JOURNEY HELP FOR: THINKING BIG,
Chapter One is a dense
overview for a LIPA-Management-Journey Rookie. But, if you are one, take heart.
This chapter provides assurances that atypical, journey assistance is
available. But, you will do best if you can be open to (counter-intuitively)
having a big vision that can be pursued one, safe step at a time.
To overhaul your corporate beliefs to follow a new, journey is tough. Besides
a road-map what else can this book provide?
It’s free and on-line so any employee at any location can be on the same
(virtual) page. Educating a critical-mass of new believers should be easier. (And, a free, sponsored, printed
version is being considered. Any interest? Let us know.)
Many of the links in this book go
directly to either 450+ YouTube video
clips that average about 4
minutes in length or to detailed how-to footnotes.
The how-to, video clips (annotated indexes on the homepage of www.merrifield.com) will be helpful for people who don’t readily read in English as well
as for conducting small discussion groups anywhere, anytime.
These references will also
eliminate over 300,000 words of just-in-case-you-want-to-know, how-to advice
from this book. Instead of bogging the book down for all, each reader can dive
as deeply into specifics as they might like.
This book is also one big invitation to do two things:
Learn from early, power-LIPA
distributor adopters. Power-users (as well as a range to the newly curious) are
meeting twice a year (March and September) at the “Advance Profit Improvement Conference” (APIC) (www.apicconference.com).
Attendees get practical tips, courage and helpful envy from the outrageously
successful distributor principals on panel discussions and an array of best
expert/speakers. Check it out.
Check out some of the more than
200+ reports and tools that can exist in your LIPA tool shed with a go-to-meeting demo from Waypoint Analytics (http://waypointanalytics.org/). Waypoint’s LIPA web service was cool 5 years ago, but
it has been and will continue to be continuously upgraded. Its total value
grows with the improvement requests from a growing group of the
most-progressive, ambitious distributors across many channels. Why not
benchmark what you are currently doing (or thinking of doing) in the LIPA/IT
area against the most sophisticated and dynamically improving tool shed?
Whether you choose to:
i. Be a monthly subscriber.
ii. Try to duplicate Waypoint’s offering in house.
iii. Rent the monthly service and copy it in-house in
iv. Or, rent for credits to then buy an in-house license
All options are possible. The key
is to break out of your LIPA-inertia
now with a web demo at your earliest convenience.
LIPA reports –regardless of how
you get them – will allow you to start
your journey with small, unthreatening steps. Logic suggests that Big Gains
require Big Change which causes Big Pain (and political resistance from the
fattest, coasting cats in the existing order). With LIPA reports, though, any
solution can begin with one: account, item, supplier, rep, branch, etc. No need
to jump in the river with both feet. And, fat cats can say that they are
on-board while trying to ignore or even undermine LIPA solutions. But, tracking
reports expose individual laggards within a month at the specific,
When all you have to manage with
are aggregate financial numbers that average out all of the high-leverage, big
cross-subsidizing account stories, then local management/sales rep opinions
supported by selective anecdotal stories holds sway. If need be, replacement
people will know immediately – with LIPA information - where, why and how to
deal with the most extreme profit-improvement opportunities. And, steadily published, case-by-case,
supply-chain-math success stories will trump old-school, gut-level
generalizations and resistance.
This book will also be
continuously improving with your help. Everyone has an open invitation to
comment on this book as it is posted and be in direct, immediate touch with me.
Be my editors and co-contributors to
make it better. I look forward to giving any contributors their public props.
For any readers who want to
critique elements of my journey guide, please do! You can reach me directly at firstname.lastname@example.org. But, if you nit-pick ideas and methods with no alternative solutions
for the question or challenge at hand is to defend the status quo. If we keep
doing what we are doing (presumably harder), then aren’t we doomed as we become
more out of synch with an ever changing world? So, please try to offer an
alternative solution for the question/problem at hand. How might we better move
forward towards becoming a high-performing company for all stakeholders that is
reducing lose-lose channel activity costs?
As I cover the stages of the LIPA
journey, there will be new – vocabulary, concepts and assumptions – that will
give traditionalists pause and confusion. Because I’m the first to write about
these facets within a new LIPA-World, I must invent terms and acronyms for what
we will be seeing. But, no one can be instantly fluent and comfortable with too
many new terms and acronyms. To keep the book moving along, many of the
definitions and explanations will be repetitively linked to a support glossary.
