Most of my time is spent working with medium sized manufacturing businesses that for one reason or another, and usually many reasons combined, find themselves struggling.
The people running these businesses are often reluctant to spend money on consulting. Understandable, not just because it can be expensive in a cash challenged environment, but because they have been burnt before.
They became successful by being good at what they do, the product manufactured, the service delivered, and the admin and ‘soft’ management stuff just took care of itself.
Unfortunately, those days are gone.
In a variation on the Pareto 80/20 rule which holds true in every case, I find myself using what has become the 70/25/5 split in the things that receive attention.
Having done the analysis to determine the 20% of things that will deliver the 80% of the value, and be able to leverage from the effort to be made, the improvement task is to focus the effort where it will turbo charge the results.
This is where the rule comes into play.
70% of the effort goes into improving the current operations.
20% goes into spreading the current, and now improving operations into related, or adjacent areas.
5% goes into new stuff, experimenting, going right outside the comfort zones.
It also tends to follow that sequence.
Let me give a generic example.
My point of engagement is usually a perceived problem with sales and/or marketing. They need to generate more revenue, and usually quickly, so call in an expert.
Typically I find a tangle of current practises and issues that are sub optimal, that are not generally seen as ‘Sales’ issues. There are poor delivery lead times, inconsistent quality, poorly understood costings, lack of cash management, a reactive and undertrained sales force, poor customer service, and so on. All current activities and processes that require work before much that is ‘sexy’ which is what consultants usually sell, can be implemented. For example implementing a sales training package will not deliver value if the product quality is questionable, or the lead times longer than customer expectations. It will just be an expensive holiday for the sales staff.
This is the 70%, the early grind of improving the existing processes and priorities. It is usually a process of planting a nurturing a variety of improvement seeds in all sorts of corners of the business, rather than applying a silver bullet solution, and it does take time.
When the seeds are becoming seedlings, and some improvement is becoming evident, and often it is anecdotal, as the accounting systems typically look behind, rather than in front so the numbers are usually lagging, it may become time to apply the next 20%.
Continuing the Sales analogy, you can now reliably manufacture and deliver products that stand up competitively, you know your margins and capacity constraints, so you can start to focus more effort on increasing your share of wallet, engaging new customers in your priority markets, and entering adjacent markets perhaps with a marginally altered product to better meet the specific needs.
By the time the 20% gathers some momentum, the business is usually becoming prosperous, so can afford to start investing some resources in the really new stuff. The 5% effort spent on new products, the next technological development, and perhaps building scale by merger or acquisition. It is here that the exciting stuff happens, the next breakthrough in performance, and the payoff for long suffering managers, staff, and shareholders.
