by The HLH Team
“Opportunities multiply as they are seized.” – Sun Tzu
Making money is hard. It’s damn hard because it’s what everyone else wants to do, too. This leaves you in competition everyday with people who may be smarter, more nimble, have more resources, and are trying to take your customers away from you. Keeping this in mind, if we think about our business more like an army going into battle, we will start to realize some habitual mistakes.
Don’t Compete Against Their Strength:
“An army may be likened to water, for just as flowing water avoids the heights and hastens to the lowlands, so an army avoids strength and strikes weakness.” -Sun Tzu
In battle, you never attack an enemy where he is strongest. If he has more ships, you lure him onto land. If he has a bigger army, you bombard him with ships.
We haven’t caught onto this in the business world, and have a bad habit of attacking our competitors where they’re strongest. We focus on what our competition specializes in and that’s where we tend to compete. Often in doing so, we fail because we’re fighting on their terms.
Where is your competition weakest? What part of their business do they neglect? What product lines are in the most remote areas of their store? What services do you know they offer, but aren’t found on their website?
Where your competitor is weak, you must be stronger. If you aim for the strong center, you’ll both end up wasting your resources in attrition. Find the weak flank, where they haven’t focused their resources and tap into that opportunity. Seizing that market will take less investment and reap higher ROI.
Speed Requires Preparation:
“To rely on rustics and not prepare is the greatest of crimes; to be prepared beforehand for any contingency is the greatest of virtues.” -Sun Tzu
If you march to battle not knowing your destination, the terrain, or having an inkling of where the enemy is, you’ll lose. The same goes for innovations in business.
With new ideas, the first one out of the gate often wins. But if you rush the preparation, and don’t have every variable accounted for, you’ll often make costly mistakes, leaving your competition to pass you in tortoise-and-the-hare style.
Don’t roll out a new product idea until you’ve taken the time you need to prepare properly. Learn what you need to learn, and, mostly importantly, try to anticipate different scenarios. Then, roll it out quickly to crack open and dominate a new market before your competition knows what has happened.
Remain Flexible:
“Avail yourself to any helpful circumstance over and beyond the ordinary rules. According as circumstances are favorable, one should modify one’s plans.” -Sun Tzu
If you need to modify your battle plan to get the high ground, do it. If they get the high ground, withdraw if you must and don’t be stubborn.
We all think we’re flexible, but flexibility isn’t just in our minds. It should be built into the way you run your business. Are you able to react to plunging oil prices, a doubling of demand for your services, or other seismic changes in circumstance?
Your team is the epicentre of your business’s flexibility. If you build a culture of favouring pragmatic decisions over ideological ones, your team should be there to strategically change your plans to always match the conditions.
by The HLH Team
“Blue oceans are right next to you in every industry.”
-Renée Mauborgne
You buy a widget for $7.00 and sell for $15.00. People buy them, and the money rolls in. That’s how business is supposed to work, right? A competitor with more buying power moves in and starts selling the widget for $10.00. Your inventory (which is excessive because you got excited about all the money you were making) sits on the shelf.
What do you do? One school of thought says that you put your price down to $10 or $11, grind the supplier, tighten perks for staff, and get down in the weeds. It gets vicious just to scrap out that extra 5%. But there’s another school of thought, and in an age of disruption it’s catching on fast. It’s to make the competitor irrelevant.
Red or Blue Oceans:
In 2005, W. Chan Kim and Renee Mauborgne published “Blue Ocean Strategy,” a book on marketing theory that advises businesses to stop fighting tooth-and-nail in the “red ocean” of thinning margins where you’re always watching your competitor over your shoulder.
Their advice: stop worrying, stop fighting, and put your energy in opening new markets. It’s for the competition to become irrelevant, because what they’re offering can’t compete with your new approach. It’s both simple and fiendishly difficult. You need to pull yourself out of the horse race with your competitors for a 30,000 foot view of what semi-autonomous revenue streams you can tap into.
What is a New Market?:
One of the most paralyzing myths of business is that all the new ideas have been taken, and we’re just fighting over the details. New ideas are everywhere, with every disruptive shift opening more of them. We just need to know where to look. Instead of fighting for a razor thin margin on that widget, how about launching a workshop about how to use it and sell them that way? Or accept it as a low margin commodity item and be the first to open up a new market, with a new widget.