YOUR – ASSUMPTIONS, TOOLS AND VISION – FOR THIS JOURNEY
How well a distributor team can walk this journey will depend upon three
How well your team is able to name
and update its existing, operational, success assumptions. Conventional channel-think
can’t generally get past, for example, the mathematical fact that big,
“best” customers are causing big losses.
and breadth of capabilities are in your LIPA tool shed?
Customer profitability analytics
(CPA) will get you going.
But, line-item, profit analytics (LIPA) will reveal the
net-profit or loss on every active SKU within the buy-sell history for each
i. LIPA provides the equivalent of an MRI scan of customer
(and supplier) activity to reveal hidden pockets-to-buckets of inefficiencies
that are immediately identifiable and measurable.
Then, LIPA is instrumental for co-creating with each
customer – using their own, irrefutable, statistical, SKU-buying data – new,
win-win, value re-tuning solutions.
You can start with CPA and then
add LIPA; these two approaches aren’t an either/or choice!
And, you must have on-going
tracking and net-profit incentive reports to keep from sliding back into old
How big and (counter-intuitively)
less risky is your journey vision?
Here are three visions from
smallest/riskiest to biggest/least-risk. (Some distributors have evolved
through each step sequentially.)
Don’t rock the boat: do some one-time, fine-tuning of the past with LIPA insights to jump
profits up 2-4 times. These efficiencies will quickly fade, though, due to the
unchanged – thinking, habits and (margin based) incentives – of the old culture. Short-term bonuses and expectations will rise
and then fade. (And, competitors are given time to wise up and jump ahead of
you IF they embrace Vision C below.)
Do a financial, strategic, core
renewal using LIPA tools.
i. By focusing on customer niches that have given you,
historically, the most net profit, you can typically double sales and quadruple
profits in best niches.
ii. Spinning-off dying, self-employed, small customers to a
different service model division will generate five
different, new net profit streams (Article 4.11).
iii. These strategies will achieve bigger, faster,
structural profits that will last longer. This approach can be initially
stressful. Most employees cannot imagine sales growing and profits exploding
with some accounts leaving and perhaps some small-customer, net-unprofitable
reps being released. The “dynamic-upside”, profit-growth of all of the
LIPA-supported solutions can be achieved quickly, however, to reassure
iv. But, you will not be simultaneously creating a high-performance
service culture that is a pre-requisite for:
“KPI-tuned, service excellence” metrics for each target niche (YT 4: 14-26) (YouTube video)
Continuous adaption and innovation
v. Environmental change and competitive responses will
gradually erode the structural profits of a core renewal without on-going
innovation from within.
Create a can-do, high-performance service culture using the one-time economic gains from LIPA insights
to engage everyone with gain-sharing bonuses. A great culture will allow you to
i. Attract, keep and keep turned-on best stakeholder
partners starting with employees who will work together to assure that...
ii. …Each target niche of customers will then get the best
service-value equation metrics plus “heroic extra efforts” for the key
iii. By turning on bottom-up,
self-organizing employee energy, management can be freed to work less in
the business and more on the business: strategy, culture and systems. (And,
make a lot more!)
iv. And, every stakeholder group will get premium long-term
economics. Be a hero to all stakeholders and be like those service companies
that we are all tired of hearing about: Southwest Airlines, Costco, Whole
This Chapter and Chapter One are meant to provide an overview of the LIPA
Management Journey which will make better sense to those underway and less so
to Rookies. The rest of the book will now be more Rookie friendly. I’ll cover
each chronological step of the journey starting with the history of how LIPA
evolved from simple customer profitability modeling in 1976 (Chapter Three).
And, in Chapter Four, I’ll provide detailed answers for the often fierce
disbeliefs that arise when veteran managers and reps first see that some “best”
customers and items are super losers.
What is the
difference between: 1) analytics, 2) customer profitability analytics (CPA), 3)
Line-Item Profit Analytics (LIPA) and 4) LIPA Management, Journey-Ware?
What is the
history of “customer profitability” and how it has evolved to LIPA Management,
Journey-Ware? (Chapter Three)
Will we be pioneers
who get arrows in their backs? Or, can we be first in our markets, but fast
followers of other pioneers in other channels and markets?
Can we use good
tools, education and leading-edge successes to still get big returns with low
Or, our biggest
competitors going to get the new upside before we get out of the starting
What are all of
the new – questions, objections and fears – that will be raised by seeing big,
(unprofitable) customers at the bottom of our profit ranking report? What are
the most complete New Answers for these New Questions/Concerns? (See Chapter
What exactly is
“culture” and how do we go from a “we can’t do that” culture to a “we can
perpetually innovate and adapt” culture? (later in the