way to improve the work of the people in the commercial organization, in light of this three-dimensional complexity (processes, categories and channels) you will be able to achieve more of your goal? More sales, more stores, greater variety per store and higher shares. Correct?”
“No doubt about it.”
“With this confidence that you state, can I ask you to estimate, what would be the effect on your goal if the team finds a better way to become more productive?”
“That is difficult to respond. But I am certain that the effects are meaningfully disproportional. What I mean is that for every one percent of additional productivity the effect on each and every measure of our goal is by far greater than one percent.”

“In that case,” I said, “What if you could increase their productivity by more than 30%?”
“I do not believe this is possible without adding resources to the team”. Mark responded. “Do you believe that the resources work so effectively that the additional productivity opportunity is much smaller than that? I mean, we started our discussion by you indicating the overwhelming sensation of everyone, that the work is very inefficient. In that case, let’s try to understand how inefficient it is. For that we need a few more questions, if you don’t’ mind?”
“Go ahead, even 5% improvement is worthwhile the investment.”

“You mentioned that there are many processes, made out of many different tasks executed by your team. It is interesting to understand how is the work structured; is it that all (most) of the tasks in a process executed by the same resource, or is it that tasks in a process are executed by different resources and the process progresses from one resource type to the next?”
“The latter” Mark said, “All of our processes involve different types of resources and the work does progress from one type of skill to another until it gets to the field sales representatives.”
“Good” I said. “considering this flow of work is there any one type of resource, or skill where the work tends to get stuck in higher volumes and for longer times in comparison to other types?”
“Obviously, and easy to answer. Work tends to get stuck with our customer marketing teams and field sales representatives.”
“I already know that the sales representatives are at the end of the processes, and therefore it is reasonable that all delays accumulate into their work. I assume that customer marketing is somewhere in the middle of the process, is it correct?” I asked.
“Yes, mostly it is” Mark answered.

“Let us look at this resource, then. If you count the number of tasks, across all processes, what is the range of number of simultaneous tasks each resource has?”
“Twenty to thirty tasks. This would be my estimate.” Said Mark .
“When a new process is initiated, is the common practice to start working on it immediately?”
“Of course,” said Mark . “As it is, we tend to end processes at the last minute, and even later.”
“Have you ever heard any of your resources saying that in spite of working all of these long hours, they feel that at the end of the day, they have barely achieved anything?”
“Have I ever” Mark smiled “every day”.
“How common do you think that the resources in this department find themselves in a situation of jumping from one task they are working on, and still did not complete, to another, and then again?”

“All the time. Shifting between tasks is the work norm here. Priorities keep changing and we need to adjust.”

“When someone working on a task needs to stop it, move to another, and return after some time to the same task. It means they have worked for some time on the task, then took a break, then came back to continue. Can you see what happened to the task duration as a result?” A short silent minute after which Mark said
“I can see, the task duration is longer by the length of the break.”
“And if there is more than one break, it becomes longer by the sum of the times of all breaks, isn’t it?”
“indeed, it does” answered Mark , with some sadness in his voice.
“You mentioned that processes are made out of tasks, executed by different resources. What is the effect of the longer task durations on the resources that are supposed to be working immediately after?”
“Clearly, they cannot start. They experience a delay.”
“Absolutely,” I said “But this is not the whole story. If it was just the delay, you would see, many of the other resources, from time to time, sitting idle. Doing nothing. Is it common?”
“Not at all, our resources are very overloaded, all of them.” There was some hope in Mark ’s voice now.
“If the predecessor tasks are meaningfully delayed, how come the other resources are not waiting? I asked “What are they working on?” Mark took some time to think and then responded
“They pull work from other sources, as they know that there is so much to do. It is good no?”
“Well, let’s think” I said, “If they pull work, and start working on it, and then the delayed task arrives. What would they do then?” The sadness returned to Mark ’s voice
“They will stop the task and move to the delayed one. That means that their task durations elongate as well.”
“Very true.’ I said. “And still, this is not the whole story.”

“When a resource stops working on a task, and returns to it sometime after. Can he return immediately to the exact same productivity he had at the time he left it?”
“Oh my god,” said Mark

“of course not, it’ll take them some time to pick up again. So, not only the duration elongates, the productivity is reduced and the time elongation will be longer than the break.”

“You are very correct” I said, “This is by far worse as the amount of capacity being misused is enormous. What do you think now about a 30% productivity improvement?” I asked,
“Suddenly it seems quite reasonable.” Answered Martin.