Lean is about developing the instinct to identify a process that’s bugging you and improve it. Spotting new opportunities for revenue streams is similar; it’s about being aware of the trajectory of what’s happening around, whether that’s worsening waste or evolving opportunity.
How to get There:
The best thing about a new market is that it’s usually uncontested. You’ll be the first one there, and you’ll be up and running before while your competition is still losing sleep over margins. On the flip side, the fact that it’s new means there will be few best practices to fall back on. Make sure you keep your eyes wide open and don’t invest too heavily.
Here are a few rules of thumb for your new market:
- It needs to be in your industry; stick with what you know. The new market should be semi-autonomous at most.
- Reverse your perspective. Go to the core of your industry, down past products and to the basic motivations of your customers. Then think from there to your products/ services and how else it could look like.
- Take time for strategy. If you go into a new market blind, you won’t have anticipated all unknown variables and you won’t get the most out of it.
by The HLH Team
“Anticipate the difficult by managing the easy.”
-Lao Tzu
The Bake Sale Debacle:
Imagine with me: you’re taking part in a bake sale for your son’s hockey team. Customers have 2 weeks to fill out an order form for various treats; you’re in charge of baking the Rice Krispie squares.
You make a good guess that each of the team’s 20 players will sell 3 orders of a quarter pan each, so you buy enough materials for 15 pans of squares. You get a great deal at Costco buying that many boxes of cereal and marshmallow bags at once.
Here’s your budget:
Projected Revenue:
15 pans @ $20/pan
Costs:
15 jumbo Rice Krispies @ $5 each = $75
15 jumbo marshmallow bags @ $3 each = $45
Gas to/from Costco = $10
Total Costs:
$135
Projected Profit:
$170.00
The orders trickle in. A square here, a square there. But the big orders never come in for you. Instead, they overwhelm the Nanaimo square mom down the block. She’s swamped, all the while after selling a measly 7 pans your kitchen is still crammed with materials and you’re $25 in the hole for materials.
So what happened?
Expect the Unexpected:
You made an educated projection of how much you’d sell, and you bought your products at a reduced rate based on that projection. You even saved fuel and time by making fewer trips. You should have come out ahead.
But the unexpected happened: the nanaimo bar competition. As you munch on Rice Krispies for the next year, you tell yourself, “I couldn’t have known.” But, there is always the unknown. Therefore we need to plan for the unknown.
Just-in-Time:
You actually had another option. You could have bought enough ingredients to get started, then waited for more orders to buy more.
Just-in-Time Inventory Management was developed in Japan in the 60s and 70s and perfected by Toyota. The philosophy is simple: only have enough raw materials to fulfill the orders you’ve taken.
The secret is in developing a reliable supply line to bring in just enough materials on fairly short notice. Just-in-time for your bake sale would have looked like this:
- You buy enough raw materials to get started with a couple pans.
- You make more frequent trips to the store. You buy smaller boxes of Rice Krispies. Thus, you pay slightly more in transportation and materials.
- You save by staying close to the rocks, and not carrying any more inventory than you need.
Here’s what a Just-in-Time process for your bake sale would have looked like:
Confirmed Revenue:
8 pans @ $20/pan = $160
Costs:
12 midsize Rice Krispies @ $3.75 each = $45
12 midsize Marshmallow Bags @ $2.25 each = $27
Gas to/from Costco = $30
Total Costs:
$102
Actual Profit:
$58
Your costs were higher. But you turned a $25 loss into a $58 profit. You expected the unexpected and built flexibility into your model instead of optimism.
Advantages:
The deadly waste of Over-Inventory is dangerous because it’s so often overlooked. When we bring in more inventory than we need, it doesn’t just sit in the corner.
It wastes money every day it sits there:
- Every dollar we tie up in inventory is a dollar less in cash flow; a dollar less we can use to run our business.
- As inventory sits, it ages. It gets old, goes bad, becomes obsolete. We often eventually need to discount, throw away, or write it off
- Every time you have to move it, money is wasted.
All in, the cost of carrying inventory for a long period is 25-30% of its value. For most businesses, that eats your profit margin even if you can sell it at full price.
Potential Hazards:
Toyota is the king of Just-In-Time Inventory Control, waiting until it receives orders before ordering parts. But when you’re close to the rocks, there’s no room for error: in 1997 a fire at a Toyota parts manufacturer shut Toyota assembly lines down for weeks because they ran out of the part after just one day.
