It's Not Luck (21 page)

I think that I’ll be happy with “Managers arrive at good decisions.” This way I leave the door open for breakthrough solutions when needed, without unnecessarily demanding them as the norm.

I think about it. It’s simple, but it does make sense. I decide to take it as the desired objective.

Now I have to clearly verbalize the conflict preventing managers from achieving this objective. According to Jonah’s guidelines, this conflict should be quite apparent in the Current Reality Tree. I have a problem. I think that I know this tree inside and out. If there is an apparent conflict, I’m sure I would have noticed it.

From my experience I’ve learned that the best way to save time is to follow the guidelines. I’ve got to look at it again, but how?

I take the first exit and stop at a gas station. “Fill it up. Super, please.”

I reach into the back seat, grab my briefcase and pull out the tree. Immediately the conflict stares at me. I guess that when you know what you are looking for, it’s easy to find. I write the conflict. “Consider the clients’ perception of value,” versus, “Consider the supplier’s perception of value.”

Now I have to prove that this conflict is what is preventing the objective from existing in reality. It doesn’t take long to complete the cloud. I check it by reading aloud, “In order for ‘Managers to arrive at good decisions,’ they must ‘Consider the need to get enough sales.’ ” This is correct at the top level.

No, it’s correct for all levels. I think it’s correct even when decisions are made at lower levels; in distribution, production or engineering.

“You are all set, sir. Eighteen dollars and thirty cents.” I hand him my credit card, and continue to read aloud.

“In order to ‘Consider the need to get enough sales,’ managers must ‘Make decisions and act upon the client’s perception of value.’ This is good.”

I turn to the bottom side of the cloud, “In order for ‘Managers to arrive at good decisions,’ they must ‘Consider the need to get reasonable product margins.’ ” Under the prevailing corporate culture, it’s a must. Actually, in most companies, even those people who understand that they shouldn’t do it, still have to. Unless, of course, someone wants to become a martyr.

I read the last connection, “In order to ‘Consider the need to get reasonable margins,’ managers must ‘Make decisions and act upon the suppliers’ perception of value.’ ”

I sign the slip, start the engine and find my way back to the highway.

I glance at the cloud. Once it’s written, it’s so obvious. Throughout UniCo, I see managers constantly vibrating on the conflict arrow.

“I don’t think we should accept the order.” “I think that we should.” “Don’t accept the order.” “Accept it.” “DON’T.” “Why did you accept it?” “We had to.” “No we didn’t.” “We did!”

Alex, I say to myself, you illustrated the point very clearly. Come on, continue.

Which arrow in this cloud makes me feel the most uncomfortable?

It’s very easy to answer that question. In order for “Managers to arrive at good decisions,” they must “Consider the need to get reasonable product margins.” In the last years I’ve proven, over and over, that when the market is segmented we can increase profits now as well as in the future—even if we sell for negative product margins. Especially when all the work is done by non-bottlenecks.

In my group, I hope that no one considers product margin as a criteria to accept an order. Orders are accepted only according to their impact on the overall throughput and overall operating expense.

We have broken the cloud.

So why are we still in trouble?

Then it hits me. We ignore product margin and it works. We have turned around all three companies from bottomless pits into break-even. It worked—but not enough. Every time we find a segmented market, we are happy to sell our excess capacity for prices lower than our average. It improves our bottom line but it’s a waste. A waste that we can’t afford anymore.

The real problem is we’ve run out of niches. We don’t dare sell below our prices in our core markets, and we don’t dare start a price war. It might ruin us. So now, in everyone of our companies, there is a lot of excess capacity.

Besides, the constant decline in prices is eroding the gains that we do get from our improvements. We must do something much more powerful. For us it’s not a matter of gradually increasing profits. To save our companies we must sell all our capacity at higher than average prices, not lower.

How?

That’s exactly what I’m trying to figure out. I have to find a much more effective way to break the cloud. I’d better look at the assumptions behind the other arrows in the cloud. If there is a better answer it must be different than what I’m already doing today.

The road is clear. I read the next arrow. “In order to ‘Consider the need to get reasonable product margins,’ managers must ‘Make decisions and act upon the suppliers’ perception of value.’ ”

Here the assumption is that product margin must be based on product cost. Which as I know, leads to the impression that a product should have one fair price.

Based on the tree, the obvious injection is to be able to command a multitude of prices. Which means, to take actions that will segment an existing, seemingly uniform, market.

Yes. This direction is clear from the Current Reality Tree. But if the cloud is useful, it should provide me with more alternatives. I don’t think that figuring out the generic way of how to segment a seemingly uniform market will be a short or easy task. Besides, this type of work requires a pencil and paper.

Before I turn toward home to do it, I should examine other arrows in the cloud. Maybe they will provide me with easier alternatives. I glance over at the next arrow. It’s the conflict arrow. According to Jonah, if you can break it, it usually provides the most powerful solutions. If there ever was a time I needed a powerful solution, it’s now.

“Make decisions and act upon the clients’ perception of value” is mutually exclusive to “Make decisions and act upon the suppliers’ perception of value.” This is plain common sense. What’s the assumption? That the two perceptions are different? It’s too obvious.

“It’s obvious after constructing the Current Reality Tree,” I dryly say to myself.

So what can I do with it? After a while I realize that the assumption is more restrictive. Suppose the client’s perception is very high, much higher than the supplier’s perception. In that case managers would not face any dilemma.

If they’re not greedy, that is.

