CHAPTER 5 PART II: DISCUSSION OF THE CONCERNS
MOST CONCERNS ARE PARTIALLY CORRECT; PUT THEM IN A
Most concerns about LIPA
ranking results contain elements of
truth that can still be honored within the context of a bigger framework
and updated guiding assumptions. Think of the story about the five blind experts arguing over the essence of an elephant by
only touching one part of the animal: tusk - weapon, ear - fan, side - wall,
tail - snake and leg - tree. If we look at all of the math-facts in channel
buy-sell processes, our partially-informed, financial-statement judgments get an
Once we see the entire
elephant (or buy-sell math and stats) how can it move and live best? How are we
and our customers adapting constantly to the changing environmental conditions?
Who is continuously improving and adapting the buy-sell process flow of goods
between us and our customers? Right now we mostly have Silo Reps, measured on
GM$s and GM%, selling to Silo Buyers over-focused on PRICE SAVINGS.
What is happening to our
buy-sell processes over the dimension of time? You may do, for example,
year-over-year financial comparisons, but the ups and downs in the numbers are
symptoms of what underlying, key customer decisions about you versus
competitors? Why not rank customers’ year-over-year,
When you do, be prepared for big shocking variances within both the top
and bottom 10 to 20 accounts. Even more amazing, no one from Reps to the CEO has
specific explanations for why most of the big ups and downs have happened. LIPA
Management will get the entire team proactively focused on key accounts pitching
big new supply-chain savings for all of next year. Then, a year from now, there
will be specific reasons for the big, positive, customer variances that will make
the financial symptom numbers leap in year-over-year comparisons.
How do we take the 39+
concerns and reframe them into good elephant customer stories? We don’t want to
be like the blind men squabbling over their one Silo metric or notion.
Enriching all stakeholders is not about debating who is right or wrong or
picking one narrow view over another. We want to find big-picture, new
solutions that can make a big difference for all four stakeholder groups:
employees, customers, suppliers and shareholders.
Many of the 39+ concerns are
derived from conventional, industry-beliefs
(or “mental models” for reality) that did work better in the rising-tide, growth-stage
of the industry’s life-cycle (and the US’ consumer economy from ’48 to ’66 when
GDP tripled in real terms). If your channel is now in a mature,
consolidating, life-cycle stage, then the buying needs of customers with a future
have changed. Change to meet the best customers’ needs or die with the
customers who aren’t changing and want to buy the Old Way.
To thoroughly and
consciously update everyone’s success assumptions (not just yours), watch the
following YouTube clips:
Our Life Cycle
different Life-Cycles YT
Make the right,
big, timely Change for Big ROI YT
Key Dates for
“Supply-Chain” Buying YT
of Innovation for Different Life-Cycle Stages YT
If your company has lost customers to “integrated
supply” distributors or bigger, more progressive customers are making noises
about wanting “supply chain solutions”
to get the products to and through their business at the lowest “total procurement cost” (TPC) with maximum ”uptime-productivity”
Levels of “VP of
Supply Chain” Objectives YT 1: 11
Case Studies v. Sophistication + Win-Win YT
Metrics lower different elements of TPC YT
of) Service Metrics lowering TPC YT
Tradeoff Names YT
Hub Economics Lower TPC at a higher Price
for Contractors YT
1: 29; YT
help/teach Contractors to Improve Up-Time
Bottom Line: are your beliefs and sales force
skills in tune with today’s life-cycle needs of your key customers? Are your
executives and key-account reps sufficiently equipped and fluent for
supply-chain-math and service-value-chain solution conversations and co-created
DEFUSE FEARS FIRST, TEACH NEW-LOGIC SECOND
Many of the 39+ concerns are
only semi-rational, because they also spring from underlying personal fears. Different people will worry, more or
less, that LIPA information and ideas are crazy out of fear for their:
Defuse fears first to calm and
open minds for new-learning to get through the conceive-believe-achieve hurdles.
COGNITIVE BIASES; RECRUITING NEW TALENT; AND GARDENING
Mixed in with fears are
human, “cognitive biases” (ref: Wikipedia). These are thinking biases that had evolutionary
benefits for hunter-gathers, but make us predictably irrational when trying to
cope with modern-day, complex-system choices.