“Can you guess where all of this starts?” I asked.
“No clue” Mark answered. “Let’s follow the track.” I said, “Let’s start at the end. Customer Marketing people each have a big pile of work to be executed at the same time. Where is this work coming from?”
“Is this a trick question?” Mark asked “It comes from the resources executing the predecessor tasks. Isn’t it obvious?”
“And where do these resources get their tasks from?”
“I see where you’re going with it” Mark said. It will lead us to the first step of each process.”
“You are correct” I said,

…and this specific step, follows a practice you mentioned earlier – start any new process as soon as possible. Can you see the effects of this practice?”

“Now I can” Mark responded, “It pushes work into the system and allow it to accumulate and to create these piles of work”.
“Absolutely” I said, “and the direction of the solution you need is to control this release so that it allows smooth flow of work, and prevents the accumulation.”

“But how do you do that?” asked Mark .
“Well, it is not too complicated.” I responded, “But the details are critical. The best way forward will be to assemble your team and together to validate our assumption, understand the details, design the solution and its implementation plan, and then implement.”
“This sounds very reasonable to me” Mark said, “Can we have another meeting to fully understand and agree on the process” “Of course” I responded.

Would like to explore such a discussion for your organization?

The post Do more with less appeared first on Granot Group.

Realize and sustain Exceptional Performance

Mickey Granot — Mon, 20 Apr 2020 11:27:31 +0000

The Corona virus has brought the world economy to an almost complete stop. The result has been fatal to many businesses and many others are still struggling and may find themselves on the verge of bankruptcy. For many of these businesses, effectively navigating the turbulent crisis period is likely to enable them to survive the crisis.

Surviving is not enough. The crisis will end, and at that day surviving businesses may find themselves in an even bigger challenge; the challenge of returning to normal mode of operations. Those who lost too much during the crisis will still face the risk of bankruptcy. More than that, the crisis is affecting markets in a dramatic way, and in the day after there will be ample growth opportunities both in terms of market as well as in terms of capacities. Those that will survive the crisis and will be prepared will be able to exploit these opportunities.

It is therefore critical for businesses to effectively use the crisis period to guarantee survival and at the same time the ability to rapidly exploit the business opportunities of the “day after” leading to rapid growth in sales and profits. This is achieved through the design of the “day after sustainable-growth strategy” and executing all the preparatory actions that will guarantee the company can execute, rapidly immediately in the “day after.

If there is one lesson to learn from the Corona virus crisis; it is that businesses are extremely fragile. To be ready for the next crisis it is imperative that businesses do whatever is necessary to immunize their future, to strengthen the company’s endurance to future crisis. This is achieved through creating and sustaining business performance buffers (sales growth rate, profitability and cash).

We can help you convert the crisis to your prosperity and anti-fragility opportunity. Contact us today for more information. The time for action is now, tomorrow may be too late.

The post Realize and sustain Exceptional Performance appeared first on Granot Group.

From Crisis to Growth

Mickey Granot — Thu, 16 Apr 2020 16:36:49 +0000

The Corona virus business crisis results with many businesses, globally facing a survival threatening reality; some are facing a total stop of their business while many others are experiencing a sharp decline in their revenues. The longer the situation continues, the more severe will the impact on businesses be.

As painful as the situation may be, this is also a perfect time to think, act now to improve immediate survivability, be ready for the “day after” and make sure the company has a clear plan how to be ready for the next crisis, as it is quite obvious now that the next crisis will come.

Naturally, at times when revenues decline businesses direct their attention to costs, in the effort of spending as little as possible during this period hoping that the period will end quickly and that cash will suffice to prevent bankruptcy. For many, these measures have already proven to be insufficient and for many others it’ll end in a similar way.

One thing, any surviving business should learn from this reality is the importance of building and sustaining business performance buffers, and particularly sufficiently large cash buffer. It is clear today, that the net Corona virus is just a matter of time, and the only way businesses can be prepared to survive the next crisis is by having these buffers.

However, in the short term, there is, for many businesses an alternative way to the one most take. A way that may help them pass the crisis smoother and more importantly be ready to get out of the crisis into a rapid growth that will eventually lead to the creation of these buffers.

The crisis enhances and emphasizes a very common business behavior – focus on cost. This behavior is wrong in regular days and may turn out to be detrimental during these crisis days. The return on management attention is always by far greater when focused at revenue generation. It is much more critical these days. The world economy has slowed down, but did not stop. There are consumers and businesses that still operate and buy. The first question, leadership should ask these days is; What capabilities we possess that currently have demand, and that it is highly likely that this demand is not well served?

