Category Archives: Manufacturing & Operations

Where Should You Focus for the Next Year? Three Points

Situation: A CEO has had to shift half of the company’s employees to part-time due to reduced business. This has hampered new product development. The situation has been exacerbated by slow payments from customers. Where should you focus for the next year?

Advice from the CEOs:

  • The company has a lot going on. Validate the company’s market potential for products in development, and start gearing up the marketing program so that it will impact this and next year’s sales.
    • Get a feel for how many customers want the new products in development. Invest in some market research to validate this.
    • The bottom line is that product development only pays if the company can sell a lot more product! The team needs to know whether customers for the new products exist, in what numbers, where and who they are, and their most critical needs. Without this market intelligence, the company is in no position to tell whether there is a market, nor is the company prepared to address it.
    • Assume that there is a market, that it can be quantified. Once the company knows who and where the customers are and knows their most critical needs, the next step is to prepare to attack this market. This is not something that is done in 1-2 months, after the product is ready to sell. The company needs to be starting now if marketing is to be initiated in 6-8 months.
  • Past practice has been to split R&D costs with the customer. The company has the expertise, the customer the money – this is close enough to 50/50. There is no need to show them the numbers. R&D should not be funded through future sales but should be making money now.
  • One project has been taking so much attention that it is hobbling the company. The company is so focused on getting this “just right” for the customer that sales and market development have been neglected.
    • For the next 3 months, focus on completing this project, getting it out the door, and getting the company’s focus back on growth. A sense of urgency is needed!

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How Do You Create an Effective Staff Back-up System? Three Recommendations

Situation: A CEO has a staffing issue. The company has four product areas but only three strong leads. There are no back-ups for these leads. The CEO feels that the company can’t afford full-time back-ups and is concerned that the presence of back-ups may threaten the leads. How do you create an effective staff back-up system?

Advice from the CEOs:

  • There are two problems, not one.
    • The leads may not be great managers and may not even like managerial responsibility.
    • The company has one administrator with support from the leads.
    • The company’s vulnerability is having an effective lead leave and taking their key core team members with them. This would create a significant hole in the company’s offering.
    • Change the structure – put manager administrators at top and let the leads do what they love to do. Fit the jobs of the leads to their skills and talents.
  • Hire the best #2s that can be found to back up the effective leads. Replace the less effective lead with a new lead.
    • Replace current team members who aren’t as good with new staff. This will provide the funding for the new people.
    • Then separate managers from architects in terms of role. This does not mean a change of compensation, or necessarily even titles. It means aligning roles with talents. It will also mean that individuals will be happier in their roles and will be less likely to leave.
    • Don’t do this all at once, but in gradual stages to avoid panic and allow individuals the time to adapt to their new roles. Act as a coach adjusting the whole team to a new playbook.
  • Consider adjusting the compensation structure to retain the key leads.

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How Do You Mitigate Temporary Loss of Personnel? Five Points

Situation: The CEO of a small company is concerned that the loss of a key individual could seriously impact operations. Alternatives include adding an assistant to the affected department or cross training another individual who could serve as a short-term back-up in case of an absence of 2 weeks or more. How do you mitigate temporary loss of personnel?

Advice from the CEOs:

  • In cases like the current pandemic, planning for multi-week personnel absences is essential. Though systems are documented, subtleties of key jobs may not be documented. This is where cross-training becomes an important alternative.
  • Train another employee as a backup for the person in question and refresh the training every 2-3 months. If the company runs into an emergency due to short or longer-term loss of an individual, hire a replacement for the individual and have the individual who is cross-trained train the replacement.
  • Have the key individual and the individual who is cross training refine the ISO 9000 documentation as the key employee trains the back-up individual. This will assure that ISO 9000 documentation is being updated regularly.
  • Establish a plan with appropriate procedures that all positions must have a back-up. Include this within the company’s personnel procedures.
  • Rewarding the key individual with a bonus for selecting and training his or her back-up is the wrong thing to do. It’s both the wrong incentive and the wrong reward. Training a back-up is an essential part of each key employee’s job, not a special task that deserves separate recognition or reward.

