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The Nasty Clog Preventing Growth

Illustrations by Karl Krieg, Creative Director, The Business Lab

What Happens When Your Focus Is The Constraint?

A constraint is that thing that limits you from getting more of what you want. 

If you can increase sales by 20, 40, 60%, and not “break” your system, then your constraint is “more sales.” If you can’t keep up with the sales you have, then your constraint is internal – “more capacity.” 

If something is limiting you from getting more of what you want, there is a specific way in which it is limiting you. It makes sense that you’d want to figure out how to remove that limitation. 

Let’s assume you are a manufacturer and can increase sales rather significantly without breaking your system. This also assumes that the market you are in has enough sales to go after. If you “own” the market (80%+ market penetration), then you’ll need to find a new segment (a topic all its own). Note of caution: never risk your core business! 

Here’s what we know about increasing sales.

You can’t ship a part until it’s packaged.

You can’t package a part until it’s manufactured.

You can’t manufacture a part until someone needs it.

You can’t satisfy a need until someone knows about you & believes you can fulfill their need.

Yep, still true – this hasn’t changed…  “nothing happens until something is sold (and paid for!).”

So, what has changed?

The way things are bought.

Products and services are no longer sold; they are bought. While the underlying meaning is the same, the above truth has become “nothing happens until someone buys something.”

This is a subtle but fundamental shift.

Back in the day, customers needed salespeople to get the information necessary for the right decision.

Is this true today?

No, no, it is not.

Why?

Because 72% of all B2B buyers or influencers are under the age of 45.

Okay, it’s not their age that’s driving the change. It’s the fact that they grew up with the Internet and having all the information they need readily available… only a click or two away. 

Why does this matter?

Because buyers can, and indeed are, by-passing your sales teams and, in many cases, your marketing efforts.

Seventy percent of B2B buyers fully define their needs on their own before engaging with a sales rep. Forty-four percent have already identified the specific solutions (a.k.a. companies they are going to contact) before reaching out to that handful of sellers. 

A full 60% of the buying process is complete before the selected sellers even know there is a sale to be had.

How many selected sellers get a chance?

Not many. No B2B buyer is going to spend their precious time vetting every company out there. So maybe they research two, maybe three? Or perhaps only one!

Today’s digital empowerment = impatience. Buyers want what they want and need now! The time between research and purchase is getting shorter. Sixty percent of buyers of industrial manufacturing products, who have been informed online, purchase on the first visit… to that one company they chose to visit. This is even more true for buyers of industrial supply products (79%) and buyers of pack-and-ship products (70%).

Is this new customer acquisition supply chain a problem?

No, not unless:

  • You were unable to get the buyer, without any contact from you, to select themself as a prospect, or 
  • They couldn’t easily, and without connection with you, find what they needed from you, or 
  • Without even contacting you, they didn’t believe you could solve their specific problem, or
  • You blew the opportunity in some way once they finally did contact you

And, of course, if the customer doesn’t perceive the value received to be greater than the price paid, they will not be a happy customer. 

Isn’t there some whiz-bang technology out there that will fix this problem and make sure we are the first to be contacted by a prospect?

Well, there seems to be no end to the explosion of marketing technology, content writing, Instagram snapping, easy-access digital advertising, and analytics going on. 

But, like a lot of data, it turns out to be just data. We’re willing to bet you already have a lot of data sitting around. Data, whose only purpose seems to be to satisfy some certification need, but does little to help you run your business better. 

Describing the benefits of technology often turns out to be a Yogi-ism“We’re lost, but we’re making good time!”

Now, we’re not down on technology. There are some genuinely company-saving-improving solutions out there, and they should be used. We’re only saying… just because you can, doesn’t mean you should. 

To become the company of choice for the marketplace, you only have to do this — change your focus. 

How?

By asking this question… “What job is my prospect hiring my sales and marketing team to do?”

The second you starting thinking in these terms, you’ll immediately switch from an internal, product-centric focus to and outward, customer-centric focus. 

What job is your prospect hiring your sales and marketing team to do?

That may be quite specific for your company – and certainly something you probably know or need to find out; however, here’s a hint.

