Friday, August 13, 2010

Theory of Constraints Mafia Offers: Dealing with a Market Constraint EXCERPT

Here is an excerpt from of Chapter 22 Mafia Offer:  Dealing with a Market Constraint of the Theory of Constraints Handbook

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Introduction: What Is a Mafia Offer?


A Mafia Offer sounds like something out of a movie, not something that could seriously help you make more money in your business by increasing and controlling your sales.

Dr. Goldratt first introduced the concept of a Mafia Offer in his book It’s Not Luck (Goldratt, 1994, 133). Later, he defined a Mafia Offer as “an offer they can’t refuse” (Goldratt, 2008, 67). But in writing, he more frequently refers to it as an unrefusable offer (URO; Goldratt, 1999, 120) and more recently he (and Goldratt Consulting) emphasizes the need to establish, capitalize, and sustain a decisive competitive edge (Herman and Goldratt, 2008).

For this chapter, I will use the term Mafia Offer and have defined it as follows: An offer so good that your customers can’t refuse it and your competition can’t or won’t offer the same. In addition, I will refer to the operational improvements required for a Mafia Offer as the decisive competitive edge, operational advantage, or competitive advantage.

A Mafia Offer is simply the offer you make to your market—your prospects and customers—to make them desire your products or services and something that your competition cannot quickly match. And, of course, the offer you make is a combination of your products, services, and how you deliver them. Moreover, for your offer—the solution you’re selling—to be unrefusable, you are most likely offering something of equal or greater value than the price you are charging.

Many people confuse a Mafia Offer with a unique selling proposition (USP), customer value proposition (CVP), or a sustainable competitive advantage (SCA).

At first blush, it would seem that a Mafia Offer is similar to these other terms; however, when most people are talking about these alternatives they are actually quite different from what TOC experts mean by a Mafia Offer.

USPs, CVPs, and SCAs take what you already do and state it succinctly and with more specificity aimed at one or a few of their customers’ problems or gaps in current market offerings. These alternatives can be Mafia Offers, but most of the time they are not. Furthermore, an SCA is, in my view, an operational or technological (although these are not typically sustainable) advantage and not an offer per se.

Most companies offer solutions that solve their customers’ various problems or symptoms.  With a Mafia Offer, we are addressing our customers’ core problem as it relates to doing business with our industry.

A Mafia Offer typically requires that you do something different (make operational improvements to establish a decisive competitive edge) to address your prospect’s core problem. These operational improvements allow you to actually deliver something unrefusable to your customers and something that your competition can’t or won’t do because they are not willing to or don’t know how to make the same improvements. In other words, you have to establish an operational advantage.

In this way, a Mafia Offer is a sustainable market offer built on this advantage. Mafia Offers are not a positioning or a tag line and “can only be created by satisfying a significant need of the market to the extent that no other significant competitor can” (Herman and Goldratt, 2008).  A Mafia Offer is where we start if you have a market constraint.
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Spend just two hours reading this chapter and if you don’t get at least one good idea for your business, contact me and I will give you a refund!

—Dr. Lisa
That’s a Mafia Offer and it’s real. The purpose of this chapter is to introduce you to the Mafia Offer—the Theory of Constraints (TOC) marketing solution. The chapter progresses from the discovery of what a Mafia Offer is, to the guidelines for creating an offer, to how to present an offer, and ends with how the reader can create their own Mafia Offer.

The best way to read this chapter is in order. Each section builds on the subsequent sections, so that when you reach the summary you will have a very good understanding of what we in TOC call the “Mafia Offer.”

Click here to get the BEST price for Chapter 22 on Mafia Offers! (this is for the DIGITAL version of Chapter 22, there is not a printed version of just Chapter 22).  Amazon offers this as a Kindle version but you DON'T need a Kindle to purchase and read it.  They offer Kindle readers for the PC, Mac, Iphone, Ipad, Blackberry and Android.
 
