Proxy Unblocker Journal

Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. TOC: a new frame of mind for sales Peter Drucker, Forbes Magazine, 5 Oct 1998 Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Frequent re-organizations. A new organization chart every quarter. The eternal problem: the customer project is in Austria, Germany, Belgium, the U.K. and Japan. Who will get commission credit? Counting fractions of people, and sophisticated schemes to allocate cost. Frequent channel conflict. Sophisticated recognition and pay schemes, based on many criteria, perhaps even weighted Do you recognize these in your sales organization? If so, you are ready for TOC. New frame of mind Many brilliant books have been written on the subject of TOC. We have no intention of re-writing any of them. We do, however, want to briefly illustrate how TOC could radically improve your sales results. In adopting TOC as the basic principle of managing your sales, you and your management team would work on the following five assumptions: Key assumption nr.1: our business is ONE system In this section, we’ll explore some of the classical assumptions that are based on an agricultural economy. You can start evaluating some of the principles that have lead sales organizations, and specifically yours, to this day. TOC is a system philosophy that considers performance improvement from the system level, not the process level. Organizations live or die as complete systems not as individual components. TOC is a body of knowledge consisting of principles, tools and applications. One key assumption in the classical framework of selling is that the whole system is better if each part does the best it can for itself. Therefore, in reality, sales consists of many sub-systems, which are funded from one source – the enterprise’s cash – but then go off and each do their own thing: marketing markets, sales people sell, order processing processes orders, delivery delivers, and if you sell more than one product family you might even have different sales teams visiting the same customer. (We know of one extreme case, where these 1. Our business is ONE system. 2. We have ONE clear goal. 3. We create the CONSTRAINTS. 4. We FIND and RESOLVE them. 5. We worry about THROUGHPUT. Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. a whole. Sales management owns and is responsible for the performance of a vital element of the system: setting the goal and resolving the constraints. Everybody in sales must focus on one goal. Everybody must focus on winning opportunities. Everybody. But the reality in sales organizations isn’t necessarily so. Optimized – not sub-optimized In the agricultural economy, each farmer looks after his own fields. Account sales organizations fail to perform, if built on that principle. Systems function as whole, not as discrete processes. Improvement of output requires system optimization. Work flows functionally but we typically manage by the organizational chart. Every function does it's best to operate efficiently and effectively. However, the system is neither efficient nor effective. Why? Sub-optimization: enhancement of one part of a system at the expense of the other parts or the system as a whole. This is local vs. system optima. How do you know your sales system is sub-optimized? There is one prime indicator to tell you: the face-to-face time of your account sales reps. We know of no indicator that shows so clearly the degree of sub-optimization and we know of none where so much cheating with numbers takes place. Every sales manager we know admits that the face-to-face time in their account sales organization is, in reality, a maximum of 40%. Many sales representatives cannot reach more than 20%. Why? Because all other functions sub-optimize at the expense of the sales force. The impact? We would like to present the Woehr/Legat rule of thumb (empirically won from years of fighting sub-optimization): for every additional line of management (equal: sub-optimization) you reduce the capacity of your sales force by 20%. The sales professionals will not have the capacity to grow T. Centralizing Sales Secretaries A few years ago, the administrative folks decided to be more cost effective Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Another example of sub-optimization is the sales forced being pulled in so many directions. For example, one Account Sales Manager told us of 27 different people in his company who wanted him to align to their goals and plans. Who then, would come to review him? Or, in one company, they measured the blessings of e-mail: they found that each of their Sales Professionals received more than 3000 pages of material every month. What they did with it varied widely, although, most disposed of it quickly. In reality, the sales force is one of the most unfocused functions of many enterprises. It is a showcase of sub- optimization. Sales – a showcase of sub-optimization These examples show that you will be of little use to the actual selling effort if you work in a sub-optimized system. This is a system wherein everyone worries about his or her piece only and where everyone can tell the sales people what they are supposed to do. You will be forced to spend most of your time in meetings focusing on internal stuff (channel conflict, special exception rules, quota splits, order sharing, ownership battles, allocation of overhead discussions, etc.). In essence, you will be negotiating all the time to compromise