This is a different question than a company should normally try to respond and it calls for the flexibility of mind to realize that the opportunities exist in markets that are meaningfully different than the strategic markets the company operates in. A good example is car producers that started producing Medical ventilators. This is a true test to “out of the box” thinking, that opens the door to rapid opportunities of revenues.

When revenues options are identified, the company can then ask itself what are the costs that must be kept (or even increased) to enable capitalizing on these new opportunities, and what costs can be reduced. This will ensure that cost reduction does not also cut the opportunity to generate revenues, and will allow best alignment between the company’s ability to make money and the company’s expenditure.

The above two actions take care of the short-term need, however focusing only on them may put the future at risk. The new business opportunities do not necessarily fit the long-term strategy and the cost cautiousness may limit the capacities and skills required to service the strategic market. Moreover, the crisis does create new growth opportunities in at least two major frontiers and those that will be ready to act fast about these opportunities will win them.

Therefore, it is imperative to devote time and attention now to getting ready for the “day after”. This requires that the company makes a serious investment in understanding the possible ways that the markets and demands are going to change. And they are going to change, for various and clear reasons, such as; the increase in unemployment, the cost reduction and the anticipated increases in taxes will lead to lower consumption, the fear of the next crisis will lead people to be more cautious about their expenditure, the changes in international transportation, in the hotel and restaurant industries and more. All will affect the buyer behaviors. Companies need to understand how does these changes going to affect their markets, their demands and accordingly their strategies.

Based on the modifications to their strategies of growth companies will need to plan and execute a sequence of activities that will advance their sales cycles as much as possible, so that as soon as the green light to return to business in lit, the cycle time for closure is as short as possible. In accordance, companies will also need to plan ramping up capacities to support the sales growth.

AS a meaningful contributor to this growth plan, one of the sad, yet unavoidable effect of the corona virus is bankruptcies. Some of your competition is not going to survive the crisis. Identifying these companies and being ready to acquire them opens the road for acquisition of both markets and capacities at virtually almost no cost at all.

We are in a crisis period, which is also an opportunity period. As always, those that identify the opportunity and prudently work towards capitalizing on it will gain the most. Do not stay behind and wait so you do not lose this opportunity.

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Are the measures taken to battle COVID-19 leading to a much bigger Crisis?

Mickey Granot — Fri, 03 Apr 2020 18:24:43 +0000

What if the measures taken to handle the corona virus outbreak result with a much bigger crisis? One that it’ll take years to recover from and with an insurmountable cost. If leaders will continue with the current measures, and won’t change now, we may find ourselves in the day after fighting for survival.

What is done now? Why?

The direction of the solution predominantly is isolation; countries close borders, people are forced to stay at home with all the unavoidable social and economic consequences. There are two key reasons for that:

The belief that the virus is contagious and spreads exponentially, and
The belief that the mortality and gravity of effect on health rates are extreme

What if one of these assumptions is erroneous? What if the rates are actually significantly lower than believed?

If we accept that the actual number of infected people is by far greater than the number of infected people that we know about, then it will lead to the unavoidable conclusion that the rates of gravity and mortality are significantly lower than believed. The current estimates are that the actual number of infected people is about 100 times greater than the number known, which means that the actual rates of severity are 100 times smaller than the ones believed. Isn’t that placing a huge question mark above the isolation measures? Is it not indicating that we are hysterically overreacting?

And if this is not enough to place a huge question mark above the measures taken, and even if some prefer to be “cautious now rather than sorry after” then it is critical to understand that as much as isolation and lock down seem to be the most effective measures to slow down (as obviously it does not prevent) the rate of the virus spread, the social and financial effects are rapidly growing to unprecedented and ground shaking levels that pose dramatic threat on people, countries, and the economies.

The Vicious Cycles

There are a few vicious cycles feeding one into the other and continuously increasing the accumulated negatives;

The individual Vicious Cycle

On the individual front, people locked at home cannot earn money, they consume their savings and/or use credit and loans. The longer the lock-down continues the less cash reserves, or the more debt people will have. When the day comes to return to “normal” many people will not have jobs, and we will not have the same consumption power we used to have. As consumption is the key engine for economic growth, a meaningful economic slowdown is expected.