The assumption is something like, “The client’s perception of value of the product is significantly less than that of the supplier.” Only then are the managers facing the dilemma.

With one eye on the road I scribble it down.

What can we do to change this assumption? Do I have an injection, any idea how to change it, I ask myself?

Yes, I do, but it’s too simple. “It’s not something concrete,” I mumble.

So I’ll have to go through the process of converting it into something concrete and practical. What’s the big deal? I know this process, I have time, what I need is a direction. And this one looks very simple. So simple that it cannot be wrong. Too simple.

For a few miles there are signs announcing the next rest area. Where is it?

I roll into it and stop.

“Take actions that sufficiently increase the perception of value the market has for the company’s products,” I write down.

This is what I call simple with a capital S. But it is a direction. And if Jonah’s methods do work, it should lead to a solution.

According to the guidelines, I now have to choose the strategic objectives. It’s not a big deal, they’re just the opposite of the undesirable effects. This shouldn’t be too difficult. I have the list here. . . . Somewhere.

It doesn’t help. This list was composed by Trumann and Doughty and it encompasses UDEs from all their companies. We don’t necessarily have to upgrade our sales force’s skills or improve engineering. As a matter of fact, we cannot afford the time it requires. For us, I laugh dryly, it will be enough if we can somehow gain a dominant competitive edge.

No, wait a minute. Even that won’t be enough. We must achieve something that most companies don’t have to. We must be able to quickly demonstrate impressive, bottom-line results.

Slowly I write the first objective: “Sell all the capacity without reducing prices.”

Considering the amount of excess capacity that we have it will result in an impressive bottom line. The problem is that we’ll have to convince everyone that we can sustain such results for the long run. This is just as important.

I add another objective, “Have an apparent, dominant, competitive edge.”

Yes. That will do it. What I have to do now is figure out how, by starting from my suggested direction, we can reach these two objectives. I’ll have to build a Future Reality Tree.

If there is one thing that is more tedious than constructing a Current Reality Tree, it is constructing a Future Reality Tree where the starting point is something that looks no more real than flying pigs.

But it’s possible. I know it is.

I start the car and decide to head back. I look for signs. It’s not a bad idea to figure out where I am. Wilmington? Where the hell is Wilmington?

So what am I waiting for? I pick up the phone and call Don.

“Where are you?” He is apparently worried. “The budget committee meeting is supposed to start in ten minutes, I don’t think I can fill in for you.”

“Yes, you can. Just ask Bill to allow it. He will. Oh yuck, at one-thirty I was supposed to have a meeting with the CFO.”

“You’re telling me?” He sounds a little irritated. “Don’t worry, I went instead. It was okay. But where are you? Are you coming back today?”

“I don’t know. Listen Don, remember the Current Reality Tree that I gave you last week? Take it home and study it. By tomorrow morning I want you to know it inside and out.”

Oh, God. It’s Milford. I’m more than one hundred miles away from home!

“Okay, Alex. Can I ask why?”

“You can easily guess.”

“Does this mean we are going to try to figure out how to increase sales?”

“Yes.”

“Hurrah!” I instinctively move the phone away from my ear. This man has well-developed lungs. “We were waiting for it. All of us.”

“See you tomorrow at eight.”

“Should I order a conference room? In your office we are bound to be constantly interrupted.”

“Good idea. And prepare yourself.”

“For what?”

“For a lot of work. We are going to kick some ass.”

19

When the coffee is served, I gather enough courage to raise the real issue. “I want to convince you that we shouldn’t sell my companies. It will be a huge mistake.”

“Alex, we went over it again and again,” Brandon Trumann sounds a little irritated. “This subject is closed.”

Jim Doughty signals his agreement with Brandon.

“Is the subject closed even if the situation has changed? Come on, you’re more open-minded than that.”

“What can possibly change to that extent?” And in a patronizing voice he adds, “Alex, let it go. It’s a lost battle.”

“Just give me some time,” I say, “and I’ll turn my companies into geese that lay golden eggs.”

“And what makes you think you can do it? Two weeks ago you were not optimistic at all.”

“I’m optimistic because of you two. You had . . . ”

“Don’t count on us. We’re the bad guys,” Jim laughs.

“Alex, I thought I explained it to you,” Brandon tries to knock some sense into my thick skull. “We don’t have a choice. The financial situation of UniCo is too fragile. We like you, we appreciate what you’re doing, but don’t ask for the impossible.”

I let him finish and then calmly continue, “You had me do the analysis of companies in the current competitive market. You started it all. Don’t you want to know what came out of it?”

“Oh yes, we do,” Jim says. “But Alex, if you think that some theoretical analysis will cause us to reverse our decision, you are more optimistic than I thought.”

“It’s not entirely theoretical, I had a very real starting point. I have the printing company turnaround to extrapolate from.”

“We appreciate what you have done with that company,” Brandon tries to pacify me. “What you’ve done there verges on miraculous. But do you believe that you can repeat the same thing over in I Cosmetics and in Pressure-Steam? They are very different from the printing industry.”

“And from each other,” Jim adds.

“I know, but I’m not starting from scratch. I’ve used what Pete did as a guide, and continuing our analysis I built a generic blueprint of how to do it anywhere. Having this blueprint, it should be relatively easy to build the specific solutions for the specific companies.”

“Do you really think you can outline the generic procedure for taking a market?” Jim Doughty asks.

“Yes,” I say, confidently. “That’s what I want to show you.”

“Any market? Even if we don’t give you any money to invest and we impose a tight time limit?” Brandon is astonished.