The PDF version is ONLY available here:  Mafia Offers:  Dealing With a Market Constraint

Copyright 2010 Science of Business

Thursday, August 5, 2010

Theory of Constraints Cloud Thinking Process Tool 4 Conflict Resolution

I just completed my first Stompernet faculty office hour where I covered the Theory of Constraints Thinking Process tool called the Cloud or the Evaporating Cloud.  The cloud is used to understand the root cause of undesirable effects and/or conflicts.

While the cloud is part of the complete Theory of Constraints Thinking Processes, it is also a very useful stand alone tool.  You can use this quick reference guide to get you started. 

Here is the one page overview I created for quick reference:  http://budurl.com/cloudsum

If you want a book on the subject, here's a couple that I recommend:
Thinking for a Change by Lisa J. Scheinkopf.
The Logical Thinking Process by H. William Dettmer (Bill Dettmer)

And in this one, Dr Goldratt talks about how to think and why clear thinking is so important:
The Choice by Eliyahu M Goldratt  (it's a novel)

If you want to be notified when the video is ready, sign up for the Theory of Constraints Ask Dr Lisa newsletter, here:  http://www.scienceofbusiness.com/free-stuff/free-newsletter.aspx

Here's to Maximizing Your Profits!

Dr Lisa
(c)Copyright 2010, Dr Lisa, Inc. All rights reserved.

Tuesday, August 3, 2010

7 Synergies for Business Success -- Dr Lisa interviews Pam Watson Korbel

I interviewd Pam Watson Korbel on the 7 Synergies for Business Success.  We found a lot of similarities between what Pam does and recommends and what we at Science of Business do (Theory of Constraints) and recommend.  Here is the video interview and below is Pam's article on the 7 Synergies.  Please leave your comments to this video!



7 Synergies for Business Success



Who can deny that they want more money, less work, more fun.™ In fact, no one has ever told me that this SmartGrowth brand promise was senseless. More often, they want to know the formula to achieve this level of freedom. The seven synergies for business success will lead you to this fountain.

Many of you will work hard to set goals and devise business plans to achieve growth... in sales, in profits, in business valuations. At the same time you probably feel a little “befuddled” about what to expect given the current state of the economy and business environment.

The following list of “tried and true” business synergies come from over 20 years of experience working with hundreds of small and mid-sized companies throughout the United States. The principles work during an economic upturn or downturn. Whether it was the Mid-western recession of the mid-80’s, the early 90’s California recession, the late 90’s boom or today, time has proven these growth principles. Keep them in mind as you plan today and in the future. Each synergy includes a checklist of tangible actions you can take in your business to implement each principle.

1. Grow from the inside out.

To profitably grow your sales, build off the foundation already proven successful in your company. Focus on your customer base and your product and service portfolio. Prioritize opportunities according to this list:

• The easiest way to grow your sales and profit is to sell more of your existing product to your existing clients.

• The second easiest way is to sell new products to existing clients.

• The third priority should be to find new clients for your existing products.

• Do not create new products for customers you don’t have yet.

Another way of looking at this is that it is easier and less expensive to find new products for existing customers than it is to find new customers.
___ an ideal client profile exists

___ sales and marketing budget that targets existing and new customers

___ system for competitive research

___ defined process to generate leads

___ defined process to maintain client relationships

___ defined process to submit bids and write proposals

___ a process exists to identify opportunities for new products and services

___ existing customers are served first each day

2. Develop a “brand promise” and live it daily.

Once you have been in business for two or three years, your customer base is large enough that, through a focus group or interviews, you can uncover why customers “really” buy from you. That is brand promise. When you know and understand that promise, integrate it into every aspect of your business. Just think of McDonald’s brand promise to provide you with consistency. Do they live that promise daily? Would they be where they are today if they had not?