They are not hiring your sales and marketing team to:

Sell them, or

Tell them

This generation of 45-year-olds and under, despise being sold and told to. Keep in mind, this is the group who invented ad blockers. And, just like that, by 2016 over $4.1 billion in advertising worldwide had been blocked.

Here’s another hint.

Think about what your buyer is doing during their buying process. Remember, a full 60% of the buying process is complete before a buyer reaches out to any of the selected companies. 

What are they doing during this time?

Your buyer is doing their research. They want education and information that will help them make the best possible decision for their company. Why? Because they want to succeed, grow, learn, be acknowledged, and solve problems. Fifty percent of B2B buyers are more likely to buy a product or service when they see personal value (career advancement, confidence, pride).

It could very well be that a simple change in focus will remove the limitation preventing you from “more sales.” 

If so, then following the ‘constraint’ guidance of Theory of Constraints will be helpful:

  1. Identify the constraint/blockage/clog. Done!
  2. Optimize or exploit the constraint – Decide the best way(s) to fully understand your buyer and their needs so that you become the company of choice.
  3. Subordinate/laser focus everything else to optimizing the constraint** – Stay focused on your buyer. Ensure everything you do, say, and project is in alignment with your buyer. Remove or reduce activities that have little to do with buyer alignment. Ex: if your initiative is to focus on your buyer and align your company/products/solution with that buyer, then this isn’t the time to involve the company and leadership in new accounting technology, or even new machinery – even if the machinery will improve output. Why? Because more output isn’t what you need. More output and not enough sales will do little for your bottom line. 
  4. Elevate the constraint – This is usually where you bring in some kind of help and is only necessary if steps two and three are unsuccessful at improving the flow and getting “more sales.” Take care not to have a marketing seizure here and start tossing out content or investing in technology. To fully understand your buyer, you only need to talk with buyers who didn’t buy from you. 
  5. When you are successful at breaking the constraint and obtaining optimum flow and “enough sales,” then the constraint will move to another area. Once you’ve reached that point, go back to step one and start over.

Good examples of subordinating or getting laser focused on an immediate goal:

Automakers who stopped making cars to make respirators (this included Formula One race car companies)

Distilleries who stopped making tequila to make hand sanitizers

Manufacturers who stopped making their product to make masks and other medical equipment

John F. Kennedy’s goal in 1961 to put a man on the moon by the end of the decade

CEO’s all over the world who come in and turn a company around

Gordon Bethune (Continental Airlines) — In 12 months, turned a $55 million/month loss into a $224 million profit

Angela Ahrendts (Burberry) — Used social media to reach a new generation, turned mirrors into catwalk screen, equipped salespeople with iPads and doubled revenue and profits within five years

Steve Jobs (Apple) — Came back, reduced projects from 350 to 50, then to 10. Focused on creating the next big thing = iMac, iPod, iTunes, iPhone and in so doing increased Apple’s stock by 900%

Richard Teerlink (Harley Davidson) — Showed up in 1981 only to find the company’s market share had dropped to 15% and the company reported a loss of $15 million. During his reign he recovered the company’s US market share to 50% and posted annual sales of more than $1.7 billion.

Stay Nadella (Microsoft) — Took over as CEO in 2014 and took an $8 billion loss to completely shut down their smartphone division, moved Word and Excel to the cloud (risking another $8 billion), used cash reserves to build cloud computing centers and by 2018, their stock price had tripled. (Nice to have $16 billion leeway!)

James Rhee (Ashley Stewart Plus Size Clothing) — Took over as CEO in 2013 while the company was facing its second bankruptcy in three years. He turned things around by changing company culture, created a mission-driven dedication to core customers, transparent communication, learning processes and kindness. Reduced corporate headcount by 40, closed 100 stores, analyzed core customer habits and reintroduced a local charitable giving program. The company emerged from bankruptcy in 2014 and by 2015 net sales were growing bu 80% and organic sales were up by 25%. Today, it’s one of the most profitable plus-size fashion brands in the world.

Mark Shapiro (Six Flags Entertainment) — In 2009 the company was $2.4 billion in debit and filing for Chapter 11. In less than a year, they emerged from Chapter 11 and cut debt in half. By 2016 the park’s surpassed 30 million visits for the first time while providing shareholders with a 14% return on investment.

