Sunday, March 27, 2011

Live from the eye of the storm (a Theory of Constraints lesson)

"Now let's go live to Suzy who is reporting live from the level 5 hurricane... Suzy, how is it out there?"

"Well Bob, I can barely stand up as I'm getting pelted with hail in 70 mile per hour winds.  I hope you can hear me because I can't see the camera man 2 feet in front of me.  Things are pretty crazy out here; the entire area has been evacuated.  I expect to be completely blown off my feet any minute, so back to you Bob." 
"Thanks Suzy, stay safe out there.  Now, in other news ..."

Have you ever noticed that every network that reports the weather also reports it "live from the eye of the storm"?  I have even seen this live reporting watching the news in China and Thailand too.  I did not understand a thing during the news, except when they were reporting "live from the eye of the storm". 
I said to Brad - hey look they're reporting "live from the eye of the storm" here too.  We mused over the way the warm dry newscaster interacts with the reporter that puts their life in danger.  

Well, the week before last I finally heard about a limitation to this kind of live reporting.  Evidently it's nuclear radiation.  Many stations told their reporters to stay at least 50 miles away from the troubled nuclear reactors in Japan.  I was relieved.  

But before they decided to pull back, reporters were right in the thick of things.  It seems to me that if nuclear radiation is where you draw the line, you would know that right from the start.  (NOTE:  they may have had a trigger for pulling the reporters back, I don't know.  It just didn't seem that way.)

Deciding after the fact can be problematic.  You might try to stick with the current approach, policy or plan for too long.  But, if you know what would cause a change of plan, you'll identify the need for the change and then change faster.  

Now I realize that you can't predict everything, but many things can be predicted.  For example, what will you do, how will you handle these situations in your business:
  • You lose 25% of you business in 1 day.  (heaven forbid, knock on wood)
  • A customer threatens not to pay $750,000 in products or services.
  • You get sued.
  • You way oversell your capacity.
  • You work through your entire backlog (while sales remained constant) because you're using the Velocity Scheduling System or Project Velocity System.
  • You're NOT going into the red zone of the buffer anymore which is slowing your ability to continuously improve.  (Remember we expect to go into the red zone of the buffer about 5% of the time so that we can collect those whys and identify our biggest disruption to flow so we can identify our one and only improvement project.)
  • And, what's your trigger to go out with your mafia offer - how will you know when your operations are ready?
 What is your list?  You don't have to get crazy, the first 3 I listed above, I hope, are very unlikely to happen to you.  The remaining items, though, may be more probable since they are negatives due to success.  So what things are most likely to happen at some point?  Then starting with the highest probability one, how could you prevent or best deal with each?

 By doing this exercise, you will be improving your systems and processes to protect against any negatives from success and from stagnation.  This will make your company more viable and more able to handle growth.  

In Theory of Constraints (TOC) this is called coming up with your Negative Branch Reservations.  We like to do this NBR analysis whenever we're going to make a change/improvement.  But most of us don't take the time to do this.  In particular, I very rarely see that clients have prepared for their negative branches to SUCCESS.  So basically I'm suggesting you do this now. 

 For example , if you don't know what your trigger is for shortening your buffer, it may not get shortened (or shortened fast enough) and your continuous improvement may be stalled.  But if instead you include in your SOP that when we've had 1 month of 1% or less stuff going into the red zone we are going to shorten our buffer -- now you know, and chances are it will get done and done quickly.  (something we do in the Velocity Scheduling System Coaching Program -- scheduling for custom job shop)

 I'm just suggesting a little preparation instead of waiting until the reporter's hair is falling out and deciding that you should have pulled out sooner (not that that happened).  

 How many people do you know that did not react fast enough in the 2008-2009 down turn?  How many of those did not live to fight another day?  What are YOU doing to make your company more viable to ensure you can take market share during the next downturn?

 Remember -- hope is not a strategy.  

 Let me know what you think, by leaving a comment on this post.    

Wishing you success.,
Dr Lisa
President, Science of Business

Sunday, March 13, 2011

I need help ... Theory of Constraints Mafia Marketing

We all want to increase sales, but getting new customers can be a challenge. In fact, this was the number 1 challenge readers of this newsletter listed (click here to sign up).