Examples like that are illustrative of risk, but incredibly rare. For lean businesses adept at Just-in-Time, the waste saved is well worth the odd hiccup.
Whether you’re a large manufacturer or a tiny kitchen cook, the first step is making your supply chain as reliable as possible. Step 2 is Just-in-Time.
by The HLH Team
“A meeting consists of a group of people who have very little to say – until after the meeting.”
– P.K. Shaw
Whether you’re the boss or the attendee, you don’t want to spend an hour in a meeting thinking about how you’re not getting any other work done. Meetings have extraordinary potential for bringing out our best, but they usually just make us sleepy.
Choose Attendees Carefully:
You can’t control attendees at every meeting. Staff meetings, like your morning fire-up, are for everyone. Keep those short and bold. For more collaborative meetings, choose your attendees wisely. Are you inviting them for the insight and/or experience they bring to the table, or because their feelings would be hurt if you don’t?
7 people has been shown to be the perfect balance of diversity and sanity for a good meeting. There is some room for movement around this sweet spot, with a couple people more or less than the magic 7. Less than 5 attendees, and you may struggle to achieve the critical mass of energy needed for innovative ideas to emerge. More than 9 people in a room and people will have trouble being heard, to the point that some will fade into the background potentially pulling their ideas off the table with their voices.
Implement Standing Meetings:
Standing meetings let the participants know the meeting will be short and concise. It allows everyone to make decisions and move on allowing the meetings to be shorter and everyone to be more productive.
At our office we have a standing meeting every morning. It is always 15 minutes max and happens every single day. This allows us to start the day off right and we wouldn’t go without it now.
Distribute a Written Agenda Beforehand:
Agendas are your secret weapon for controlling the meeting’s trajectory. They communicate the meeting’s purpose and show the roadmap for how to get there.
Whether you have a set agenda (although it should never be truly static), or a one-off, distribute it beforehand with the explicit expectation that attendees review it.
If you want to involve everyone on a deeper level, ask for their feedback in crafting it. This sets a more collaborative tone which you may or may not want.
Be Brutal with Tangents:
If a one staff member rambles on to another staff member about his weekend, headache, or cat’s eating habits, it wastes the time of 2 people. If this happens in a meeting, the waste is exponential. Let people know beforehand that you will shut that down, and then don’t be shy about doing so.
It gets complicated when the tangents stop being about cats, and start being about another aspect of the business that needs to be talked about, even though it has nothing to do with the meeting’s agenda-driven purpose. Keep the meeting on track, and either ask them to carry it on later or give them a few minutes to sidebar and return while you carry on with the main group. Otherwise you’ll sacrifice the intact goal of one meeting for the partially formed goals of 2 meetings.
Listen:
Seems obvious, right? The reality is that if a person doesn’t feel heard in a meeting, they will feel deflated and contribute less the next time.
It’s the organizers job to create and keep an open, respectful space where everyone feels heard. If there’s disrespect, shut it down decisively. If a few people are monopolizing, reach out to the quiet ones, who sometimes have the best ideas go unnoticed.
Take Notes & Hold Accountable:
If a meeting happens and nobody remembers it, was it useful? Of course not. So always take notes, even if it seems trivial.
Make sure the notes names, so that you can hold them accountable at the next meeting. But, beware of the “Hank thought of it so Hank has to do it,” trap. If Hank thinks that every idea he has will end up in the record with his name and as yet another task stacked on him, he’ll just stay quiet. Find the balance between holding people accountable and being punitive.
Cited:http://projectmanagementhacks.com/meeting-tips/
https://www.inc.com/jim-schleckser/7-plus-or-minus-2-for-meetings.html
by The HLH Team
Remember when you couldn’t find the stapler? You know you saw it on that desk over there, but now it’s gone and the receptionist doesn’t know where it is.
Every minute you spend looking for that stapler is a frustrating waste of time, morale, and efficiency.
5S is a method of organizing the workplace that dovetails beautifully with lean methodology. It’s an important component in Continuous Improvement (Kaizen), and fosters efficiencies by saving time, improving discipline, and being a constant reminder of the importance of workplace standards.
It’s Japanese methodology and the name derives from a list of 5 words, which translate into seiri, seiton, seiso, seiketsu, and shitsuke. Companies embarked on a deliberate Continuous Improvement path typically employ 5S to some degree.
Sort (seiri)
Even with the time wasted in looking for staplers, how many old ones do you have lying in the bottom of drawers and at the back of office cupboards?
