“Innovate or die” is business-strategy logic. If we don’t change at least as fast as our business environment, we will gradually die often with a traumatic end. But, most companies can only fine-tune the past. Significant, strategic-change programs are defeated by organizational and channel resistance.
How do we upgrade all of the sub-elements that contribute to our capacity to change things? What if you saw your company in an entirely new way? Could you change to capitalize on new insights? Try on the two, change-management cases below. Then consider attending “Change Management Camp”.
#1: Civil War Surgeon Transported to Today’s Battle Zone
First, you are Virgil Cain, Civil War surgeon extraordinaire. No one saws off limbs more sparingly. You are magically transported to a present day operation in Afghanistan. You are overwhelmed. You don’t initially even see the patient just a magical screen with images that make no sense. Today’s colleague, Dr. Kildare, is in a costume with a mask. He’s manipulating knobs while looking at the magic screen describing how he’s reconstructing shattered bones with tiny screws having never eye-balled the shattered bone. Most of his vocabulary is foreign. Dr. Kildare subsequently walks you slowly through today’s process from injury through rehab and prosthetic fittings. Each step involves medical knowledge and tools that were inconceivable in 1865. And, old practices –like doctors spreading germs and causing more death via infections than surgical cures – is hard for you to believe. Kildare then invites you –like a medical student today- to do some hands on learning with the next patient coming into surgery. Knowing roughly what to do is not the same as doing it well: lots of practice is necessary. But, if we want to be more competent and do better for our stakeholders, we have to start sometime -small, safely and slowly – towards re-learning our craft informed by new: tools, insights, education, methods and skills.
#2: CEO of $60MM Distributor Losing $1MM per Year & No Relief In Sight
2009 was brutal to your distribution channel. With plunges in both product prices and customer demand, sales dropped 30% and your company reported a $1MM loss. By subscribing to an analytic software service for distributors, you are now looking at “cost-to-serve” and “net-profit” for every line-item-pick. Summing up these “quantum profit” increments allows us to look at profitability ranking reports for customers, items/suppliers and territories. Believing what we are seeing and making sense of what to do is a bit like Virgil looking at and acting upon MRI and live laparoscopic images the first time.
In ’09, 500 customers apparently made $2MM which was more than offset by the bottom 2,500 customers losing $3MM. You are paying reps to get any and all margin dollars even if the service costs exceed the margin dollars for a loss. Two of your 15 product categories lost $2MM for which there is a centralized, logistical fix! What are you going to do with these insights?
Who will lead the journey to higher levels of profitability, value-creation and growth?
Case Studies on Change Management Teams
Waypoint Analytics is a comprehensive analytical service that allows distributors to understand the profit contributors and detractors hidden within their financial numbers. As each Waypoint client experiences their first wave of Virgil/60MM-distributor insights, how do they re-organize to change? In order, these roles must be filled:
1. Someone with access to the company’s transaction system pulls reports containing the invoice data for loading into Waypoint.
2. The CFO is usually the editor of Waypoint’s cost-modeling and then may hand off on-going maintenance of the model and cost allocation updates to an assistant.
3. Some key, designated person becomes the evangelist to teach all employees the importance and power of cost-to-serve and net-profit-management thinking and tactics. Imagine teaching a room full of Civil War doctors about simple, powerful, do-able, bacteria-control procedures to take back to 1862. Can they first admit their honest, ignorant guilt in killing patients by spreading bacteria?
Do people managing, selling and serving customers based on only sales, margin dollars and margin percentages want to see that some of “our best accounts” are actually big losers? Will they believe that they can?
1. Most footnotes are extensive in length and substance and may be found at www.merrifield.com/insights.
2. More on “Quantum Profit Management”(QPM) at www.quantumprofitmanagement.com
Bruce Merrifield (Bruce@merrifield.com)