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How Do You Construct a Deal to Expand? Three Areas of Focus

Situation: A CEO has an opportunity to combine with another business to expand their market geographically. A lead to work with the current owner to manage the transition has been identified. A second option is to bring in a new manager from the outside to manage the transition and the expanded business. How do you construct a deal to expand?

Advice from the CEOs:

  • Basics that are needed prior to initiating negotiations:
    • Define what the seller wants – both financially from the sale and in terms of ongoing involvement in and support of the business.
      • Without a lengthy transition period, the value of the business is not significant. The value is in the current owner’s relationships – both with clients and his team. It is critical to retain both.
    • The other big question is what the seller wants personally.
      • Is it legacy? Is it the opportunity to transfer knowledge?
      • The seller knows the CEO’s company and approached them about a sale. Play on this.
    • Are there potential complications to the deal?
      • Do any non-compete clauses exist with other companies?
      • Do other agreements exist that impact the value of the acquisition?
  • What other aspects of the deal does the group recommend?
    • Within the new organization, put the current owner under the recommended lead. This gives the lead more prestige and demonstrates trust. It also raises the bar for the lead.
    • A bonus is that the current owner and the lead get along. This will facilitate the current owner’s mentoring of the lead – like the child that he wishes would have taken over the business.
    • The current owner is a savvy businessperson, and the existing relationship between the seller and the lead will facilitate his ability to pass this knowledge on to the lead.
    • The current owner’s key assets are his connections and knowledge of the business. This will include subtle aspects to the business of which only the current owner is aware.
  • The option to bring in an outside office manager potentially complicates the situation.
    • Bringing in an outside office manager to manage both the lead and the current owner is the worst case – the most likely to blow up.
    • This arrangement puts the current owner two reports away from the CEO.
    • With an additional person involved, the personal dynamics become more complex. Keep it simple.

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How Do You Optimize Your Sales Organization? Seven Points

Situation: A company currently has inside and outside sales teams, and coordinates efforts with SalesForce.com software. Their strategic initiatives are to double inbound leads, create a triage approach to new leads and to lower the cost of sales. How do you optimize your sales organization?

Advice from the CEOs:

  • When outside sales claims that they have limited band width, it is necessary to find how they are spending their time.
    • If they are not spending most of their time developing and closing sales, adjust the system so that they are concentrating their efforts in these two areas.
  • Decide what the sales teams are selling – set up the organization so that it complements the sales goals and objectives. Below are alternatives used by others.
  • One company has evolved “product managers” who are like sales engineers but more experienced. They are highly paid and highly skilled. They are business oriented, with good communication skills, well rounded, and have successfully closed sales.
    • In contrast, the role of this company’s “salespeople” is to follow up. Lower level salespeople are tasked with generating leads for the product managers
  • Another CEO observed that what the company has done up until now all has worked well. The question now is how to mature their system?
    • This company’s solution has been to use outsourced Inside Sales Support (ISS) based abroad to find prospects.
    • ISS personnel are teamed with and managed by the company’s salespeople. Salespeople develop their own system. The ratio is  1/1, but outside personnel are ½ time for each salesperson.
    • This allows the company to reduce services quickly if they become overwhelmed.
  • A third company uses a 3-tier system:
    • Prospect development.
    • Inside sales for lead evaluation.
    • Outside sales – get hot leads from inside sales, develop, close.
  • Consider this alternative: instead of a shotgun approach, target three accounts – Elephants. One company did this with an intense 6-month focus. The President and CEO drive these sales. The result: they have closed one, one is pending, and a third is likely to close.
  • Another CEO observed that the essential issue appears to be an efficiency problem.
    • Too much of the outside sales time adds limited value to marketing or the company.
    • Redirect their efforts to hunting.
    • Once an account is closed, sales is out of the picture. The customer transitions to the customer service organization for additional sales and service.

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How Do You Shift Culture as the Company Grows? 12 Challenges & Countermeasures

Situation: A company has grown through its expertise consulting for other companies. For its next growth step the CEO and Board want to shift to a project basis. This entails several changes, from compensation to organization and focus. How do you shift culture as the company grows?