Before establishing a system, we need to first clean up from years of not having a system.
Ask yourself which items you need and which you don’t. Do all the pens on your desk actually work?
Do you really need 4 coffee mugs? Fewer items cluttering up your daily space will keep your head clearer and make it easier to find the items you do need.
Set in Order (seiton)
Give the stapler a fixed address.
Establish a home for all equipment and mark it off with tape or labeling if necessary.
People use the equipment on a first come, first served basis. It goes home after it’s finished with; no exceptions. Equipment is kept close at hand, so the people who need it most often don’t have to go far for it.
“A place for everything and everything in its place.” It reminds us of elementary school, but it’s the central pillar of 5S’s effectiveness. If you use the stapler, put it back. Elegantly simple.
Shine (seiso)
Clean the stapler. Clean equipment is not only more pleasing to use, but we tend to take better care of items we see as new over items we see as old and dirty.
Not only is clean equipment better for morale, it’s also safer. In 5S, equipment is cleaned while inspected and inspected by cleaning, so damage is caught as early as the next polish.
Standardize (seiketsu)
Now that your clean and functioning stapler has a home: standardize it. Creating high standards will formalize 5S and pivot it from one-off housekeeping to expected workplace standard.
The standards will help you maintain the order you’ve established moving forward. If you fall off the horse, refer to those standards to get back in the saddle. Eventually you wouldn’t have it any other way.
Sustain (shitsuke)
This is the hardest part.
Right now your mind is on keeping the stapler in its proper place but it won’t be for long.
Our busy minds move from focus to focus, but 5S cannot become “last month’s project” when we become engrossed in other things.
5S must become engrained in company culture if it’s to be maintained. More than just housekeeping, its long term integration requires a shift in how employees see their workplace.
It’s a microcosm of Continuous Improvement as a whole, in that it requires a shift in company culture and ongoing focus and discipline to be successful in the long term.
by The HLH Team
Continuous Improvement
We hear the terms “lean” and “continuous improvement” a lot, and often interchangeably. While lean focuses on improving customer value by eliminating waste (read more about lean here), continuous improvement focuses on making incremental efficiencies to internal processes which accumulate over time.
First implemented by Japanese industries struggling to rebuild after the devastation of WWII, kaizen was so successful that savvy American business picked it up. It’s now swept across the globe and has become a defining feature of many of the world’s most competitive businesses.
Continuous Improvement is Cultural
The Japanese term kaizen translates simply as “improvement.” Continuous improvement is a mindset. It’s the long term discipline of making incremental improvements that accumulate over time into big bottom line improvements.
There’s no room for elitism in continuous improvement. The CEO and shop floor or mail room worker alike must be committed to a cultural shift. Everyone endeavors, and everyone benefits.
Kaizen relies on workers’ grass roots ideas about how to improve the process they’re involved in everyday. It can’t be imposed effectively from head office because it requires intimate knowledge of ground level processes. This is why continuous improvement must begin with a cultural shift.
It’s About Empowerment
When was the last time you brought in a high priced consultant to talk to you about efficiency? Did you know that, most of the time, the answers he/she charged a bundle for were probably in front of you the whole time?
The beauty and the discipline of continuous improvement is that it’s not about hiring expensive consultants to tell you the secret of doing it. You have all you need to do it right now: they arrive at work every day for shift.
Continuous improvement harnesses the talent of your workers. It empowers workers to take more ownership of improving the processes they’re most engaged with. In exchange, management must take their employees’ ideas seriously and give them the consideration they’re worth.
You can simply think of it as the circle of business life.
When employees are motivated and engaged in their jobs, and not just performing automatic tasks, they become wellsprings of ideas. The ideas probably aren’t earth shattering, but shattering the earth isn’t the goal. Continuous improvement makes big bottom line changes out of small improvements amortized over time.
A few seconds saved in a process that’s repeated thousands of times will reap big dividends.
The Process of Continuous Improvement
Continuous Improvement relies on a 4 step cycle, iterated indefinitely and improving processes as it goes.
It’s planning deliberately, taking decisive action, gathering key metrics, and taking the data seriously, which you roll over into your next decisive planning process.
Companies are made of separate processes, like trees are made of leaves, and every process can be improved. Continuous improvement is about creating the culture where every employee is personally invested in making improvements. It takes time to create that culture, but once established it will become the solid foundation of your company’s future.
