You Don’t Have To Change. Survival Is An Option!
By Larry Girouard
Last month I was at a presentation where a lean consultant was discussing the power of implementing lean methodologies to improve corporate efficiency. He stated that 95% of what we do in our businesses is considered non value-added as viewed by the customer. 95%!!!!! Absurd? Greatly embellished to make a point?
At first blush the magnitude of this number appears to be exaggerated, and irresponsible to even put it out there. Only 5% of all the activities that we perform in our businesses are considered value-added from the customer’s perspective!!!
He then gave the following example of something that we are all familiar with … watching a football game. Every Sunday in the fall and winter many of us pull up a chair from 1pm – 4pm to watch a football game. We may watch 2-3 games over the course of a weekend, but let’s focus on a single Sunday game.
While this next statement can be debated, the real value in watching the game is when a play is in progress. Certainly the announcers add some value, and the instant replay helps us look at a few details that we might have missed, but when the rubber meets the road, the real value starts when the ball is snapped.
You might ask a friend … How many minutes during the 3 hour program is the football actually in play?
Well here are the statistics … there is an average of 125 plays in a football game, and the average play lasts 7 seconds. Do the math … 14.58 minutes or 8% of the 3 hours is all the time the ball is actually in play. 92% of the time we are sitting around waiting for the next play.
In business it is the same thing. A customer calls up and wants a product. In the manufacturing world, a 3-4 week lead time is normal. That being said, well over 90% of this time is non-value added, or waste. This is a fact, and you can take it to the bank. This is true for every company, including your company. Company presidents and management teams just never look at their business through the lens of waste.
There are very few company presidents that I know that do not want to both increase market penetration, and improve their bottom line. While the example above relates to a football game, the same non-value added inefficiencies can be applied to your business.
What can company presidents do to reduce the non-value added activities in their businesses?
Most small companies have well under a 3% – 5% market share, and therefore have a real opportunity to capture share. These small companies talk about growing 5%-10% a year in sales. That sales goal is, in my opinion, problematic. If you have a company that has 3% market share, why not set a goal to capture 1%–2% additional market share, or 33%-66% growth? The one trait that small companies have that the 800 pound gorillas in their market do not have is AGILITY. Small companies have the real potential of moving quickly in responding to customer needs, wants, and complaints.
You cannot capture additional share of any significance unless you can confidently answer the question that every target customer asks, or is thinking about. Why should I buy your product or service?
Strategic Planning for smaller companies is not as much about writing a thick plan that, in short order, ends up in a desk drawer, as much as it is about the willingness of the President to change the corporate culture. Having the courage and passion to change the way team members work with each other within a function, or cross functionally, represents THE key building block for the execution of a market penetration program.
The ability of a company to quantifiably differentiate itself from competition sets the stage for market penetration.
In almost every case that I can think of, the lion’s share of differentiation comes from the behavior of people within the organization, and not from features/benefits of the products/services that the company was founded on to deliver. Behavior and efficiency go hand in hand, and efficiency is directly related to the elimination of non-value added activities … better said, waste.
In the world of lean there are seven deadly wastes: transportation (the excessive moving of stuff from one place to another), motion (employees looking for stuff, or excessive walking/motion in a process), waiting (for information, for meetings to start), over processing, over production, defects (in products and communication), and excessive inventory (tying up a company’s money). These wastes either costs money, or take up employee’s time, both of which represent a totally non-productive use of an asset. Customers are not willing to pay for these added costs because they add no value to their experience.
Like the football example of 92% waste above, if waste can be reduced in your business, it will have a direct and measurable impact on the customer experience in the form of shorter lead times, improved on time delivery, faster response to quotes, and the like. The result – an improved customer experience or value proposition that will simplify market penetration. As management teams of small companies begin to take this more globalist view of their company, growth beyond 5%-10% a year becomes a much more realistic goal. Improvement in the way the team works together offers the single greatest potential in realizing loftier and more profitable growth goals.
Also, a company that is not growing presents no opportunity for its management or employees. The result – a culture with no emotion or energy as everyone just goes through the motions to get through the day. Considering all this, you still do not have to change. Survival is an option.