Embrace the constraint. All improvement is through the constraint. 

Oddly, it is the path of least resistance.

Flow on…

KE

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How Private Equity Firms Can Find The Hidden Organic Growth

Illustration by Karl Krieg, Creative Director, The Business Lab

It’s time to pull out the most under-used but insanely useful growth tool of all time. It’s the ultimate formula for increasing sales, reducing costs and improving efficiencies in a key operational area. 

If this thing’s so great, why is it under-used?

Brain defects effects.

Brains are hardwired to crave certainty, stability, and consistency. Processes and systems provide this certainty, stability, and consistency.

Processes and systems are like cultures. Something needed to be done. We came up with a way to do it. It worked. When we run into that situation again, we remember what worked, so we do it again and again and again. A belief is a thought we keep thinking. A culture, process, or system are tasks we keep doing. It’s also known as the status quo. And, it’s not likely to change any time soon. “Everyone wants something different, but no one wants to change.”

It’s why most companies benchmark performance against the competition and industry leader. If you are the market leader, you’re happy that you are one step in front of the other guy when the lion comes at you. 

COVID 19 is giving companies a huge opportunity to shake off the status-quo-ness that creates unintentional inefficiencies. Because COVID is assaulting our notion of certainty, stability, and consistency, companies are ripe for innovation or new and improved ways of looking at things. 

Is this just another “let’s make lemonade out of lemons” article? 

No. Here’s why. This is a real game-changer and the best part?

Hardly anyone will do it.

If you’re one of the few who sees the “reason why-ness” of this tool…AND…you utilize it, you win!

So, what is this insanely effective, under-utilized growth tool?

The Unknown.

Actually, it’s not unknown at all; it’s just been hiding behind the status quo.

If something is successful or unsuccessful, there is a specific way in which it is successful or unsuccessful.

Do you remember this from high school?  

Us either, but, before this formula, all ships were made out of wood. Why? Because wood could float and iron did not. When Archimedes figured out the formula, they could make ships out of iron. Did anything change about water or iron or the laws of the universe? No. It’s just that someone found the specific way in which something works. 

Every industry has a way in which it limits the customer. Every company has a way in which it limits more buyers from buying. 

When you know, and you do or can easily acquire this knowledge, you will use it to your advantage, significantly grow organic revenue and make the competition relevant. 

But hurry. The sooner things get back to normal, the less chance you have of pulling this off.

Because timing is essential, we’ll give you the 500 ft view here so you’ll know where to start.

The Industry

Most every industry has a “way of doing business” that customers complain about. What are those complaints and which of them can you “fix” (especially the most advantageous one) without having to invest a lot of capital? Ideally, these “fixes” will be difficult for your competitors to copy right away. We guess that you have a lot of this intel in-house. Your sales, marketing, customer service, product folks face these issues often. Industry associations and industry forums are also excellent sources of information. 

Examples include:

The Printing Industry — customers complained for years about having to buy in bulk to “get the best price break.” Unless NOTHING changes in your business while you are getting through all that inventory, all is good. It turns out, this isn’t the case, and boxes of business cards, brochures, pocket folder, sales sheets, etc. end up in the trash. This is where digital printing presses came into being. One of the first companies to offer this kind of printing press required you to purchase two machines — because the technology was so new, and they knew they had reliability issues, if you wanted in the game, you had to buy two machines. These were VERY expensive machines. And, companies who saw the digital printing goldmine bought two machines and thrived and thrived and thrived. 

Clothing Manufacturing Industry — they have a similar problem as the printing industry. Customers have to buy months ahead of the season, they have to guess what is going to sell, and they have to buy a LOT of it to get the “price breaks” or even the merchandise. Manufacturers require high minimums of the same thing in order to do business with them. This leaves a lot of clothing stores with a lot of unsold inventory. Manufacturers who figure out how to shorten the supply chain and provide only the clothing their customers need, thrive. The Goldratt Group (Theory of Constraints) has been helping a few savvy manufacturers do this very successfully for years. 

Copier Industry — their customers complained about the cost and the service of large copiers. Xerox figured out how to sell the service vs. the product. No one owns a large copier anymore, they lease it, and the lease comes with automatic maintenance. 

