Bold Exec

Double Your Results by Isolation: Part II

The technique of Isolation works wonders to double-up on improved results. When we acquired Paradyne, among many, many issues to deal with were two that benefitted from isolation. We previously discussed the aged accounts receivable; the second is this resale product.

The only growth within Paradyne over the previous several years came from a product (call it X) manufactured by another company and resold by Paradyne through the Lucent (another separate company) sales force. Although this situation was locked in via long term contracts, the value added by Paradyne was virtually non-existent. Regardless, this had been the only growth area and so every department and most individuals found a way to attach themselves to it. Everyone talked about product X, how they were helping, what they were contributing. It was like a cancer, preventing everyone from putting their energies and efforts into the current and developing products of the company. So we isolated. All functions of product X, including order placement, supplier and channel interface, scheduling, the little development there was, billing, and collections were isolated into one teeny department of about 8 people: and that was their only and full time job. The other 792 people in the 800 person organization lost their product X distraction.

The isolation of the aged accounts receivable, described in a previous posting, plus the isolation of product X allowed the full energy of the remaining organization to go where it was needed; two years later we had a successful IPO.

Not Your Founding Father's MBO's

Summarizing "Not Your Founding Fathers' MBO's":
Original management by objective techniques are out of date; they miss the mark on many fronts; entrenched, manipulated, a longer time frame than business allows.
So instead use these Living Breathing Bible techniques:                                         Create concept type priorities, those with some wishful thinking but which also that clearly represent the changes required for your organization or survive and then prosper.
Lace each with as many specifics are you imagination can create, using both knowledge and intuition to create them.
Go through the difficult process of stack ranking each priority, make your management team recognize that the initiatives or investments outlined in item #4, for example, will not be funded until the specifics in item #2 are achieved.
Learn more about your organization and gain fresh thinking by assigning the priorities to others than the obvious functionaries.
Learn more about your business by thrashing through many mid-course learning-based corrections to your initial specifics.
Learn more about your progress by reassessing the specifics and prioritization as new information develops on your path to excellent performance.                                  Learn, learn, learn.....

Double Your Results via Isolation

The technique of Isolation works wonders to double-up on improved results. When we acquired Paradyne, among many, many issues to deal with were these two; both of which were optimized by the technique of isolation. The first was a portfolio of aged accounts receivable from equipment previously sold on perpetual leases. The second was the resale of a product to Lucent; that product developed and produced by a third party. This week we'll discuss the lease issue; next week the resale product.

The collection procedures for these aged leases was co-mingled within the company's accounts receivable department. While the normal accounts receivables from current product sales and these lease receivables for aged leases technically fell under the same organizational category of accounts receivable; the techniques, considerations, servicing, and attitudes required to optimize both were very different. And results for each category were sub-optimal. So we created a separate subsidiary for the collection of these lease receivables with its own management, objectives, and performance criteria. Results for the standard new product accounts receivables radically improved: results for the aged lease receivables radically improved. Isolation of issues that, while on the surface seeming to be categorically linked, have in fact sufficiently differentiating characteristics, can achieve dramatic results.

Living, Breathing Bible Part III

We’ve been through (a) concept-type priorities, (b) specifics, (c) tough-minded initial stack-‘em prioritization, and (d) scrambled assignments; To conclude this topic today I’ll address (e) many mid-course learning-based corrections, and (f) event or decision driven reprioritization.

 

(e) By launching priorities with very un-proven yet specific goals, making the list of specific possibilities extensive, and continuously challenging the team via review of those specifics, you will face many mid-course learning-based corrections. I previously laid out the specifics for the “get our balance sheet credit-worthy within 6 months” priority. Remember we created this conceptual priority, and then laced it with specifics; specifics created partially by judgment and partially by intuition. So now we’ve been underway for a while, and the team assigned to this priority creates an interim report: “we’ve discovered that we have been billing 5 days after shipping so are losing 5 days on our collections; by billing on the day of shipment we should save $3M not the $1M we estimated”, “collection procedures, originally targeted at $4M, is not achievable, customers are only 2 days late on average so practically no savings are available”, “customer terms are longer than competition by 10 days and gives us no competitive advantage; by correcting to market we can achieve $5M vs. the $2M projected”, “in addition, via this exploration, we found a new opportunity--payments are mostly coming in by mail vs. electronically so by educating and facilitating we can save 2 days, $1.5M” . The result is that the new target for the A/R portion of this objective is now $9.5M vs. the original $7M target. It goes on and on.

 

(f) When you face real-time decisions, your initial prioritization gets put to the stress test. Two of our initial priorities were #1 cash creation, and #3 re-establishing our market place product quality image. We know that all four of our priorities we considered to be mandatory, but we initially determined that #1 cash creation just had to be ranked higher than #3 product quality image because, without meeting bank covenants on cash, the company will be out of business. So, because of that, initially an investment to re-tool several products and to market those improvements was put on hold. However today we’re now assessing new inputs. First, the cash collection actual results have been above target, and those targets have been increased; second our largest customer has made warning threats to remove us from the bidders list if there was not a quality improvement program in place. Time for a reassessment based on new realities! We now decide that #3 product quality is ahead of #1 cash creation; and therefore the priorities will be  reprioritized. 

 

By following steps (a) through (f) your organization is highly engaged in gaining breakthrough results, and you and they are learning rapidly concerning the inner workings of your business and those entrusted to gain further results. [TE1] 

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 [TE1]Published 06/22