among internal forces, which compete with each other in sub-optimization. One Sales Executive stated that “Channel conflict is actually healthy for a sales organization”, or another stated that “There will always be conflict between product teams and sales teams”. Does it have to be like this? We think not. TOC offers a way to radically reduce sub-optimization. Significantly wider boundaries - not just selling To understand a business as a system, first of all we must understand the system’s boundaries. Classically, in the reality of managing sales, we understand selling as the system which sales people use to sell. In agricultural terms, it is the Salesforce Company’s Throughput Partner Sales Program Quota Customer Requests and Needs Product Sales Program Country Sales Program Solution Sales Program Channel Sales Program Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. system with which they plant and harvest their fields (hence the term “customer cultivation”). From the TOC point of view, your sales system’s chain extends much further out: to your customer's customer. You, your accounts and your account’s customers are all working in one system. Your part (your sales system) will work optimally if the whole works well. The selling system’s boundaries Classically, the “sales people” are the sales system. They get a sales goal, and then go out and sell. Where is the sales management in this view of selling? Their job is to set goals, control cost (you need to watch those sales reps very carefully, to ensure that they stay at the right hotels!) and send out paychecks. If sales are weak, what do they do? They fire the sales rep. If sales are strong what do they do? Give a bonus. In this classical view, the sales manager is not part of the selling system. The pervasive value system makes sure that it stays that way. In classical sales, similar assumptions define the role of product management. Their job is to invent, design and deliver fantastic products. Introduce them to the market. Then go off and do the same again. This assumption says “if you throw a good product over the fence to the sales force, and if they fail to sell, it is their fault.” Both assumptions lead to the wrong decisions being made in the knowledge Our Enterprise Our Account Account’s Customer Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Selling products that are “fit for selling”. Making them fit for market Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 10 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Selling is a virtual collaboration system Key assumption nr.2: we have ONE clear goal Most sales managers believe that their account teams have a clear goal. Many account teams we have met have no clue what they are truly supposed to achieve. We’ve found that to release the power of TOC, you need one clear goal for each account team. Do you have that in your company? Maybe you are the star we have been looking for but first, let’s review a checklist. Ask yourself if your account teams have, for their account, multiple goals for: Quotas (sales goals) per product, per product group, per country, per channel, per industry, per segment, etc.? Product Management Opportunity Pre-Sales Consulting Partner Customer Account Team Sales Management Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 11 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. 35 items, 18 of which he had no influence. He was country sales manager of a small European country, and one of his performance indictors was, for example, “total corporate profit”. By the way, he commented: “what a complicated way to tell me that the company wants to reduce my salary.” Sales to an Account 1994199519961997199819992000 Prod.A Prod.B Prod.C Prod.D Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 12 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. account manager. However, reacting in the TOC frame of mind we would instead state simply that when sales drop, the sales system is constrained. Somewhere the system has run out of capacity. A bottleneck appeared and was caused by a lack of physical capacity or by a policy. That’s all. No need to downsize! You need to find out what is limiting the system’s ability to grow. If this were one of your accounts, where would the account team have run out of capacity? Or where could they have run into a policy barrier which did not allow them to grow further? In a real life scenario, this happened because the account team ran out of an administrative capacity to deal with the follow-up details on shipments, Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 13 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. needs to be done to make them go better; or review financial results; and even still others use just pure intuition. The TOC frame of mind takes a very different assumption as a basis for resolving constraints: at one point in time there is one and only one constraint that matters. Working on anything else is a waste of time and money, and could make things worse. We’ll explore next some thoughts on why TOC takes that view. The constraint is the weakest link The weakest link You must view your system as a chain; one that is only as strong as its weakest link. If the whole chain is supposed to pull 10 tons and only one link can carry 8 tons, then the whole chain’s capacity to pull is constrained to that weight of 8 tons. Strengthening the other links to hold 11 tons will not improve the strength of the chain. Unless you strengthen that weak link, the strength of the whole chain will not improve. “Strengthening anything by the weakest link produces no perceptible performance improvement of the overall chain. Strengthening the weakest link produces an immediate increase in the strength of the whole chain – but only up to the level of the next weakest link.” That weakest link is the constraint for the whole system. All other “problems” are irrelevant for the whole. This insight for your sales system forces you to radically change the assumptions by which you manage your sales today. Sales people are action people. Their genes are programmed to act and move. If they don’t radiate this attitude they will not make it in the ranks. Faced with a problem they will solve it. Break through. Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 14 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. However, we are now saying that this attitude (highly appreciated in the present social ranking system) may be more harmful than beneficial. That having an improvement project in each of your functions in sales and marketing may be a total waste of time and effort. Chances are that you will make things worse. Every “classical” sales manager intuitively will oppose that view. We did, too, when we heard it the first time. Since then we have learned, practiced and understood that there is only one true constraint, which limits a sales systems capacity at any one time. This is difficult to find. The sales rep always pays the price Whenever something goes wrong in the sales system, it is always the sales rep who pays the price by compensating for the weakness of the system. Let’s look at the process to book and confirm orders in the illustration below as an example. Each link in this chain has a different set of measurements: How many times is the order “clean” (correct number of accessories, configuration, etc.)? How many times does your product group deliver to the original acknowledge date? How long does it take for admin to confirm credit worthiness for a new or small customer? A simple order process Dettmer, H. William . Breaking the Constraints to World-Class Performance. (see bibliography). Customer Sales Admin Sales Professional Factory Decide Order Place Order Transmit Order Check Order Ack‘lege Order Receive Order Check Order Receive Order Order Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 15 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. What happens when the order doesn’t arrive on time, or there is something wrong with the invoice or when the installation goes wrong? Who does the customer call? The customer calls the SR. The SR is then spending their time fixing your system and not doing the selling. In this example, the weak link “constrains” the performance of your SR’s. The weakest link in a virtual chain The “weakest link in the chain” is a useful representation of the constraint. Again, sales are more difficult than other processes. Selling is not a sequential process, so a sequential chain is not a good representation to illustrate the weakest link. The chain of selling looks more like several chains interwoven to build the solution and win the opportunity to do business. If you sell technical equipment, for instance, your product features may be world class. However, if you do not have engineers who speak the local language, the orders for your equipment will remain low. Someone else’s weak link in the chain will constrain all others including your brilliant product. Originally, TOC found its main applications in supply chain areas like manufacturing and logistics. By its very nature, selling is a different kind of process – a non-sequential, virtual collaboration process. Throughput is limited to the strength of the weakest link Selling is not one single chain, but a network of links and chains, where each set of links must contribute to the strength of the whole. Each solution for the customer is “composed” of and sold by other combinations of links. Networks made up of links and chains. Every time you engage in the sales effort it is a new link in a new position in the chain. Other processes with this characteristic are top management and research (the R in R&D). Before we can apply TOC to Product Pre-Sales Consulting Partner Customer The Opportunity Account Team Sales Management Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 16 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. selling, we need to have a closer look at how constraints appear there and how we can make them visible. All sales constraints are policy caused There are several types of constraints (weak links). The physical ones are markets, resources, materials, vendor/suppliers, financial and Policies Policies Policies Policies Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 17 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. assign a third AE when there is an opportunity in Portugal. The other two AE’s are busy in Germany. Key assumption nr.4: we find and resolve the constraints The systemic constraint is the one single constraint, which causes most or all of the unwanted situations we struggle with. It is difficult to find. It hides and lurks behind layers and layers of symptoms, which are all caused by the constraint. Finding and fixing the right constraint will result in immediate increase of T. Fixing the wrong constraint will result in nothing and time lost. The systemic constraint is the root cause of our current reality The history of failed enterprises is filled with decisions that fix the wrong systemic constraint. Here are three examples of systematic constraints: Company A believes that they do not have enough sales professionals. A hiring campaign is launched. 