For Simple Rules that Work, Identify the Bottleneck

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Bottleneck

Most organizations struggle with pinpointing exactly where to look for ways to simplify. What specific decision or activity prevents the company from moving forward? Where will a change have the most impact?

In Simple Rules: How to Thrive in a Complex World Donald Sull and Kathleen Eisenhardt use the term bottleneck to describe such activity and counsel to start with how the organization is doing something:

A company’s how will often point to a broad process, such as marketing and sales or new product development, crucial to creating economic value. These overarching processes consist of several discrete steps, each with a candidate for simple rules.

Some companies use a flowchart to make the process and its steps visible. They say:

By plotting key activities and decisions in the process, it is easier to pinpoint the precise spot where simple rule can work their magic.

Given that most organizations struggle with two problems: not creating the right products or services, and not reaching the right people, it is not surprising to identify a bottleneck in the product design workflow or in the sales process.

For example, the authors say a provider of installed multimedia systems found that 7 percent of their projects were stuck in the design distribution phase of their process, which, broken down, looked like the following:

  1. discover and qualify opportunities
  2. develop a pre-proposal
  3. design a solution
  4. conduct pre-sales planning

In other words, waiting for engineers to create proposals was costing the company in two ways — projects were not flowing smoothly, and each solution was custom resulting in one sale out of six, an unfavorable ratio.

The solution was to develop a simple rule to streamline the decision process of when to customize and when to offer an off-the-shelf product. A rule of thumb Sull and Eisenhardt suggest when looking for the bottleneck is to:

look for a critical activity where the number of opportunities exceeds the available resources, such as when sales opportunities outstrip a company’s ability to meet demand.

As an example, the authors cite a German company that produces machines to process materials like plastic, wood, and metal to make them easier to recycle. The company receives many more requests than they are able to fulfill. Management had tried a forty-point checklist to vet opportunities, which the sales group found too complex to adopt effectively.

The managing director decided to create simple rules and with a team came up with:

four boundary rules to screen customer requests for any product that required customization the company:

(1) must collect at least 70 percent of the price before the unit leaves the factory;

(2) any product discount can be no more than a set percent;

(3) there can be no ‘hidden costs’ of installing and servicing the machine (e.g., extreme climate, dangerous political environment);

(4) the company must have sold and tested a similar product in the past twelve months.

Another bottleneck with opportunities exceeding capacity could be in the choice of external partners. Special machinery or expertise and timing — e.g., how long after contract signing they should begin working on a project, and also how many partners to on-board within a set period of time — are some examples of where to start when formulating simple rules to vet providers.

Many organizations should also consider taking a look at decision that involve coordination between different groups or departments. Especially now that we can embed communication and marketing in the product and service, it is a good idea to bring in experts from those teams early in the development process, for example.

Today marketing, product, technology, finance, and sales should collaborate much more closely for better results. And given the cast of characters to consider how the most important decisions involve the things we don’t do.

Psychologist Karl Duncker observed that “when people are used to thing about something in a particular way, they have great difficulty in thinking about it in new ways.” We are slow to consider alternatives, but we can bring alternative viewpoints to the conversation.

 


Conversation Agent – Valeria Maltoni

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