A big bias that affects all
“change” options, for example, is “Loss
Aversion”. Comfortably-fixed humans are wired to be twice as fearful about
losing a dollar as they are ambitious to get another one. Most veteran
distributor executives and reps are, therefore, playing not to lose (freeze/flight response from our amygdala) as opposed to
focusing on the upside of winning more (fight response). (The aphorism - “A
bird in the hand is worth two in the bush” - has now been scientifically proven.
But, the upside of LIPA Management is many more birds than two in the bush that
won’t fly away.)
Who will “play to win” with your
LIPA Management information? Recent Supply-Chain graduates? Students are majoring
in “supply chain studies” at many colleges today, and newly minted graduates
don’t have anything to lose. With student loan debt, they need to play to win.
They want to find some real-world applications for what they been taught: how
the biggest, most-successful, global companies have been steam-rolling
competitors with supply-chain innovation advantages. They can easily embrace
LIPA, supply-chain-math without any Old Beliefs to hinder them.
But, most distributors don’t
have what it takes to hire and keep a Supply-Chain Kid. Do you have: a
compelling upside-growth vision; supply-chain-math tools and plays to pursue;
and collaborative access to your biggest, most ambitious accounts that want to
co-create next-level buying processes? If your sales force averages 50+ in
years; sits on all of the big accounts; and wants total control to sell as they
did in 1990, then you’ve got a recruiting problem. And, your company’s future is
Another test for your
company’s bias towards loss-aversion is to see if you can sell the troops on
applying gardening beliefs/methods to
your customer-garden. We all understand (and believe?) that weeding a garden will allow more local,
soil nutrients to be available to the roots of what we are trying to grow. We
also readily understand and believe that: if we prune a bush, then the fixed, flow of root nutrients will immediately
flow to the remaining, better parts of the bush which will then grow better. Do
all of your employees believe that – “weed
to feed” and “prune to grow” - will work for your bush of customers? Who on
your team honestly believes (or disbelieves) that:
Your company can
grow sales and profits faster by selling
fewer, best customers more effectively than what you are presently doing!
By doing so, EVERY company stakeholder will do
better! This is what happened in three out of three distributor case studies
cited in Chapter One.
With faith in LIPA Management upside wins, can you boldly
guarantee all key, best employees upfront that they will have: job security; no
downside income risk; and much better odds of growing incentive income based on
growth in net profit?
Is your own loss-aversion
still holding you back from offering income guarantees for best players who are
still spooked about LIPA Management ideas? If so, keep reading for more courage!
EXPECT – UNIVERSAL, GENERAL, MATH-FREE, AWFULIZED -
Many of the 39+ stated
concerns are math-free beliefs…. “Our
costs are all fixed right
now. We have slack to take a few more
orders without any or much over time,
etc.” Really?! Where’s the math to support these beliefs?
With detailed CTS
information for each customer and groups of customers, powerful new insights
are possible. The Old Beliefs are not going to like mathematical, factual
contradictions. Patient, persistent and kind educational repetition will reshape those Old Beliefs. (Rules of
“5-7 and “1-10”: YT
Assumptions are also stated
in the universal/general “ALL” mode. All
of… our reps (suppliers) won’t like this… (all)
little customers (acorns) grow into big ones (oak trees). Everyone will
think I/We are crazy. The key for getting by UNIVERSAL/ALL concerns is to sort
the universal group into “great-OK-weak” piles and cross-check them with LIPA
information. Then, solve each sub-set of
“all” in an appropriate way (examples later).
And, finally assumptions are
“Everyone in and out of the company will: think we are crazy; hate this;
retaliate; etc.” If we poke entrenched beliefs with new facts
that provoke anxieties, universal, awful statements will emerge. Again, it
is helpful to point out that there will
be a range of reactions (1 to 10) from any (universal) group of humans. How
many of us would, for example, be offended by and switch business from a
long-time supplier-friend who invited us to look at some new channel math to
see if we can find some win-win opportunities to experiment with?
In sum, our challenge is to
deal with: (1) dated beliefs supported by (2) no real CTS math; infused with
(3) personal fears and (4) cognitive biases; and then applied (5) universally
with (6) anxious awfulization. How will we teach
our way to group buy-in?
