Recently, there has been a lot of discussion about US auto manufacturers and what, if anything, should be done to save them.  I am not going to get into the politics of it, but it strikes me that there are some valuable lessons to learn from their troubles.

This week, after many delays, Tata Motors finally launched their Nano, the so-called “people’s car” intended to make cars accessible to the masses at a price point of about $2,000.  While in this economy, it may make sense to copycat the Nano, and I won’t be at all surprised to see that happen, I think that looking in the rearview mirror, if you will, of the past years of the US auto industry, they failed to do something that Tata Motors has done with the Nano, and I would argue that most of the big German automakers have also done well, and that is to say “no” to specific sets of customers.

The Nano isn’t trying to be any more luxurious than it is.  The makers of the Nano decided very clearly that there is a segment of the car buying market that will buy a car that is “just” transportation and nothing more.  Many of the big German automakers went the other way with luxury cars from Porsche, Audi, and Mercedes and while they have some more affordable models, they are unambiguously, unapologetically, luxury cars.  The US automakers lost their way because they tried to be all things to all people, and in the process didn’t really do a good job of meeting the needs of any one segment, be it price, quality, big, little, you name it.

I don’t claim to have the answers to solving the global auto industry’s problems.  My point instead is that right now most companies are in more of a retraction mode than a growth mode, so right now is a perfect time to be very specific about who is, and who is not, your target customer.  Stay away from the gray areas of what they value, and make that what you value, and if there are things that don’t directly link to that value set, look at them and ask if they can be cut or outsourced (many cannot, but it’s worth asking).  Eclipse Aviation is an interesting example of a company that went with one-size-fits-all luxury in the private jet world.  Their customers like the luxury, but their customers don’t mind giving up choices in the luxury, because what they really value is a cheaper private jet for their transportation needs and stripping out all of the personalization time and cost is a big part of where Eclipse cut their costs.

So rethink who your most valuable and profitable and loyal customers are, and think seriously about saying “no” to some of the others like Tata Motors and Eclipse Aviation have done, and look at the impact that can have on your costs and your overall operating model.

-Ric

Today’s economic climate some are calling a depression is forcing managers in every business to make huge cost reductions.  There’s no escaping it.  Reduce expenses substantially and quickly or you’ll be out of a job.  And if you can’t do it, your replacement better do it.  If she can’t, she’ll be out of a job and the company may be out of time if other managers can’t do it.  There is a way to do it, but more than anything else – more than money, time, or operational knowledge – it requires thinking about how a business needs to operate VERY differently.  I call this shift in mindset “Getting out of the ‘how’ trap.”

By the end of this post you will have a much clearer sense of what you are doing, and experience tells me that it will change the way you approach what you do.  In my experience it’s a lot like the arrow in the FedEx logo (it’s in the white space between the “E” and the “x”).  Most people haven’t seen it before, but once they see it, they can’t believe they didn’t see it before, and can’t not see it from that point forward.

OK, now are you ready to see the arrows in your work?

Starting to see your arrows, that is to say actually understanding what it is that you and your colleagues do, starts with what I call the “how” trap..  People get so attached to “how” they do what they do, that it actually masks “what” they are doing. It’s a totally human condition, and it’s the same thing as when we go to a favorite destination like a restaurant, we always drive the same way, we associate the route we take with the destination so much that when someone else drives there and they take a different route we ask “why are we going this way?” we know darned well it usually doesn’t matter “how” we get there as long as we get there.   The “how” trap also traps us in our work.  In a work setting if you walk up to someone, we’ll call him Tim, sending a fax and ask “what are you doing Tim?” Tim will probably look at you a little funny, because it seems so obvious, and say “I am sending a fax.”  Well I can tell you with absolute certainty, not knowing any more about Tim’s job or his company, that’s not “what” Tim is doing.  Tim is in a “how” trap.  In this instance, “what” Tim is doing is something along the lines of Communicate Status or Confirm Order, the fax machine is simply a “how” he is accomplishing that what.  Common “how” verbs are:

·         Fax

·         E-mail

·         Automate

·         Phone/Call

If you define your “what” in terms of the outcome (with verbs like communicate, verify, create, etc.), it enables you to disentangle it from the how language and see it for what it really is.  So what? Well for starters, if I need to cut costs in Tim’s department, one of the things I might do is ask what’s really required in the work they do and what’s not.  If I ask Tim if sending a fax is a requirement, odds are he will respond quickly with an “absolutely” when the “what” of Communicate Status is the actual requirement, the fax is what’s probably discretionary (absent some regulation or customer/partner contract that mandates it).  A-ha!  If the fax machine is an optional “how”, if we have Tim use e-mail instead of the fax machine, maybe that’s a good way to save on long distance costs for the fax machine and I am on my way to cutting costs.  Not so fast.  Separating your “whats” from your “hows” is just the first step.  Before I just start changing “how” things are done, I need to get a better sense of where the Communicate Status fits in to the overall work Tim is doing.  This Tim happens to work for an insurance company, and he is sending faxes to communicate the status of an insurance quote to one of his insurance agents.  Communicate Status is just one of about 10 steps Tim goes through in the overall Create Quote “what” that Communicate Status is a part of.

Once you have unmasked the “whats” that make up a block of work such as  Create quote, things get a lot more interesting, because now you have the ability to do three things much more easily than before:

·         Unmask redundancy and repetition of “whats” –  Most organizations know there is some repetition, but few realize how much there is.  One big organization I worked with thought they were repeating a “what” but they didn’t realize they were doing it more than ten times and in under three months we eliminated more than $40 million in cost and redeployed over 60 people.  Then there was a logistics company with five different divisions and they thought that there was about a 10% commonality in the “whats” in each division and it turned out to be more than 70%.

·         See what is contributing the most, and the least value in your organization.   People are often surprised when I say I want to talk about their low value “whats” first.  Fixing high value work can be hard and risky (you should still do it but eyes wide open on that).  Low value work, by definition matters less “how” it gets done so it tends to be a lot easier to cut costs and to innovate in those areas, because if you make mistakes, since it’s low value stuff, it’s not such a big deal.  That logistics company I mentioned, a lot of the repetition was in pretty low value work, which made it obvious that we needed to identify best practices in each area and just standardize across all areas for that best practice, and since it was, by definition low value work, we knew we didn’t need to be too careful about it.

·         Understand where the real performance levers are.  This is huge for project selection and prioritization.  If you can start to see which “whats” are the real performance drivers, you can focus on them and also work to remove any performance impediments around them, and that is powerful.  If you want to start rethinking your organization, really understanding what drives your performance is a key

So that’s some food for thought on what’s what and how to get tactical and high level in the discussion of “what” and in my next posting I will talk more about business value and why even though the self-service check-in at the airport (outsourced to customers) may seem like a similar decision compared to the ATM (also outsourcing work to customers), they are at opposite ends of the business value spectrum.

I look forward to hearing your comments and I will write again soon.

-Ric