Advice from the CEOs:

  • Risks & Challenges
    • Biggest risk – dissatisfied employees who see less billable income per hour and may not see the “more hours” part of the picture.
    • The biggest personnel challenge will be those who have been with the company for many years, and who will see the most change – maybe not to their specific practices if they can bring in business, but on the project side.
    • Communication is a critical challenge, and also the best way to avoid landmines. Put a velvet glove on the presentation of the opportunity: “This is good news – we know that the low hanging fruit is now mostly gone, and that the remaining fruit is higher; to counter this we now have more options.” Carefully prepare communications to both management and consultant team members.
    • Another potential landmine – the impact on the company’s reputation if it blows up after a year. Set appropriate expectations – the company is introducing a new program rather than a wholesale rebranding.
  • Countermeasures to Mitigate the Risks
    • Maintain a structural option that preserves the old model for those who can bring in new projects and who prefer this model. For them, the new model is just an option that can help tide them over if there are gaps between the projects that they bring in.
    • Present the project option as new opportunity. Give more senior and experienced consultants priority in choosing whether to participate or not in new project work.
    • Plan and create the ability to assess the old consultancy model vs. the new project model. This will be especially important when individuals are spending part of their time in each area.
    • Create a set of metrics for each business – the consulting and project businesses – to measure whether they are on track. Identify and monitor the drivers for each business.
    • Keep the title Consultant on consultants’ business cards – Consultant, Sr. Consultant, etc. Allow them to continue to take pride in their role.
    • Move to the new model through a planned phase-in but retain the option to adjust the speed of transition between the old and new models. This will allow sensitivity to changes in the environment.
    • Don’t consider an immediate and complete rebranding – think in terms of introducing a new product under the company’s well-known brand. Plan a gradual transition of business to the new model. Introduce the new product as a new offering. As it picks up steam, gradually move brand identification and promise to the new model.
    • For the new project model, create incentives for project performance. Show team members that while the hourly rate may be less, if they perform as a team they will share the upside through project bonuses.

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How Do You Create Consistent Business Operations? Seven Thoughts

Situation: A CEO is concerned that business operations are inconsistent. Employees are always coming to her for answers instead of working things out themselves. As a result, the CEO is continually focused on operational details as opposed to strategic direction. How do you create consistent business operations?

Advice from the CEOs:

  • Make managers live up to their titles.
    • Require them to go to each other to solve problems first, instead of always asking the CEO.
    • When they ask a question, don’t give them the solution, but advice on how to solve it.
    • Require them to present solutions vs. problems
    • Be willing to spend money on their solutions.
  • Answer all questions with questions.
    • Ask them for their recommendation.
    • Keep asking until they come up with the answer.
  • When one starts to delegate, it hurts for a while but will work itself out.
  • The CEO should not be doing “regular jobs” that are really employees’ responsibilities.
  • How has implementing these suggestions impacted other companies?
    • Businesses have become more diversified.
    • CEOs are focused strategically vs. tactically.
    • Businesses are more successful and profitable.
    • CEOs enjoy coming to work again.
  • Create a sales intern program.
    • Hire 4 sales interns for $10-15/hour – with the offer that after 3 months there will be full time jobs for those who prove they can sell.
    • Have the top 4 sales staff design the intern program – call response scripts, responsibilities, etc. – subject to CEO review and approval.
    • Assign one intern to each of these 4 sales staff in mentor/mentee relationships. This will demonstrate the capacity that each has as a sales manager.
  • Should younger workers be handled differently?
    • Allow flexibility – where appropriate – on hours and how they do their jobs.
    • Responsibility will also vary by pay level – higher pay equals more hours and more accountability.

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How Do You Plan for Patent Expiration? Six Suggestions

Situation: A company is facing the expiration of the principal patent for its main product. There are subsidiary patents which still have life. Currently, there are no competing products, but several companies understand the technology. How do you plan for patent expiration?

