How Do You Grow Revenue?

When we recently surveyed a diverse group of business leaders about the greatest challenge facing their organizations in the near term and long term, we heard from most that by far the biggest challenge was to grow revenue.

Many of them have accomplished great productivity improvements, but until demand increases, the additional capacity cannot be put to profitable use. In fact, throughout the world, economies are suffering from excess capacity which leads to high levels of unemployment.

When we don’t have enough sales, our tendency is to cut jobs, cut capacity and lower costs. But, as many of you may know, this approach does nothing to grow sales revenue and often results in some dire circumstances.

Clearly there are alternatives… and we plan to present additional information on this subject going forward. In the meantime, maybe you’d like to share some success stories about how your organization has grown sales revenue?

Motivation for Improvement

In order to make the kinds of improvements in business that we all aim for, we need to motivate people to engage their brains to the fullest, examine the current work processes critically, think deeply about root causes, and think expansively about possible solutions. We want them to consider alternatives, anticipate and minimize risks, implement planfully, and measure and evaluate results. And we usually want people to do all this while keeping up operational responsibilities as well.

So the challenge of motivating our team becomes very important.

In his recent book, Drive, the Surprising Truth About What Motivates Us, Daniel Pink explores the impact on performance of different approaches to motivation. His research might surprise you!

For more details, we highly recommend his book. You might also read more on the subject in one of our recent newsletter articles.

Partners in Improvement

Conway Management Company has recently created a “Partners in Improvement” group, which is comprised of select experts and leaders in Improvement from around North America.

We conduct periodic meetings, during which participants share fresh ideas, best practices and solutions to common problems and challenges associated with Continuous Improvement. Over time, we plan to post some of our findings in this blog and on the Conway Management Website – so please stay tuned!

We hope you find this of interest and welcome your input as well.

Method to Madness?

Anybody might make an irrational decision now and then, right?

For example, anyone might occasionally spend more on something than it is worth, become too attached to a particular investment, make an employment decision based on gut feel when the facts are against it. But in his book, Predictably Irrational, Dan Ariely asserts that in addition to being vulnerable to an occasional random bad call, we human beings are predictably irrational. There is, it seems, some method in our madness.

Remember those supply/demand curves in Economics class that have us neatly arriving at a price where supply and demand are in perfect equilibrium? Hogwash!

Ariely cites a number of experiments that show that that the prices at which people are willing to buy or to sell are influenced by factors that have absolutely nothing to do with the intrinsic value of the object or service. Decisions humans make about the price at which to buy or sell are influenced by factors that are, in fact, quite irrational – but predictably so!

For example, in one experiment, Ariely passes out to his class a sheet of items he intends to auction off. But first he asks the group to write down the last two digits of their social security numbers next to each item and also to note whether they would, hypothetically, be willing to pay that price for the item. Then they are allowed to bid on any of the items they would like. When asked if the silly exercise with the social security numbers had influenced their bids, the participants said “no way!” – yet those who wrote social security digits between 80 to 99 placed bids that were 2-3 times higher than those students whose last two social security digits were between 00 and 20.  Ariely concludes that market decisions can be greatly influenced simply by having considered whether an item was a good deal at a certain price – even if that price was obviously randomly selected.

Ariely presents other experiments designed to identify the hidden forces that affect our decisions, many of which are irrational in a strictly economical sense. What are the implications for business if buying and selling decisions are so strongly influenced by irrelevant factors? Can a better understanding of your customers’ decision making process help you sell more and grow?

Pricing is not the only way that human decisions are influenced in a predictably irrational way. In other experiments, Ariely tests the forces that affect honesty and the willingness to cheat to make a buck. In these experiments, he found that people were predictably less likely to cheat if they were reminded of an obligation for honesty (unenforceable though it was) immediately before the opportunity to cheat presented itself. Interesting.

Even without the toothless exhortation for honesty, participants refrained from wholesale cheating for cash rewards — even when they could feel sure of getting away with it. There was some cheating to be sure, but not nearly as much as the opportunity deliberately allowed. But when the rewards were provided in the form of tokens instead of cash, the amount of cheating soared. The tokens could be exchanged for cold, hard cash at a table just a few feet away, so they were nearly the same as cash. Nonetheless, the scruples that prevented people from dishonestly acquiring actual cash lost their efficacy when those people were faced with an opportunity to dishonestly acquire a cash-equivalent!

If scruples lose their power and influence over people as they become removed from actual cash currency, what are the implications in our increasingly cashless economy? What are the implications for the contingency compensation packages that have become so commonplace? Could this phenomenon have led to some of the previous decade’s egregious instances of ‘cooking the books’ from Enron to Madoff?

Predictably Irrational illustrates interesting facets of human decision making. Understanding the patterns of the irrational biases and influences might help us anticipate and avoid unintended consequences of the decisions we make.

What do you think? Do you see any signs of this behavior in your experience?



Quantification… Are We Working on the Right Things?

When engaged in an improvement initiative, two key questions must be answered:
(1) Are we working on the right things?
(2) Are we going about it the right way?

The second question is usually the easier of the two. Are we … involving the right people, gathering all the facts and data about the current situation, looking deep for root causes, and thinking broadly about possible solutions, etc.?

But the first question is critical and potentially more challenging… Are we working on the right things? Certainly going about improvements the right way — methodically, data-driven, with the right people, etc. — is important to your success. But far more important — and often more difficult — is identifying the right things to work on.

Quantifying the waste is an essential tool for separating the vital few from the trivial many opportunities. To make the best possible use of this tool, you might ask yourself these questions:

  • Am I creating real gains or merely shifting the shape of the waste?
  • Am I missing the rest of the iceberg?
  • Where does the problem fit into the overall process?
  • Am I correctly valuing the cost of lost time?
  • Am I so focused on the snags in the day to day work that I miss the game-changing opportunities in front of me?

For additional examples and ideas on how to best quantify waste, click here

Productivity Gains – How they Really Impact the Bottom Line

Increasing productivity or reducing the amount of “people time” associated with various processes usually sounds like a good idea. In a few instances, the impact of increasing process productivity on the bottom line is clear and simple. It may reduce the expenditures on overtime or contract workers.

However, beyond those few cases, productivity improvements for employees do not directly reduce expenditures, but instead increase capacity; and the extent to which these improvements benefit the bottom line depends on how that capacity is put to use.

The impacts can be extremely profitable or can amount to nothing — or worse!

Click here to read more…

Are We Learning?

The history of commerce is littered with organizations that have erred in big and varied ways. There were Wang’s strategic errors, GM’s stifling bureaucracy and short-sightedness, Digital’s burdensome overhead, Enron’s dishonesty, AIG’s recklessness, and… more recently, there are Toyota’s troubles, which many believe are troubling in an entirely new way ( see related article).

But there has been more than enough said and written about all of these situations and miscues – so, the question is, what lessons have we learned? We look forward to your thoughts!

Challenges and best practices associated with continuous improvement