“Simplicity, simplicity, simplicity! I say let your affairs be two or three, not a hundred or a thousand; instead of a million count half a dozen."
-Thoreau, Walden
In “Money Ball" (April 2015), I recommended that home builders who want to outperform their peers and take advantage of the brightening but still unsettled home building market need to tighten up their execution across the board. The payoffs include better customer retention, higher profits, and the ability to innovate in ways that create value for the company and its customers. Before a company can focus on tightening, however, it needs to simplify its business processes.
The need for simplification and focus is just as important for building product manufacturers (BPMs). The problem is that developing a mindset of simplicity isn’t, well, all that simple.
One of the most challenging tasks for every company is to learn how to say “no." Most end up trying to serve too many customers, and are reluctant to refuse any customer requests, even if those requests dilute the company's focus by pulling it in too many directions.
This is too bad, as it's impossible to achieve simplicity without saying no to things that complicate your mindset, your business, and your customers' relationship with your company. Indeed tTrying to do too much ultimately pushes those customers away: when they feel like you are “hard to do business with” or “don’t align" with how they operate, it's often because they are frustrated with wasted time, mistakes, and re-work –the three evil spawn of too much complexity.
When Thoreau implores us to be diligent in saying no he is really telling us to develop the discipline of focus, lest we risk not just inconvenience, stress, and overwork, but outright failure. Later in that quote he adds that the reason one should focus is so "he would not founder and go to the bottom."
How can we heed Thoreau's wise advice and apply the principle of a simplified mindset to the hyper-frenetic business world of 2015? The first step is to realize is that the advice to focus is as relevant today as it was 160 years ago. That's because in the world of building products, the most profitable companies are those with the sharpest focus. They focus on the right customers, with the right combination of products, services and programs that solve the problems those customers truly care about and need solved.
The question, of course, is how one should go about developing that focus.
Clarifying The Goal
As with most things, it's best to start with the end in mind. We can clarify that end with a series of questions. What would focus look like in the company? What is going on in the mind of its leaders? Have they set a clear direction with defined goals and objectives? How many “strategic initiatives” is the company working on right now?
If your answer to these questions is “I don’t know," “not really," “I don’t think so," or “15-20 I guess," there is at least an opportunity for internal communication to improve dramatically. That is, there's and opportunity for the firm's leaders to revisit, re-evaluate, and clarify what they believe is truly important to the future of the business, and what goals should be driving the company.
There is incredible power in the simplicity of a well-considered, well-communicated set of goals, objectives and strategies carried out by a clear-headed and committed organizational team. If this doesn’t sound familiar, you're probably not doing it. In that case, it might be time to start thinking about what should get the yes and what should get the no when it comes to the strategic plan, the long range operating plan, the business plan and next year’s budget.
The art of saying no is so difficult to cultivate that it makes sense to consider some of the reasons why. If we can identify barriers to developing a simple and focused mindset, then we can figure out how to remove them and get on our way.
Why We Can’t Say “No”
In our work with building product manufacturers we have found five critical obstacles that make it difficult for people to say no to those things that hurt the company's focus. There is a solution to all of these, but first lets look at them individually.
Fear: This is also known as Forget Everything And Run. We humans are driven by fear and with good reason: if our predecessors had not been afraid, there is a good chance that we would not be here and that some other super-species of predators would be ruling the earth. In the context of business, fear is primarily the fear of being wrong. In most organizations this fear drives the company to serve too many customers, with too many products, services and options. A good friend of mine who learned how to speak Portuguese in his late 30’s said “really the only key to learning a new language is to release yourself from the fear of looking like an idiot.” Although it can seem impossible for traditional organizations to achieve this mindset, doing so is an absolute necessity.
Cowardice: This is an unfortunate but typical response to fear. Instead of developing the mindset that lets them confront problems at a factual level and make tough decisions, cowards in the corporate context allow problems to perpetuate so that future teams of managers and leaders can similarly choose not to decide. We see this in a lot in missed opportunities for product innovation: promising ideas that could help pull the company out of a sales slump are shot down because leadership lacks the guts to try anything truly groundbreaking. It's more comfortable – and safer – to make incremental improvements based on survey-based market research.
Broken processes: Many times, the processes that should connect our organizations to our customers and markets, and that should provide the crucial insights we need to say yes and no to the right things, are not functioning properly or are completely broken. One of the most common broken processes in BPM companies is the communication link between marketing and sales. The marketing team views salespeople as reactive order-takers, and the sales team believes that marketing inhabits an ivory tower where pristine theory rules in a sales prevention zone. What should be a tight and productive partnership, with the appropriate amount of creative tension, often devolves to a “Hatfields and McCoys” type feud.