Domino’s Pizza — they understood people did not like waiting for their Pizza, so they invented the “30 minutes, or it’s free” solution. Since then, wise plumbers, electricians, and HVAC business owners have transformed their businesses.

Sephora — they watched and saw that women like to try on makeup before they buy it. Rather than scheduling an appointment with a department store, they created a store around this behavior.  

Look Around — a small hotel in a resort area has a huge parking lot. It noticed cars were gathering there during COVID. Fearful of any COVID issues, they roped off the parking lot. When the hotel re-opened, it put out a HUGE sign saying, “OPEN.” The sign is right next to the parking lot, which they hadn’t un-roped. Eventually, they noticed and opened up the parking lot.

Risk Reversal — many companies understand the barrier of risk for their customers, and now they thrive because they offer 100% money-back guarantees or “pay for performance” models. 

Industry “Issue” Ideas to Consider:

Conveyor Belt Manufacturing Industry – Industrial conveyor belts can cause serious injury and death. The MSHA (Mine Safety and Health Administration) states that over 40% of conveyor injuries are caused while a worker is performing maintenance, another 30 to 40 percent are inured while cleaning an area next to the conveyor. Forty-eight of the 200 fatal mining accidents involve conveyors. Innovation in this industry is almost non-existent, and the problems that existed in the 1930s are the same today. 

What is the single most effective tool to prevent injury and death? Training. But, no one really thinks something bad is going to happen in their company, and besides, managers are too busy to attend training, so they send a junior team member. This person has little to no authority or influence when it comes to training, so..… Even though they train new employees, there isn’t enough focus on conveyor training. 

What can conveyor manufacturers do to help? Here are some ideas:

  • Include Virtual Reality Training and Phone-in-Headsets with each purchase. Require operators to keep the headset with them at all times. When doing ANY maintenance or review, the headset will be accessed to review the necessary safety and maintenance steps. Update the headsets each year with any new education. 
  • Include a Secret Shopper visit four times a year to watch what’s happening and offer solutions specific to the problems. 
  • Install video cameras and sensors to view and monitor the machines. Observing the speed limit and capacity ratings on conveyors are critical. Install sensors that detect overages and alert operators and executives. 
  • Put speed governors on the belts, so it knows the max speed for the given weight on the belt at any time.
  • Send trainers and technicians to each location twice a year for inspection and training. Create train the trainer programs so that operators train each other — maybe they get bonus money from you, vs. their direct employer, to be the trainer. Pay them to record training videos that reside on your website as well as their employers.
  • Send non-identifying questionnaires (one or two questions only) for employees to share concerns; call executives when you see a problem or pattern. Send daily texts to operators reminding them of the top issues: The speed limit of this specific belt, location of the shut-off system, how far away ancillary workers should be from the machine, etc. 
  • Invest in your sales and technical teams to be sure the company is buying the right belt system for their needs. 
  • Create a Technical Institute where you train and place highly qualified employees inside your customer’s facilities. 
  • If elevators, cars, refrigerators, filtered water pitchers (Brita Infinity Water Pitcher that automatically orders filters for you when it’s time), printers that automatically order ink (HP subscription model) can trigger maintenance calls before anyone is aware there is a problem, why can’t conveyor belts? If you say, “price — no one will pay for this,” I’ll bet you are wrong. Price is rarely the issue salespeople, and companies think it is. Price is an excuse, and the last thing you want to be competing on. 

If you manufacture machinery where any stoppage or breakdown is expensive for your customer, include a 3D printer setup to make on-demand parts that are frequently needed for maintenance and repair. 

If you install and implement corporate CRM (customer relationship management) systems, include voice-activated entry for all salespeople to use. Why? Because adoption is the most significant barrier to success, these technologies face. Make it as easy as possible for the sales team to update the system without obstacles. 

SOMETHING within your industry can be altered to create a significant advantage for you and your customers. 

The Solution

You can also ask, “are there companies that would never consider our solution, but could?” That’s what WeWork did. They looked around and saw a lot of business being done in coffee shops. Those people are not candidates for typical office space leases, and they wouldn’t want that anyway because they like the vibe of the coffee shop and the people around them. There are many reasons WeWork is struggling now, but none of them have to do with tapping into a previously unidentified market of need and desire. Had office building owners and managers seen what WeWork saw, the benefit would be all theirs. 

