Category Archives: Index

144. Baseball’s Adoption of Analytics v. Distributors

Red Sox ‘02 v The Orioles ‘19  

Analytics have swept through Major League Baseball (MLB) over the past 17 years. The Oakland A’s got first analytical results. But, the Boston Red Sox were the first to go big in 2002. John Henry, the new owner, was a believer. He had gotten rich by trading commodities with his own invented analytics.   

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142. Hiring Hourly People Solutions

Distributor Case Problem (3/14/18)

A distributor needs to hire six hourly people across four locations. But:

“We can’t find acceptable candidates for our normal starting wage. We don’t want to hire new people at a higher rate than our veterans. And, we don’t want to hire flakes who can’t pass our drug test. What do we do?”

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141. What’s Your Flywheel?

Flywheel?

It’s a term popularized by Jim Collins (author of: “Good To Great”, etc.) The idea is that within great companies there is often a virtuous-cycle with about 4 to 6 steps that drives profitable growth. Each step reinforces the next. The entire cycle compounds itself.  The rich get richer, and the poor? Well, they work hard to deliver commodity-value for poor results.    

Collins’ New Monograph:

Collins recently published: “Turning the Flywheel: A Monograph to Accompany Good To Great”. It’s a quick, concise, recommended read. His concepts aren’t new, but his terms are catchy and inspirational.

And, Collins distills – an entire process for creating a flywheel – into a simplified (not simplistic) brilliant whole. For summary pictures Google Image: “Flywheel + Collins”. To see the flywheel that is eating into all physical, product-push, un-digital channels, Google image: “Amazon + Flywheel”.

Two Problems with Collins Framework

First: most companies don’t have the requisite capabilities to make big changes away from their complacent, hidebound status quo. Collins’ updated framework has four stages with 12 underlying capabilities – including looking at the “Brutal Facts”. Who, for example, wants to confess to tolerating incompetent and/or complacent players, having flawed, data-free beliefs, or having 30-50% of their customers being net-unprofitable?

Second: his monograph is necessarily generalized. What’s a best, distributor-specific flywheel strategy? Answer: at youtube search for: “merrifield + service profit”  to find my 7-minute adaptation of “the service profit chain”.  Then, for implementation specifics, request my free “Core Customer Renewal Roadmap” (bruce@merrifield.com.)

Roadmap Warning: Data-Free, Emotional Objections Ahead

In many presentations, audiences have agreed with the logic of my version of the Service Profit Chain. But, when management teams read through my Roadmap, the “concerns” start to arise. Write them down. Gently unpack their origins. Forgive past mismanagements; “we were doing the best we could with the analytics we didn’t have.” Test the data-free assumptions with statistical data and surveys of parties “who won’t like this”.  Maintaining the status quo is not an option in a fast-changing world.   

The Necessity of a Service-Excellence Flywheel

Physical, Product-Push Channels are under siege. Whether Amazon-Business nibbles or chomps into your channel over the next few years is one concern. A bigger concern? All next-gen, B2B buyers want digital-buying experiences and empowerment. Without flywheel profit-power, can you innovate to meet customers’ growing digital needs?  Or, will top 5% already-Great distributors innovate faster and eat your lunch?    

Come and meet me at MDM’s Pricing and Profitability Summit, in Denver, on April 15-17. I’ll make it easier for you: use coupon WayPoint2020 to get 100$ upon registration. See you there. https://pnp.mdm.com/

139. Better Mental-Models for Profit Power

Mental-Model Fuzziness?

We make decisions from a stew of emotions, beliefs, biases, and mental-model assumptions. Models approximate reality, so each has its blind-spots. But, a robust set of models can minimize oversights and help to make better business decisions.  

As a management team exercise, try writing down your models. Then, test them further with analytics, stakeholder surveys, and team discussions. Some common, flawed beliefs follow to get you going.         

Financial Model Beliefs 

  • Do you pursue greater sales to get economies for better buying and to spread fixed costs?
  • Do you grow sales by maximizing selling pitches to more customers to get more margin dollars? (And, why not sneak up prices too? Buy low, sell high!)   
  • To control costs, do you pay “fair” wages, run lean, and keep everyone busy? Then, won’t a bit more of each incremental, margin-dollar flow to the profit line?   

Financial discipline is good! But, the belief-questions above all have flaws and blind-spots. For example, does “make the numbers” work against investing in FedEx’s service-excellence model of: “People, Service, Profits”?

“Good Service” Beliefs

“Good service” is a commodity; it keeps you in the meet-the-price game. “Best service-value” – in the minds of targeted-customers – wins!  But, what are your assumptions for choosing initial segment(s) of customers to target? Can’t service-value metrics vary subtly and importantly for each customer niche?    

Target-Customer Beliefs

“Financial-Think” assumes bigger customers are better, and all are good. But, what if two customers are equal in both sales and margin dollars, but vary in average order size by 10X? Isn’t the small-order customer less profitable?

Cost-to-Serve analytics reveals that about 20% of big-margin-total accounts are typically net-profit losers.  They have too many small-dollar picks and/or orders that cause big, unnecessary activity costs for both parties. Win-win fixes are possible!  

People cannot process two orders at the same time. What is the opportunity cost of processing losing-orders from losing-customers? You can’t pursue, win, and process bigger orders from more net-profitable customers when consumed with losing Busy-Ness! So, what are your order-size-economic assumptions informed by Customer and SKU net-profit analytics?       

Innovation Beliefs/Conclusion   

Studies conclude that 60-80% of premium profits that star companies earn comes from innovations. Top 5% distributors grow faster and make 2-4X the ROI of the bottom 90% of distributors. The Stars are playing a better mental-model game! Why not upgrade your mental-models too?

For more mental-model testing, request my free: “Core Customer Renewal Roadmap” (bruce@merrifield.com). 

137. Amazon’s Channel-Model Innovation Challenge

LEVELS OF INNOVATION: INCREMENTAL, BUSINESS-MODEL, CHANNEL-MODEL

All businesses innovate. But, rearranging the deck furniture on the Titanic (an incremental innovation) is not as powerful as getting an iceberg-resistant ship or an ice-berg-free route.

Business-model innovation is when you rethink the system of how you organize your resources to create a breakthrough value for some target group of customers. You may also, simultaneously, eliminate wasteful or dying activities. Common phrasings: Weed to feed. Prune to grow. Downsize, Upgrade, Refocus and Revitalize. Do a “Blue Ocean Strategy”, etc.

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