And it’s no wonder, according to a 2009 Marketing Sherpa study if you have 100 opportunities only 4 are likely to move from “sales ready lead” to “qualified prospect” to an actual customer.

And those numbers are based on “averages”. If you have a more technical sale (which many of you do) requiring a higher quantity of information transfer where the quality of that information, the timing of the delivery and the method/quality of that delivery can all cause your actual average to be lower.

But there is some good news. One proven way to increase conversion rates is to get the prospect to seek YOU out.

How much do you love it when a customer or prospect comes to you with what basically amounts to “I need help…”? If you’re like me, you LOVE it LOVE it LOVE it!

WHY do we love it?

* Because if they were willing to ask for our help:

* They know enough about what we do that they think we have the expertise to help; and

* That they, at some level, already trust us.

Which means the normal conversion rates don’t apply -- we have a much higher likelihood of winning this business.

If you didn’t trust someone, would you ask them for help?

If you didn’t think someone could help you, or thought they were an idiot, would you ask them for help?

No! So if someone does ask you for help. This is a really good thing.
So one of the key marketing questions (if you want more sales) is – how do I get more existing customers and new prospects to ask me for help on work I want to do and I’m qualified to do?

Here’s the formula we’ve been using to elicit the "I need help" response:

1. Shine a light on the problem. (there needs to be a message to market match)
2. Verify or validate the problem.
3. Show that it's even worse than that. (don’t exaggerate, be truthful in all of this)
4. Provide the light at the end of the tunnel.

And yes, for the Theory of Constraints fans out there you’ll notice that this is based partially on the TOC Buy-in process. Step one would be equivalent to “Agree on the Problem” and step four would be equivalent to “Agree on the Direction of the Solution”.

Let’s go through this with an example. Let’s say that I sell tooling for machine shops. And shops that use my tooling can reduce their setup times typically by 25%.

1. What problems do your customers or prospects have, that are significant, but that you can help solve?

They have long setup times. So long that a fair amount of their production capacity is spent setting up machines. Capacity that could be used for shipping more jobs.

2. How can you verify or validate this problem?

The National Institute of Standards and Technology ( reports that US manufacturers waste 25% to 65% of their capacity being “ineffective”[1]. That’s a large portion of US manufacturing capacity that is not productive.

[side note: I had to go find this statistic, but it wasn’t hard to do. And look at the power of having a government agency showing that what I’m writing about is important.]

3. How is it even worse than that for your particular target market?

And custom machine shops are undoubtedly at the highest end of that spectrum. Machine shops rarely have the luxury of staying in one setup for any length of time. The nature of a custom business is small runs that don’t often repeat.

4. What kind of hope is there for solving this problem?

But, a number of custom machine shops are turning these statistics around using tooling that’s designed for quick setups. This tooling costs the same as traditional tooling, the only catch is that you will need to do a little up front work with your tooling supplier.

Now, I do not sell tooling. But if I did, I could use this information in my marketing to get existing customers and prospects to respond and fairly quickly ask for help designing tooling that will reduce their setups. Will everyone? No, of course not. But the best ones will (the ones that really relate to the problem) and they are much more likely to turn into a sale.

The response you’re after could be to get them to download a report on using tooling to reduce setup times or to sign up for a webinar or to sign up for a consultation with you (depends on your sales process and what you’re selling).

We are closing over 67% of the people who contact us from this type of marketing. That means 67 sales out of 100 instead of 4. And selling Velocity Scheduling System and Mafia Offer Boot Camp is not only a technical sale, it’s a counter intuitive one. So before you go dismissing this technique, convinced it won’t work for you – I suggest you give it a try.

If YOU generated your marketing materials or wrote your newsletter and articles with the objective of getting prospects to ask for help – would you get a few more quality leads?  (that's Mafia Marketing)

If you wanted help applying this concept to your business -- getting more customers and prospects to contact YOU – wouldn’t you contact me? :-)

Let me know what you think, by leaving a comment on this post.  I read ALL your comments!

Wishing you success,

Dr Lisa
President, Science of Business

P.S. FOR CUSTOM JOB SHOPS ONLY: The next Velocity Scheduling System Coaching Program starts on March 28.

P.P.S. Ready to increase sales? Need a Mafia Offer? The ON-LINE Mafia Offer Boot Camp is open for registration!