Inertia: The mindset that no customer segment, product line, product option or service can be changed, reduced, increased or eliminated perpetuates uncontrolled yeses. This mindset drives the company to continue on its current path even if that path leads nowhere. Remember that when an individual or organization says yes to something, she or it is also saying no to at least one other thing, assuming that none of us have unlimited time or resources at our disposal.
Politics: The assumption by middle managers that the company leadership will not tolerate changes to or elimination of pet projects and unprofitable customer segments, product lines, or services is often much more prevalent than those leaders’ actual reluctance to making the needed changes. Middle managers often use an absent boss as the “heavy” to prevent them having to entertain a change that will cause them to have rethink their approach. It's often little more than an excuse.
While there are additional reasons that our organizations have a hard time developing focus and our individual leaders and managers struggle to achieve a focused mindset, we have seen the above five challenges at work again and again in our clients’ organizations. The good news is that all of them can be overcome. But doing so requires you to transform your company’s relationship with your customers.
Developing a Linked Community
Continuum Advisory Group advocates a “Linked Community” strategy: an organized approach to getting input from customers, suppliers and other business partners when making important business decisions. Its four basic components include two types of groups and two analytical efforts.
- An advisory board consisting of the manufacturer and all of its major suppliers and influencers. We recommend bringing the board together for an annual in-person meeting, preferably in a nice venue that puts everyone at ease and helps them feel comfortable sharing their thoughts and suggestions.
- A set of customer research panels, consisting of groups of individuals who interact with the company’s products as they flow through their channels to market: distributors, installing contractors, specifiers and designers and homebuilders. These panels, once established, provide the manufacturer with 8-10 annual views into their channels that allow the manufacturer to conduct an ongoing “conversation” with its constituents.
- Influence mapping. This is where the manufacturer uses data gleaned from the panels, along with other quantitative and qualitative insights, to develop a fact-based understanding of how the decisions that influence the specification and purchase of its products are made, the degree of influence of different players in the channel and who has the ultimate decision making power.
- Traditional market sizing, segmentation, trend and other market data and analysis. It is still critical for manufacturers to understand the size, growth rates, trends, regulations, legislation and other factors that will impact its markets and their segments: the playing field for their business. But this task is made much much easier with data gained from the advisory board and research panels.
The Linked Community enables structured and periodic executive level interaction among your company and its customers and influencers, as well as frequent interaction at multiple levels between your customers’ organizations and your own. The rewards include a deep understanding of channel structures, decision-making processes and decision influencers, as well as a better long-term understanding of market size, segments, trends and directions. Close interaction between Community members at all levels also makes managers and leaders more willing to address the types of challenges described above. The Linked Community approach allows the manufacturer to tap into proprietary insights up and down the value chain for key industries, markets and segments. Companies who are able to execute on this shift of organizational mindset and culture are able to create truly sustainable competitive advantage.
There are many possible examples. For instance the Advisory Board could agree to fund a trial of a new product. Or they could agree that strategic HR is an industry problem that will persist over next 15 years and devise a playbook for addressing it. Ultimately, they might even design a new business model that helps redefine the BPM industry much like Southwest Airlines redefined air travel.
A well-constructed and well-managed Linked Community is also a great source of competitive advantage. Manufacturers who take advantage of it will:
- Know more than their competitors about their market and its trends, influences, initiatives and challenges.
- Build the single most difficult strategic element for their competitors to imitate…deep, high value, long-term and collaborative relationships with the best customers and influencers in their relevant industries and market spaces.
- Gain factual, actionable insights about their relevant market spaces much more quickly and cost effectively than their competition.
- Find themselves in a better position to align their business models to maximize value and profits as supply chains evolve and shift.
Very often your customers don’t really know what they need from you, and almost never know what’s possible. Great innovation rarely comes from asking customers what they want; rather it stems from observing your customers intimately and patiently to discover how your products and services can dramatically improve their business results. The Linked Community makes this type of observation and of insight possible.
But it all begins with simplicity and focus.
Think how much easier business would be if we knew exactly what to keep and what to throw away, who to collaborate with and who to keep at arms-length, and what our best customers are willing to pay more for. With these insights we would be better able to predict and drive meaningful and valuable change in our market spaces. More importantly, we would be in a position to capture more than our fair share of that value.
