A Little more on applying Little’s Law to Lean your Marketing!

In a previous post, I transformed Little’s Law to marketing utilizing this formula: Marketing Cycle Time = Customers in Process / Closed Sales. I would like to simplify this formula and change the nomenclature a little. I think more accurately it should be called Sales and Marketing Process Time(SMPT) = Prospects in Process(PIP) / Customers(C). You could also use the same formula substituting Prospects for possible Revenue opportunity and Customers for Revenue.

However, if you put your Theory of Constraints hat on for a second, you would consider Revenue as the Throughput. Though this is not a major change in thinking, Throughput is the measure that drives Theory of Constraints. In your marketing process, this makes perfect sense, you should be measured in Sales Revenue, correct?

Reviewing some basic teachings of the Theory of Constraints, you may start looking at your marketing process a little differently. If you believe reducing your SMPT is important you simply have to reduce the number of Prospects in Process (PIP) if your Throughput(TH) or Customers(C) stays relatively constant. If you have large amounts of PIP it is a pretty simple task. However, the question maybe, what if you don’t have enough prospects in your pipeline?

You know your SMPT is a function of all of your process time. It represents all the stages of your Marketing Cycle both value added and non-value added time. So to reduce cycle time you must reduce value added, non-value added or a little of both. Since common sense dictates that non-value added time makes up for the majority of the time and if anything you would like to increase value added time, you must attack the non-value added part of the process.

We must accept the fact that there is waste in all processes, and we must work on a continuous basis to remove it. As we remove waste, another large culprit of efficiency is variability will be reduced. However, the other item that Little’s law demonstrates is the PIP in the process. As we evaluate this number think about the cost of having access PIP. Not having a targeted market, you may waste mailings, telephone calls and a few other inexpensive items, but I think about this on a much grander scale. Think how much you may be diluting your message. Can you afford to do that? You have heard me discuss how clarity may be the single most important reason that you lose prospects or sales. You cannot increase value-added time or decrease non-value added time without clarity.

How do you increase clarity to your prospects? Again, hopefully this does not sound like too much like a broken record but there are only two choices: reduce the number of prospects or segment your list or both.. Effective segmentation may be your single biggest constraint in improving sales. What do you think?

Related Posts:

Great Resource on the Theory of Constraints: Ebook on Integrating Theory of Constraints with Lean Six Sigma

Improve throughput, cut your customers in half!

Lean your Marketing thru Segmentation

Technorati Tags: lean,lean marketing,business901

IF YOU WANT TO BE ONLINE, YOU NEED TO LEARN ONLINE

IF YOU WANT TO BE ONLINE,

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Technorati Tags: FaceBook,LinkedIn,Social Media,Twitter,Web 2.0

Using Value Stream Mapping Software

There is a lot of dispute about Value Stream Mapping software, and whether it should be used or not used. Most Lean practitioners will tell you that early introduction into converting your Value Stream Map into a computer generated document will hurt the overall flow of the procedure and be a detriment to the brainstorming process. They prefer using post-it-notes or pinning paper to a wall. Allowing as many people to interact is the whole point. I have a tendency to agree with the statement. Participation, interactivity is the key. In fact, when I build a marketing calendar for a company, I do the same thing. Even taking advertisements, direct mail pieces, etc. and pin them to a wall.

It works great except…many times it seems that I am explaining the process along the line. I end up teaching what a Value Stream Map or even a Marketing Calendar is and the purpose, we are doing it. Sure, I know that should all be done before hand but do we? Do we take the time? Many lean practitioners work hard to help an organization to improve their Lean skills. This is a slow, difficult and often frustrating part of the process. Computer-supported Value Stream Mapping may help Lean practitioners be more effective in this respect. Creating a simple mapping process for them to input into the software and through the use of the help section, both written and video supported, would not hinder the mapping but facilitate the actual process in the Value Stream Mapping Process. Explanation of the key concepts and how they are used would make the best use of everyone's time.

When setting initial assignments, don't require that a map be drawn but have a procedure to check off that the different nomenclature was understood. This will give most individuals solid footing for the meeting. You may want to do a webinar on VSM to facilitate the mapping process. Use the tutorials embedded in the software as a basis of discussion. This way there will be a reference point for everyone afterwards.

A better way, for those with both the technical agility and a suitably equipped classroom, is to do "live" mapping and update the actual process constructed on the wall every 15 minutes or so. Having a reference point can be very handy when you are taking down a stray path. This would also enable a wider audience as actual attendance would not be required. Especially in supply chain applications, you could have numerous suppliers and/or downstream and upstream customers participating from a distant. Another feature is that you may choose to schedule times when different participants would be available. Mapping in real time, can be difficult and beyond the scope of many organizations. However, if it is possible, it gives you instant documentation for the entire organization and a basis for a process that I would refer to as a true Value Stream Management process.