___ clients provide referrals

___ company maintains a client/prospect data base

___ system for regular customer feedback and research

___ system for gathering input about products and services

___ incentives provided for repeat business with company

___ the company has a written definition of quality

___ vendors must meet standards for quality

___ company defines a competitive market position that is unique

___ the company can measure “real” image and reputation

3. Put people first.

On one of my new motivational calendars this saying appears: “Keep your employees happy and they will keep your customers happy.” Another page says, “Companies don’t succeed, people do.” Whether times are good or not, the most successful companies have found that people are the critical difference to long-term success in a competitive environment.
___ employees are encouraged to cross boundaries

___ turnover is below the industry average

___ an employee appreciation plan is in place

___ an employee recognition system is in place

___ managers may deviate from defined policies to be flexible with employees when it does not hurt the business

___ employees receive on-the-job and/or classroom training every year

___ employees understand what decisions may be made without management approval

___ the company has an employee manual

___ every employee has a job description

4. Values validate valuation.

Having worked at Enron in its early days of the 80’s and now lived to see where it ended up, I have no better testimony as to the importance of defining company values and living them. In the end, they do validate your company’s valuation.
___ prospective employees are screened for their fit with company values

___ a written, company values statement is provided in the employee handbook and visibly posted throughout the company

___ the executives discuss the company’s values statement during employee orientation and at least twice a year at company meetings

5. Lead to create and maintain wealth.

Michael Gerber of the E-Myth has a great saying, “Owners need to work ON their business not IN it.” How much time do you spend every week working IN versus ON your business? Your job description and duties should be oriented so that the business operates without you. Those businesses have higher valuations.
___ an exit plan for the business exists

___ succession plans exist for each shareholder working in the business and every key manager and key employee

___ the valuation of the business is re-evaluated annually

___ the industry system for establishing business value is well understood (value drivers, methods of valuation commonly used, trends)

___ owners spend four or more weeks a year away from the business

___ strengths, weaknesses, opportunities and threats reviewed twice a year

6. Hire both leaders AND managers.

Leaders work on strategy, vision, mission, values and goals. They rely on managers to create systems, implement goals, and deliver the brand promise. Every business needs both leaders and managers. The person who can be both a leader and manager is truly gifted and rare.
___ regular meetings are held at the shareholder, executive and employee levels

___ the company has 5-year, 1-year, quarterly and monthly goals

___ the company posts its mission, vision, values and goals

___ the company has a business plan (sales forecast, expense budget, organizational chart and plan)

___ outside advisors meet regularly with the shareholders and management

___ employees document policies and procedures


7. Monitor, Monitor, Monitor…whatever you measure will improve.

I have never seen this fail. When clients are short on cash and they start measuring it, cash improves. When businesses do not have enough sales to cover overhead and they monitor sales daily, sales increase. When employees overspend and management starts monitoring, expenses decline.

___ each business function develops monthly and quarterly goals

___ each business function has one to four key numbers that it monitors via a written report

___ each employee understands his/her one key measurement

___ each employee has a performance contract or scorecard

___ each employee has a performance review twice a year

___ employee compensation is driven by performance and merit

___ company measures itself against a budget

___ company compares results to industry standards and sets goal to exceed the industry

___ financial statements are produced by the 10th of each month

___ monthly sales reports are prepared by the 5th of each month

___ sales are measured daily


The Intangible Synergy – The quality of the CEO is directly proportional to the quality of the company.

Great CEOs incorporate the skills of discipline in their personal lives and those skills carry over to company results.

___ Company executives, managers and employees follow a time management discipline.

___ The company follows a regular meeting schedule.

___ Wellness is promoted among all stakeholders.

___ Personal balance is encouraged among employees.

___ All stakeholders are satisfied with the communication practices.

___ Stakeholders share a positive affirmation that the company will succeed.

With these simple tenets, there is no reason for more money, less work and more fun™ to be a mystery. If you have not started setting goals and developing a plan for this year, start now. If you have, did you incorporate these guidelines?

The big payoff if you follow these guidelines is simple freedom to choose your activities. By growing successful businesses, women business leaders will achieve the freedom to spend more time on corporate boards, community service and public policy.

You can contact Pam at http://www.smartgrowth.com/.