The Business Vicious Cycle

On the businesses front, the situation is similar. Downsized/ stopped businesses cannot make money. The problem is, that many of the businesses do not have cash reserves and cannot consume too much additional credit. Many businesses will just not exist on the other side of the Corona virus crisis, others will be struggling seriously and of those, there will be a second wave of bankruptcies. Those businesses that will survive, will find themselves without capacity (having fired so many people during the virus crisis) and with meaningful challenge in rebuilding their capacities. The combination of reduced consumption and lower capacities of businesses will further enhance the economic slowdown.

The Government Vicious Cycle

As far as governments are concerned, they are already dedicating immense (unplanned) budgets to handle the current lock-down, and when the situation ends, they will need to invest heavily in incentivizing regrowth of their economy. However, where would governments get the money for that? How will they cover these budget holes? The only government source of income is taxes (and most governments do not have too high cash reserves, and if they do are keen in keeping them in a sufficient level). They will have to increase taxes, which will immediately counter the desired results and add fuel to the slowdown fire as people ability to earn, even after the crisis will be kept low. Refueling the individual vicious cycle, and business vicious cycle, that in turn will further fuel the government vicious cycle.

The longer these isolation measures are continued the longer will these vicious cycles continue after the end of the COVID-19 crisis.

Isolation/ Collaboration

The isolation increases the sense of – “Every man for himself”, so these cycles will hit at varying strengths different countries. However, if there is one thing the Corona Virus is teaching us loud and clear is that the virus does not respect borders, does not care about religion, does not consider wealth, talent, hierarchy etc. It affects all and everywhere. This critical learning, needs to be translated to the realization that the best chance we have to fight back is by enhanced cooperation between countries. Enhance Collaboration, the opposite of the isolation trend.

The Key Solution Element

In management the key “secret” to success is focusing – knowing what to do, and no less important what not to do. It is therefore critical to find the focus point and make sure everything else is done in accordance. The key focus now should be to solve the virus situation rapidly – have a cure/immunization; it must be the key focus of everyone. It is commonly accepted by everyone, as can be read and heard in any news bulletin, that no one can foresee when will the current measure allow the return to regular life conditions. Estimates vary from weeks to months, or more. An international collaboration, dedicating budgets, resources and means is required to quickly find an immunization/ cure to the Corona virus. This cooperation, must be kept thereafter as such threats are not unlikely to occur again in the future.

Immediate Changes Required

The isolation must be stopped immediately, it is clearly not effective. Focused tests to risk populations is what is required, with measures to avoid massive gatherings.

Protecting health care staff and means of taking effective care of those infected and again, both of these will be much more effectively realized through global collaboration.

In addition, governments need to reduce the tax load on individuals and businesses right now, to enable a smoother cross through the virus period and reduce the cash needed during the lock-down/ slow-down period.

This concept is applicable to businesses as well. Too many businesses are laying off/ sending to indefinite payless vacation employees to cut their cost expenditures. It’ll be wiser to have an overall salary cut. By that people will be able to continue and sustain themselves now (with less government funds). This will also allow business to effectively reduce cost now, and sustain recovery capabilities for the day after the virus.

It is high time for bold leadership, locally at the countries level and globally.

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3 Signs that your business is Fragile

Mickey Granot — Wed, 01 Jan 2020 10:12:18 +0000

We, people, have a innate quality that brings us to ignore the fact that we are mortal. We live with that, and not just accept it, but mostly live as if it can never happen to us. This is a quality, because it allows us to live our lives without being preoccupied with that fact and thus not losing attention to what we cannot (most likely) change. However, it is also a deficiency as it also leads to ignoring signals that may indicate we are getting closer to that end faster than we would have anticipated and not too rarely when we react to these signals the required intervention is radical, and may not be as effective. Even though we live as if we are immortal, we are still mortal.

One critical way we have developed over the years to allow us to feel even more confident in living this way is immunization. We use immunization to equip our body with the mechanism to protect us from serious diseases and enhance our health and endurance.

It turns out, we carry this behavior not only in regards to our personal life but also to our social life whether it is in our business, family or society. In the business world we run our businesses as if they’ll exist forever and as if bankruptcy cannot happen to us. Again, quality as well as deficiency. In physical health it is somewhat easier to see/ feel the signs in comparison to the social health. But the fact we may not easily see/ feel the signs does not mean the signs are not there. Similar to our bodies, if we fail to acknowledge these signs and react too late to them, the intervention required is radical and may not suffice to save us.