It should already be apparent that handling mapping can be a very different experience than is had when using the traditional method of post-it-notes. Value Steam Mapping represents information more densely and makes more information immediately available to the mind. It supports a wider range of interaction, which is ultimately what we are after. That said, these are the early days in computer supported mapping.  For now, there needs to be a balance, but it is changing. I predict that since it is not a technology issue but a policy constraint that it soon will be common place. If not, you may be the like an accountant dealing with a system of ledgers and manual entries and Turbo-Tax has largely replaced that group.

P.S. I market Value Stream Mapping Software on my Site.

Related Blog: Why would you use Value Stream Mapping?

 

Technorati Tags: Value stream Mapping,VSM,Policy constraint,Marketing Calendar,Mapping Software,Lean

Greater Marketing segmentation = Increase Revenue

Today’s products and services reflect greater marketing segmentation. As you know, I use the Duct Tape Marketing Hourglass as The Pillar of the Lean Marketing House but there is no universal terminology, it is just convenient to stay with one message because even as you segment your list you still have to recognize the marketing process into stages such as Know, Like, Trust, Trial and Buy.

As you segment, each segment will include fewer customers. However, it should enable you to identify the individual stages more effectively or determine your material and information flow needed in each step. It will also allow you to define waste and create better value for your customer. In fact, this is basically the definition of Value Stream Mapping.

As a result of this exercise, you will change the shape of your Pillar. You should be able to shorten your cycle in some and as a result decrease your expenditure in the marketing process. Others, on the other hand, may be lengthened and a total different approach may have to be utilized. A good example of this may be in the pursuit of a governmental contract. The point to be taken is that there is nothing wrong with either situation, what is wrong is treating each segment the same.

The key ingredient to get started is developing the NEED statement for each marketing segment or Pillar. The statement should clearly define your CUSTOMER’S CORE PROBLEM and your ability to solve that problem. Defining this alone will provide clarity throughout the various stages in your marketing process. The NEED statement is a living document that will evolve as your product/service and the customer’s use of it changes. Further development of this statement should include limits on cost and time to keep your Pillar within boundaries that you are able to manage.

The point of defining the Need Statement is to succeed at developing a manageable process. We want the resulting marketing phases (Know, Like, Trust..etc.) to meet our customer’s needs, at the right time and at the right cost. It must do this in a way that maximizes our investment in the process. Marketing can be a complex and often risky process and in today’s world it mandates speedy development. The Lean Marketing process is geared to provide a framework and specific tools for efficiently and predictably reaching goals.

Related Posts:

Following the Customer’s Need in your Value Stream Map

 The Pillars of the Lean Marketing House

Value Stream Mapping for Marketing

Get Rid of Your Marketing Vision Statement and Address the NEED!

Why do The Pillars of the Lean Marketing House™ crumble?

Applying the Marketing Hourglass: The Pillars of the Lean Marketing House

Technorati Tags: Lean Marketing,Duct Tape Marketing,Lean Marketing House,Pillars

Business Plan Mistakes

Affiliate Post of the Week: Business Plan Mistakes

By Palo Alto Software, Inc.

Often you may hear about what a business plan consists of. While including the necessary items is very important, you also want to make sure you don't commit any of the following common business plan mistakes:

1. Putting it off: Don't wait to write a plan until you absolutely have to. Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan.

Don't wait to write your plan until you think you'll have enough time. "There's not enough time for a plan," business people say. "I can't plan. I'm too busy getting things done." The busier you are, the more you need to plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the individual burning trees.

2. Cash flow casualness: Cash flow is more important than sales, profits, or anything else in the business plan, but most people think in terms of profits instead of cash. When you and your friends imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don't spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table.

3. Idea inflation: Plans don't sell new business ideas to investors. People do. The plan, though necessary, is only a way to present information. Investors invest in people, not ideas.

Don't overestimate the importance of the idea, particularly the importance of the uniqueness of the idea. You don't need a great idea to start a business; you need time, money, perseverance, common sense, and so forth. Very few successful businesses are based entirely on new ideas. A new idea is much harder to sell than an existing one, because people don't understand a new idea and they are often unsure if it will work.

4. Fear and dread.

Doing a business plan isn't as hard as you think. You don't have to write a doctoral thesis or a novel. There are good books to help, many advisors among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as Business Plan Pro, and others).

5. Spongy, vague goals: Leave out the vague and the meaningless babble of business phrases (such as "being the best") because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. You need specific dates, management responsibilities, budgets, and milestones. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results.

6. One size fits all: Tailor your business plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better.

7. Diluted priorities: Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is something else, certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each.