Your Buyers

How many sales have you lost that you don’t know about? Hard to say because you don’t know about them. But, they are out there. The buying process starts somewhere and ends somewhere. Sometimes you are included, sometimes not. But when you aren’t included, do you know why? And, if you know why, can you fix it? 

Would you be more visible to buyers if you knew

  • Why were they doing okay then decided they needed a solution like yours? What happened? What broke that camel’s back?
  • What ‘work-around’ are they using now to ‘deal’ with the situation?
  • Who all is tied to this activity and how entangled is everyone? 
  • How the research started, what the buyer did, and where they ended up in the process?
  • What the buyer believes is relevant to the solutions available to them?
  • What solution attributes did the buyer compare, and why? What was the benchmark?
  • What attitudes, processes, information, perceptions prevent the buyer from considering you?
  • What buying risks are they trying to eliminate or reduce?
  • Why did they buy from the other company? What did they value about this company’s approach?
  • What content your buyer trusts and uses in the decision-making process?
  • Who is involved in the decision, and what kind of influence do they each have?
  • What limitations solution suppliers, including you, place on them?
  • What your buyers were hiring your sales and marketing team to do for them?
  • What your buyers were hiring your product or service to do for them?

Unless you’ve had several unstructured calls purposefully guided to obtain this information from people who did not buy from you, please do not assume you, your sales or your marketing team know this information. It’s a limiting status quo kind of assumption. 

Find out. Then align your go-to-market, messaging, and sales processes with this intelligence and become visible to a lot of buyers.


Reduce your investment in status quo-ness and increase your investment in knowing. 

KE

P.S. We realize that we bypass all the messiness of the status quo-ness and make a big assumption that you can ‘just starting doing things differently.’ We know it doesn’t work like that, but start with understanding your buyers and see where it leads. Your people will immediately begin to see connections, connections you can take advantage of without much resistance.

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How To Waste A Lot of Money

The Sirius Decisions Survey found that 60 to 70 percent of all B2B content goes unused. 

That’s a lot of dollars wasted. But why? 

Why does this content go unused?

Guessing!

The most expensive prospecting expenses are those where you don’t know how a prospect buys. 

Most companies think they know, which is why they create content. Many companies also create buyer profiles…This is John; he’s 37 years old and is an Operations Manager in the Materials Handling industry. He is married with two children and drives an SUV. He has a degree in engineering and loves to play tennis, go hiking, spend time with his family, and attends charitable events often. It tells who he reports to, his objectives/goals, what associations he belongs to, which social media accounts he has, etc. 

They use this information to “speak” to John via content. Content that hopefully brings him their way when it’s time to buy a solution like theirs.

But, is this buyer profile going to tell you—

Why were they doing okay then decided they needed a solution like yours? What happened? What broke that camel’s back?

How he started, what he did, and where he ended up in the process?

What he believes is relevant to the solutions available to him?

What solution attributes did he compare, and why? What was the benchmark?

What attitudes, processes, information, perceptions prevent him from considering you?

What buying risks is he trying to eliminate or reduce?

Why did he buy from them? What did he value about their approach?

What content he trusts and uses to help in the decision-making process?

Who is involved in the decision, and what kind of influence do they each have?

What limitations solution suppliers place on him?

No. No, it is not.

Now, your sales team may say — hey, I know my clients. This is what they think, and this is how we should approach them.

This is excellent intel for buyers who buy from you.

But what about all the other buyers who didn’t buy from you? Or worse, never even knew about you

Products and services today are bought, not sold. 72% of B2B buyers and influencers are 45 years and younger. They grew up with Google and iPhones and access to as much information as they want. They also grew up with Enron and “too big to fail” and a massive disdain for marketing rhetoric. 

Buyers do not want to be sold to. They do not want to be told what to do or what to think. They do, however, trust what they believe and know. And they trust their own processes for obtaining that knowledge and belief. They don’t need sales or marketing people unless those people are a means to their end in finding the best solution for their immediate problem. 

Buyers are 60% through their buying process before they contact any supplier. Because they are 60% of the way through, they only contact suppliers who make their very short list.