10% more sales reps are added. Orders go … down, not up. Company B believes that their Marketin g needs re-engineeri ng. Task forces The Goal The System The Systemic Constraint Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 18 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. The Copenhagen Meeting It was a nice day in Copenhagen, Denmark, as far as the weather was concerned. However, the top sales management team that met to review the sales results was not in such a nice mood: frankly, they were a disaster. And, so the team did, what teams do in such situations: acted. They held a brainstorming session, then created a list of issues, took a vote (every member had three votes), defined the priorities, set goals and assigned owners. The mood turned from gloom to pride: they felt proud that they had reacted quickly and fiercely to an issue at hand. Good top managers will act quickly when danger is near. It just so happened that another sales management team (one level lower in the organization) met two days later. They went through the same process, for their area of responsibility. Again, they brainstormed, voted and decided. Yet, the issues they raised and the resulting decisions they arrived at were completely different from the top management’s issues. They were not even subsets of the top management’s issues: they had absolutely nothing to do with what the top management had arrived at. If you have ever experienced a situation like this, you might wonder who had the right answer. Who understood the real problem? Who was able to identify the true constraint as the one piece in the chain, which was the weakest link? Without understanding TOC principles, sales management has neither the understanding nor the experience to rapidly resolve systemic constraints. You Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 19 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. The new organization scheme makes it harder than before to win opportunities. It forces the sales professionals to attend even more internal Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 20 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. How to cause the change? Goldratt realized the five focusing steps alone were not adequate to deal with "what to change", "what to change to" and "how to cause the change". Over a 7- year period Goldratt created and refined a logical “thinking process” to deal with problems presented by policy constraints. The “thinking process” is applicable to any system as long as you can define the goal of the system. That is why it has successfully been applied across diverse organizations: steel plant; cancer research lab and a South African elementary school. The TOC thinking process The TOC thinking process is composed of 5 basic logical tools: the Current Reality Tree (CRT), the Conflict Resolu tion Diagram (CRD), the Future Reality Tree (FRT), the Prerequisite Tree (PRT) and the Transition Tree (TRT). Within the TOC, there is also one sub tool and some logic rules. The 5 basic logical tools are: 1. Current Reality Tree (CRT) - a problem identification tool. It helps us work back to identify a few root causes or the single core problem. DELTA T- Selling uses the CRT in account analysis and constraint resolution. 2. The Conflict Resolution Diagram (CRD) - resolves those hidden conflicts that usually perpetuate chronic problems. The CRD is also used as a creative engine to invent new, breakthrough solutions to those nagging problems. DELTA T-Selling uses the CRD in systematic constraint resolution at the quarterly project review. 3. The Future Reality Tree (FRT) serves 2 purposes: Tests and verifies that the action we would like to take to resolve the core problem will in fact produce the ultimate results we desire. Also known as a simulation engine. DELTA T-Selling uses the FRT to construct the “mafia offer” and to select the opportunity. Identifies any adverse new consequences our action may have, using the negative branch (NB). In other words “a test to insure the cure doesn't kill the patient." DELTA T-Selling uses the NB to insure the removal of the constraint really works. 4. The prerequisite tree (PRT) helps execute our decision(s). DELTA T-Selling uses the PRT to build the win plan Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 21 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Key assumption nr.5: we worry about throughput Global system measures Your sales organization, your product groups, your customers and your customer's customer. How do you know if you have optimized, sub-optimized, exploited, elevated or just bogeyed a par 5? The traditional approach is the standard financial measures. The standard for most decisions is profit. A decision that produces higher profit is good. A decision that produces lower profit (or a loss) is bad. The two key measures to evaluate the "good" or the "bad" of a decision are Net Profit (NP) and Return on Investment (ROI). You, the CEO and the CFO all understand these, but can a customer engineer or an SR take an individual action directly linked to an increase in corporate net profit? Does he or she know when they do? Goldratt came up with a simple way to evaluate (as well as speed up) an operating decision. In TOC we use Throughput (T), Inventory/Investment (I) and Operating Expense (OE). These measures are predicated on the assumption that the organization's goal is to “make money now and in the future." The emphasis is to make money not save money. No company ever "saved" their way up the Fortune 500 ladder! The enterprise viewed as a system The definitions of Throughput, Investment/Inventory and Operating Expense are included for clarity: Throughput (T) is the rate at which an organization generates money through sales of products or services. This is new money coming into the system. This Inventory Operating Expense Throughput $ generated Through Sales $ spent to create Throughput Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 23 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. 3. Reduce the staff working on the account 4. Cut all other cost. Which of the three performance indicators have you been programmed to focus on: OE, I, or T? The classical assumption is that you must focus on OE: “when sales drop, cut cost”. Typical for the agricultural economy: when harvest return drops, cut the rations for the farm hands. How many sales organizations do you know where this principle has been applied? And how many of those have cost- saved themselves “up into the FORTUNE 500?” You could also focus on your supply chain, and cut inventory, but let us go straight to the focus recommended by TOC: the focus on T. Before we introduce some further thoughts – why don’t you check your own focus? Take a look at your agenda of last week – how many hours did you spend on each of the three global business indicators? OPERATING EXPENSE Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 24 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. TOC simply states that a business has one and only one goal: to “make money now and in the future." The emphasis is to make money not save money - chasing cost is non-productive: What should our priorities be? The illustration below shows that the leverage on T is the highest. In a virtual chain it is practically impossible to find out where you have surplus capacity. TRADITIONAL MANAGEMENT 1. OE 2. I 3. T JAPANESE MANAGEMENT (“JIT”) CONSTRAINT MANAGEMENT 1. T 2. I 3. OE Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 25 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. The leverage on T is highest In the McKinsey Quarterly , there is a report on mergers: 160 acquisitions by 157 companies across 11 industry sectors in 1995 and 1996. Only 12% grew over the next three years. The report concludes that the “big threat is revenue shrinkage. Executive management focuses on cost cutting rather than growing revenue.” It is all about T! TOC has taught us to realize that chasing cost in response to dropping sales is non-productive: do you want to make money or save money? To sum it up We sales managers have been taught and programmed to base our decisions on concepts that come from the agricultural economy. In today’s knowledge economy those assumptions have become useless and often lead us to make wrong decisions. 1. You need to understand the meaning and impact of chains, weak links, variance, interdependency, sub optimization, constraints and T (throughput) 2. You must view your business as a system ( you, the account, the account’s customer) 3. You must state one clear goal. Make everyone contribute 4. You must worry about throughput. Stop worrying about cost McKinsey Quarterly , Oct/Nov 2001 issue, report on mergers page 16 Diane Hess , The Street.com, 4 Oct 2001 Practical Limit Theoretical Limit Theoretical Limit (SP-VC) Potential for Improvement Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 26 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. 5. If you struggle to reach your goal, T is constrained 6. You must identify your two tasks; 1) encourage your team to raise valid constraints and 2) resolve those constraints fast Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 27 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Food for thought: diagnose your sales system Now with your newfound knowledge of TOC we want you to think about your present sales system and do this simple diagnosis: No clue We talk – but we do not do it. We do it. We do it better than some of our 1. We view sales as ONE system. 2. There is only minimal sub- optimization in our sales system. 3. Our main worry is T. We manage cost, but it is not our prime worry. 4. We know exactly where our sales system is constrained. 5. We are very fast and successful to find and resolve our systemic constraints. 6. Our management team has only one charter: to find and resolve the constraints in our sales system. Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop 28 Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Excerpt from UNBLOCK THE POWER OF YOUR SALESFORCE! W.A.Woehr, D.Legat ISBN 3-7083-0082-3 (German: ISBN 3-7083-0166-8) Order on-line at www.delta-institute.com – or at your favorite bookshop Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland. Copyright Delta-Institute S.A. 12 cheminde PomoneCH 1228 Plan les Ouates Tel. +41 (22) 885-02-75 Fax +41 (22) 885-02-76 mail@delta-institute.com www.delta-institute.com All rightsreserved. No partof thismaterial maybereproducedin anyform orbyanymeans, electronic, mechanical, photocopying, record ingor otherwisewithoutthepriorwrittenpermissionof theDelta Institute, Plan les Ouates, Switzerland.