8. Hockey-stick shaped growth projections: Have projections that are conservative so you can defend them. When in doubt, be less optimistic.

Source: bplans.com

Technorati Tags: Business Plan,Marketing,Marketing Plan,Palo Alto Software,Planning

A3 Marketing Reports

The definition of an A3 Report is a simple storyboard that tells the whole story of an improvement event on one 11x17 sheet of paper. The left side defines the problem, the right side proposes solutions. That is the basic structure. However, A3 is much more than that. It is the tool used to implement the PDCA process. Understanding A3 thinking and you can apply this to problem solving, proposals and status reports. But you have to pick a template and you have to follow some outline in creating an A3 to get it off the ground.

Typically, when I create an A3, I go about it a little differently by utilizing the Six Sigma principles of DMAIC. This acronym stands for Define-Measure-Analyze-Improve-Control. The Six Sigma process improvement process(DMAIC) is closely related to the PDCA lean process. The difference is the set of tools being utilized. I believe DMAIC has a stronger set for variation and process control. The PDCA process has a more simplified version. Depending on your needs either tool applied appropriately can be utilized. Lean has a tendency to be favored initially because of the lack of measurements within most organizations. The important part is that you start the process.

The chart simplifies the DMAIC process to a much simpler nomenclature:

• What is important?
• How are we doing?
• What is wrong?
• What needs to be done?
• How do we guarantee performance?

Whether you decide to use DMAIC or PDCA for your A3 makes little difference. The tools are just that, tools. The important part is that you have flexibility to format your A3 report in any way that most effectively can tell and demonstrate your story to your team and others. Your goal is not to complete the A3 report, it is to harness all the benefits through implementation from the problem solving that took place.

You have heard me say that I use A3 Reporting in the marketing process. It demonstrates and recaps the thoughts, efforts and actions that took place for a particular campaign, such as advertising or public relations or even a launch. This report can really highlight the value that marketing supplies. I will be discussing DMAIC and how it applies to the foundation of the Lean Marketing House™ in the upcoming weeks.

Related Information:

Lean Six Sigma Templates for DMAIC and A3

Why use A3 in Marketing

Why do The Pillars of the Lean Marketing House™ crumble?

Lean Marketing House™ – Foundation

Technorati Tags: Six Sigma,Lean,Marketing,DMAIC,A3,PDCA

Applying Little’s Law to marketing

Most marketing systems are out of control. They just have not been managed with understanding the process speed and the effect of the flow on the process. Understanding some of the drivers of this process is much simpler than you might think. A simple equation called Little's Law can tell us how long it will take any prospect to be turned into a sale simply by counting how many customers are in your funnel and how many sales we complete each day, week, etc.

Marketing Cycle Time = Customer in Process / Closed Sales

Little's Law is a pretty cool tool and more important than it might seem. Many of us may not know what our average marketing cycle time is, let alone the variation of it. But knowing when someone enters your Marketing Funnel and when they exit it might seem immeasurable. The thought of having to track a prospect through all the stages in the process may seem rather daunting. However, with Little’s Law and segmentation of your individual channels, you can get a reasonable estimate of these factors. We only need two of these factors to get the third. It is just math! We need reliable estimates but if you look at segmentation closely and how Little’s Law applies you can go a long way in getting some very useful numbers. If you know your customers and the process and how many sales you are closing you can estimate your cycle time. If you know your cycle time and the number as sales you close, you can estimate the amount of customers in your process.

These customers will be waiting between different stages or activities. It may be either internal or external reason but for this conversation it is not important. In lean, we consider this as someone’s queue time. This time in waiting (queue time) counts is a delay, no matter what the reason. As you begin to track your customer’s flow it soon becomes obvious that some of your activities from the eyes of your customers are of little value. A critical metric of waste for any process is what percentage of the total cycle time is spent in non-value added activities and how much of this is waste. The metric used is process cycle efficiency, which relates the amount of value added time to the total cycle time of the marketing process. Typically, marketing cycle efficiency of less than 10% indicates that the process has a lot of non-value added time or added wasted opportunity.

Marketing Cycle Efficiency = Value-added Time / Marketing Cycle Time

Waste is any time, cost, etc. that has no value in the eyes of your customer. All organizations have some waste. Lean shows us how to recognize waste and by utilizing these two simple and doable formulas. Don’t accept that Marketing is not measurable, it is!

Technorati Tags: Lean,Marketing,Six-sigma,Cycle Time,Little's law

Even Strong Pillars can crumble?

Most organizations build their pillars at the strategic business unit level, in the marketing departments within the business. However, they must include and receive buy in from customers, sales and other parts of the value chain to make it work. If it is pushed down it will seem like just another program.