SOME TEACHING GUIDELINES
Defuse fears with guarantees, baby-steps and
robust, repetitive education.
Giving a one-time, rational answer
to one of the 39 concerns will not cure a
person’s anxieties. If you buy into the
huge upside possibilities of LIPA Management, then there will be big
productivity and profits to share with everyone. You can underwrite their
perceived risks with financial guarantees. Give the best players (especially
reps) guaranteed W-2 salaries going
forward with only upside incentives (on “net-profit growth”) to come. AND, you
can assure everyone that any new actions will start with learn-by-doing, no-risk, baby steps. LIPA tools allow
you to experiment one, best – customer, Rep, branch, supplier, etc. – at a
Help incumbent managers to “save face”. They will be defensive
about having to lead – what now appear to be – net-profit, losing initiatives.
And, they will feel insecure about not having “New” answers, expertise, and skills
for employee needs. What are face-saving steps? (1) Name the fears. (2) Accept
them as normal human reactions. (3) Take personal shared-responsibility for
past decisions. (4) Point out that you and all managers don’t have to regret doing
the best you could with the limited past information that you had. (5) Forgive
everyone (yourself first), so we can focus all energies and can-do spirit on
the opportunities at hand to move forward.
A Sample, Save-Face, All-Forgiven Speech:
“From me (the CEO?) on down, there
are no bad guys here. We have all worked hard in the past to do the
best that we could with the information we had. With breakthrough LIPA
insights, we get a one-time opportunity to turn hidden, channel, activity-waste
into win-win benefits for our customers and ourselves. But, we have to seize
this one-time windfall before our competitors see it and get there first.
no one in our marketplace has done these things and few in any distribution
channel have, there is no detailed road-map or how-to cook-book for how to
specifically proceed. And, if there were, we would be too late to the
opportunity to gain anything.
we do have lots of educational support from the APIC community. And, with LIPA
information we can design – small, low-risk, high-gain,
high-learn-by-doing – experiments. We will all learn together from these
experiments and pick up speed and courage as fast as we choose.
our old financial efficiency and sales volume beliefs are not wrong. We will
still strive for efficiency and sales growth, but in more strategically-effective,
focused ways. We will grow volume by growing our share of the big,
best-customers’, total spend. They will want to maximize their new,
supply-chain productivity that we co-create with them.
Growing-nowhere Minnow accounts that are currently losers is a different challenge. Right now we have a people-intensive,
service-model that totals more service costs than the GM$s coming in from the
typical Minnow. We will have to unilaterally reduce service costs and/or raise
of these Minnow are good friends who we see and visit with a lot (too much it
now economically appears). And, no one likes to have their services reduced and
prices raised. Our best Minnow friends
will not be happy with us which will be stressful.
here is what is at stake for all of you. How many of you would like to donate
pay-deductions to help finance the losses we would continue to incur if we
don’t change our service model for (best-pal) Minnows? No need
to volunteer, you already have! The losses we incur from over-servicing
and under-pricing Minnows reduces company profits
that don’t get reinvested into: company growth; your job future; and a
gain-sharing bonus we would like everyone to earn going forward. If we can grow
profits above a minimal survival target level, a big portion of extra profits
will go into a gain-sharing bonus for all. Solving our Minnow loss problem is key to more pay for all.
distributors in many channels have figured out how to solve the Minnow problem,
and their stories are on video clips that we can watch and discuss. We will get
through this problem and many of our Minnow customers will adjust and stay with
us on a profitable basis going forward. Our gain-sharing bonus pool will grow
as a result.
in general, we will not abandon any of our old core values. We will blend both
our old beliefs and values with the new LIPA insights. We won’t have false
choices and fights between: old ways and
new ways, who’s right and who’s wrong. Both
old and new can be
blended together to achieve more creative and profitable accomplishments that
will reward all company stakeholder groups. FINITO!
Next, be prepared to explain things “5 to 7 times”. I’m a
big believer in the “rules of 5-7 and 1-10”. Most people need to hear
variations on a new idea 5 to 7 times to truly get it and retain it. And, more
practice is necessary to be able to teach or sell the idea forward to others.
3: 32; and YT
ON TO THE
DISCUSSION NOTE FOR THE 39+ CONCERNS.
Chapter 5, Specific Answers To The 39+ Concerns