Like with our body, our business is exposed to attacks coming from the external environment that weaken our business immunization system and exposes it to health deterioration. These “attacks” are a result of decision and actions taken by other entities (such as: government, competitors, tax authorities, suppliers, customers, social organizations, unions etc.) that have a meaningful effect on the business. Every such attack affects the business immunity system, sometimes positively and at other times negatively. Eventually the business ability to take advantage of the positive effects, and absorb the negative ones is dependent on how well is the business immunized.

And similar to our bodies, immunization is the answer. We need to inject into our businesses the mechanisms that will protect the business from serious diseases and enhance the business health. But, before we talk about the immunization, let’s identify the signs that indicate our business is not as healthy as we thought it is.

How would we assess the immunity of our business? There are three indicators for that:

The business top line rate of growth – if your business rate of top line growth is equal to, or lower than the average of your market (on an ongoing basis, not one quarter/one year), your business immunity is weak.
The business Profitability – If your business profitability (net profit divided by sales) is equal to, or lower than the average of your market (on ongoing basis), your business immunity is weak.
The Free Cash – If your free cash is less than 6 months of operating expenses, your business immunity is weak.

And if all of the above co-exist, your business is fragile and subject to severe risk to its survival. Ignoring that, is similar to ignoring that your white blood cell count is extremely low. When all the three signals, indicate low immunity you need to immunize the future of your company, urgently.

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The Fallacy Of Business Opportunities

Mickey Granot — Sat, 21 Dec 2019 18:12:15 +0000

Companies, and their leaders are constantly engaged with two challenging tasks – grow the top line, do it profitably. To achieve the first one companies try and have in their possession products and services that they can offer to their market that answer the market needs, or even anticipate needs to be answered, they then try to target the geographies where these products and/or services are going to be offered (normally wherever they currently operate and in addition new desired geographies), they then prices their products and/or services trying to not deteriorate the attractiveness of the product/ service and still leave some decent margin.

On the other side, companies try to have their costs as low as they can, to enhance the probability that at the end of the day, the level of profitability will be good enough. They try to find supply sources that are cheaper, to subcontract parts of the work that others can do cheaper, to enhance efficiencies so that more work can be done with lower costs.

Those two streams of investment, cost, effort and management attention are demanding and consuming. So, wouldn’t it be a good idea to try and make the utmost effort to not wast significant portions of that?

The business of a company, can be looked at as a funnel; from the entry side we pour into the funnel business opportunities converted to customer orders and at the exit side of the funnel we collect the revenues from our customers. This analogy can be used to understand one basic rule of funnel flow – Garbage In Garbage Out (GIGO). If you allow entry into the funnel of bad business opportunities the effects on generating profitable revenues is negative.

So, what are bad business opportunities? How do they affect the business? and, of course, can we do anything about it?

It seems that the moment companies have defined sell-able products and/or services they commonly operate (de-facto) on the basis of the assumption that anyone willing to buy the product and/or service at plus, or minus the desired price point is a good business opportunity. Accordingly, anyone willing to place an order with the company, commonly the order will be accepted (and even celebrated and rewarded). But more often than not, the opportunity is not really that good, and quite likely it is even really bad.

A bad opportunity is one that consumes resources on the expense of better opportunities, piles obstacles on the delivery system, absorb management attention, negatively affects the ability of the company to service well the better opportunities, and at the end lives both the bad opportunity customer as well as the better ones dissatisfied. This happens, when the “bad” opportunity does not fit the company’s business strategy. For example, when companies have a strategy that calls for long term relationships with customers, opportunities that cannot be long term, are bad. Or, when a company has a strategy for relationships with customers that can buy large volumes for some meaningful time, any opportunity that is low volume, short term is bad. What normally happens, is that sales people (wanting to get their commission) would normally present the bad opportunities as opportunities that have a potential of becoming good in the future. I urge you to check your statistics and observe: How many of the bad opportunities did turn into good ones, ever? And how many of the good opportunities you lost, as your service levels were unacceptable? I am quite confident you will be surprised.

It all starts with the opportunities companies allow into their pipeline. GIGO. It is not too difficult to prevent it and the negatives of those bad opportunities are insurmountable and grossly underestimated. What you need to do, is to have clear definition of the criteria for a good opportunity and the discipline not to allow any other opportunity into your pipeline. It is a simple as that, sadly though simple does not mean easy. It is much easier to fall for the fallacy of the opportunity promise and shut the eyes to the fact that what started as a bad opportunity almost never turns into a good one.

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