Once we have designed The Pillars of the Lean Marketing House™, we need to implement it throughout the entire organization. This requires careful planning and coordination with all parts of the organization. It is beyond the scope of this post to go into an entire Product Launch but we basically should know, how to organize, coordinate efforts and establish deliverables within the organization. Also, we should have knowledge of the time, availability of data and the resources needed. Another important aspect is the degree of support and funding both in time and money that management is willing to commit too.

When completed, The Pillars provide clarity, the budgetary requirements and a platform for management to buy into and support. However, it lacks the foundation needed for implementation and measurement that is required for successful deployment. We will need to integrate the Hourglass into lower level blocks or the Foundation of the Lean Marketing House™. The blocks provide the stability to the The Pillars of the Lean Marketing House™. They are made up of the tactics we will employ to move prospects from one stage to another. As we move the forward, a more formal collection and reporting system will emerge. Once we get more and more blocks working, we will begin to link the different segmented pillars together.

Building The Pillars of the Lean Marketing House™. often require continuous testing and modification to see if the process is working. This can be frustrating for many who routinely expect perfect solutions. Many times you are testing something that you never had applied or had measurements before. You will revisit your pillars, adjusting and re-aligning it to fit with the organization. It is not unusual to postpone the rollout of pillars until the first pillar is well established and working. The foundation of the Lean Marketing House™ will be explained in upcoming posts.

Related Information:

Lean Marketing House - Foundation

The Pillars of the Lean Marketing House Webinar

Duct Tape Marketing

Technorati Tags: Duct Tape Marketing,The Pillars,Lean Markeitng House,Lean,Marketing

Do your Map your Value Stream backwards?

In the book, Learning to See by Mike Rother and John Shook, they recommend a mapping tip of beginning the Value Stream Mapping process by walking downstream from the customer end. This way, they say you will begin with the processes that are linked most directly to the customer. As I was reading, actually re-reading the book, I thought how simple and intelligent that statement was. Starting at the end of the process should be the logical thing to do if you are considering developing a pull system. It is the beginning. This is very similar to my thoughts I expressed in my Mirror Marketing E-book.

Mirror Marketing E-Book

In a marketing perspective, how often do we really consider what our customer is real needs are. I find it interesting in a recent study by Rain Today they cited that the number one reason that most professional service sales are lost is CLARITY! I think it might also be said for many product opportunities. It might not be directly, but if your product or offer was fully understood before the purchase decision was made, would that improve your closing rate?

So do things become clearer walking backwards? Try this old golfing trick, walk your favorite golf course backwards. Does the out of bounds, elevations and other danger seem entirely different? Why not put yourself in customer shoes? In Six Sigma perspective, we call this process Voice of Customer but do we really consider the metrics of delivery performance, number of defects, invoice accuracy and other views that the customer is experiencing.

If you have a customer that will take the time with you, try having him draw a process map of your product. Or just blue sky the different experiences that he has with your organization. How accurate are they? After that, have them draw a future state. What would they like to see from your organization? Are you willing to deliver that experience?

Technorati Tags: Value-Stream-Mapping,Lean,Mirror-Marketing,Marketing

Delivering in the NOW time

If you want to be successful in today’s market consider using this tag line. What reminded me of this is discussions I have had with Jeff Slater of Sonoco on the Supply Chain, Bob Sproull, author of The Ultimate Improvement Cycle and this recent video on the American Express Open Forum, Delivering What the Customer Wants.

Customers are demanding shorter Supply Chains and more customization. Their trade-off is that they are willing to wait for a very short-on-time delivery and the faith not that the product or service will be perfect, but that it will be supported and corrected if there is a problem.

The internet has made people accustomed to buying things sight unseen if they have trust in the people and organizations behind the product. Does anyone mind when the product says Beta on it?

However, how can a company make money with customization and supply chains being the 2 biggest drawbacks to efficiencies? The first thing I would let go of is the word efficiencies. That seems to me an out-dated word still being used by cost accountants. The Theory of Constraints utilizes measurements using the term of Throughput which I believe has a lot more bearing on the health of a company. Most companies also fail to realize that the “asset” of inventory actually penalizes you in your supply chain and typically reduces your time to market.

Delivering in the Immediate Moment is typically not about production time, it is about policy constraints and having a supporting system in place to support that goal. Building a Value Stream Map can clarify many of these issues. However, first things first, remove the word efficiency and add the word throughput to your vocabulary.

Related Posts:

Theory of Constraints + Lean + Six Sigma = Ultimate Improvement Cycle

Lean Six Sigma applied to Supply Chain

Application of Lean Six Sigma to the Supply Chain

Technorati Tags: TOC,Theory of constraints,Value Stream Mapping,Efficiencies,Throughput