What job is your buyer hiring your sales and marketing team to do?

Buyers want to make the right decision for their companies. They want ways to be more and more valuable to their companies. They want to prove they make the right decisions. 50% of B2B buyers are more likely to purchase a product or service when they see personal value (career advancement, confidence, pride).

What will it take to be the company that helps them make the right decisions?

‘I never teach my pupils; I only attempt to provide the conditions in which they can learn.’ –Albert Einstein

If ever there were a time to step back and do what’s necessary to understand your buyers completely, this would be it. 

Keep improving.

Stop Guessing.

KE

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Poop-to-Value

Illustration by Karl Krieg, Creative Director, The Business Lab

What Fertilizer to Use When Growing Revenue

True story — Some time ago, we visited the owner of the a large concrete manufacturing company. He told the story about how he wanted an airplane. He had his license and, for years, had been hounding and hounding his wife to let him have a plane — both, of course, smiling during this story. When she finally said “yes,” he was so excited, he ran out the front door, jumped in his car, but then realized he had no idea how or even where to go to buy a plane. 

Sometimes marketing plans are like this.

Everyone gets excited about the latest thing, say, “outbound lead generation,” but then it’s pretty unclear what that means, how you’re supposed to start the process and how to measure success.

When we look at many manufacturing companies, especially those with revenues less than $100M, it seems to us that growing revenue is easier and far less complicated than many other initiatives the company is invested or investing in — cost efficiency programs, automation, digitalization of everything, new investors, etc.

At its core, growing revenue follows these steps:

  1. Define a target market or competitors you’re going to take market share from
  2. Learn how your buyers buy — all the way from the influencers to the CEOs
  3. Build a plan to educate/win the heart of each person in the buying process
  4. Execute the plan, adjusting where necessary
  5. Qualify, then send those leads to the well-prepared sales team

Of course, there are many steps involved. But none of them are hard and, except maybe for some guidance, each company already has everything it needs to do this. 

Like our airplane friend, companies get excited and think they need to blog, and tweet, and link and like, create personas, go inbound & outbound, create sales videos, go to trade shows, send newsletters, and on and on and on. 

We call this a marketing seizure with a high poop-to-value ratio — meaning a lot of sh#&! is going on, but you don’t have much to show for it.

We are not saying that you should or shouldn’t do these things. If you have the reason, commitment, and proper investment (full executive-support, patience, time, money, talent), then you probably have a full-fledged Marketing and Communication department and are omni-channeling your way through sales heaven.

But, let’s look at it this way.

Manufacturing throughput is the rate at which a system generates revenue through sales (Goldratt). Applying this to the marketing side — customer throughput is the rate at which nonpaying prospects (inventory) are processed into paying customers.

For our purposes and example:

T = throughput = revenue

I = inventory = cost of turning suspects into prospects, then into customers

OE = operating expenses = customer service, marketing, marketing/sales salaries, etc.

ROI = (T-OE) ÷ I

ROI = (Throughput – Operating Expenses) ÷ Cost of turning suspects into prospects, then into customers.

Here’s how it works

Somehow, someone, who has a need they think you can maybe help with, finds you — they are now a suspect. They “engage” enough and become a prospect. When they purchase your product/service, they become a customer. Once they become a customer, you/your company receives revenue.

The goal is to increase throughput while minimizing operating and inventory (prospecting) expenses — assuming reducing these expenses does not negatively affect throughput.

Decreasing operating expenses will increase your ROI. Reducing your cost of turning suspects into prospects (conversion) will also increase your ROI. But of course, neither is as profitable as increasing your throughput.

Here’s something many companies don’t realize.

And it’s costly — It not only increases conversion expenses, it decreases throughput. Ouch!

What is this “something” you ask?

Well, it’s “guessing.”

Yep. Guessing. Guessing? Yes, guessing is the main reason for a high poop-to-value ratio and low ROI.

We would explain it all here for you, but the stats tell us that this article is already way too long — We guess we have overstepped our pixel limit. OMG, 733 words, 3,712 characters without spaces, 4,426 characters with spaces. Our apologies!

Until next time, Remember reduce poop-to-value ratio and improve your investment.  

-KE