Advice from the CEOs:

  • Think of this as a two-step process:
    • Step 1 – Step back and look at what the company has:
      • Patents – including the claims that have been awarded on all company patents.
      • Facilities – capable of manufacturing current products, but also additional products, perhaps with a minimum of additional equipment.
      • People – competent staff running manufacturing operations, and tight office operations.
    • Step 2 – Loot at where the company could go and evaluate the markets where the existing technology is applicable:
      • Work with outside, imaginative people who can take a fresh look at the options.
  • Looks carefully at the claims in all the company’s patents.
    • What do they cover?
    • Is there an opportunity to extend current claims through process patents?
    • Caveat: a company can file for a process patent on anything that has been for sale on the market for less than a year. However, if they have been selling a product covered by this application for more than a year, they cannot.
  • Look at other markets – companies that could license the company’s technology, or with whom the company could partner to provide new consumer-oriented products:
    • Is there inexpensive, affordable equipment that would enable the company to produce additional products in the current location?
  • Think outside the box: what business is the company in? Think more broadly than the current market about where high value opportunities exist. These can be low to medium volume, high price/margin or high-volume lower price/margin.
  • Patents are not the only protection – trade secrets also work. 3M’s primary IP strategy, particularly on their adhesives, etc. is through trade secret – both for low and high-volume products.
  • “Product” patent extensions have limited utility. They are easy to design around. “Process” patents have more utility. These can be licensed at low cost per application in high volume applications and provide a nice royalty reserve stream.

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How Do You Increase Brand Awareness? Six Observations

Situation: A CEO wants to increase brand awareness for her company and its primary service. The objective is to increase the client base and drive revenue growth. They have identified their primary growth opportunity and differentiating advantage. What else should they do? How do you increase brand awareness?

Advice from the CEOs:

  • What is lacking is a clear vision, path, and marketing plan. These are prerequisites to deciding either the solution or hiring a high caliber individual to execute the plan.
  • What steps are involved?
    • Survey 20% of current clients. Ask “why did you choose us?”
    • Develop the tools to track and show clients service performance online.
    • Use these same tools to show company performance online.
    • Tune messaging to potential clients to highlight demonstrated service performance.
    • Play elite – as the company’s name and reputation grow, clients should aspire to being accepted as clients.
  • Think long-term.
    • What is unique about the company’s ability to manage and extend the longevity of clients’ key assets?
    • How well prepared are potential clients to manage this on their own?
    • How does the company help potential clients to manage and extend the life of those assets?
  • Once there is a clear plan, fine-tune the internal focus of the company to align with the plan.
  • Increase involvement in communities where potential clients are found.
    • Host seminars and webinars on relevant topics.
    • Evening seminars in locations that potential customers congregate – existing clients attend and bring a friend.
    • Focus on referrals from existing clients – with a reward – a free consultation.
    • Look for non-competing service providers who can be good referral sources.
  • Make it easy for potential clients to switch. Use mass-marketing to spread the word with a multi-tiered approach to different segments of the target market.

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How Do You Respond to a Price Increase from a Supplier? Six Points

Situation: A small company has a parts supplier for product that they sell to their most important customer. That customer’s specs are “copy exact” on components for existing products; also, their new products are usually based on existing components. The supplier significantly raised prices on the parts supplied to the company. How you respond to a price increase from a supplier?

Advice from the CEOs:

  • This is an extremely sensitive situation. One solution is to not to rock the boat. The reality is that the company needs the parts, and it will take a lot of effort to replace them with parts from an alternate vendor. Just continue the relationship. Quit worrying about it and milk it for as long as it lasts.
  • Find out what caused the supplier to raise prices. The supplier needs to understand that to preserve the company’s margins they may have to raise prices to the final customer. This may threaten both the company’s and the supplier’s business with the customer.
  • Make sure that the supplier understands the company’s costs: office, salaries, equipment, maintenance, and local regulations that are unfriendly to business and difficult to deal with. Ask them to reconsider or reduce the price increase.
  • Assure that the supplier understands the value that the company provides and the importance of this collaboration to the business and profits and bottom lines of both companies. Leverage this value to get the price that the company needs.
  • Renegotiate the relationship to assure that supplier can’t go around go around the company and sell directly to the final customer.
  • Start building relationships with alternate suppliers.

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