Lean Sales – Can You Really Make LEAN, Six Sigma or TOC Work on the Sales and Marketing Process?
The goal of any organisation is to reduce costs and maximize profitability whilst retaining customer value. That is what everyone within an organisation or company thinks about, works toward, and wants to achieve. In pursuit of that goal, many different principles have been applied to business, but the sales and marketing function continues to fail miserably against the operational side of the business when it comes to cost reduction, eliminating waste and maximizing profitability.
There are well-proven disciplines that have been applied to companies that can reduce costs and maximize profitability. The principles of these cost and quality control disciplines are well known and certainly have made dramatic improvements in manufacturing, distribution, and general business performance. Lean sales are not high on the agenda initially, but as companies seek to continually improve, this area of the business comes under the spotlight.
Is it a stretch however to attempt to apply lean principles to these processes to sales and marketing?
There have been books written and concepts of how they can potentially be applied bantered around, but rarely do you see actual case studies of results being achieved. Certainly, not a level that would validate them as processes to apply to your sales and marketing organisation.
Two of the well-known disciplines are LEAN and Six Sigma. These are the two that are most often attempted to be applied to the sales and marketing function. Looking at each of them in succinct form, they can be best summarised as follows.
LEAN originated from the Toyota Production System and has been extremely successful in improving the performance of manufacturing. Lean is a management philosophy focusing on the reduction of the seven wastes (over-production, waiting time, transportation, processing, inventory, motion, and scrap) in manufactured products. In principle, there are similarities between manufactured products and sales and marketing processes. However, in manufacturing, you are dealing with a fixed constant, whereas in sales and marketing, you are dealing with a mobile constant.
Six Sigma can be understood as a methodology for improving business processes. It was originally developed by Motorola to systematically improve processes by eliminating defects. A full explanation of Six Sigma goes beyond the scope of this article. Within Six Sigma, there is the model of DMAIC, which is designed to improve existing processes. The basic methodology consists of the following five steps, Define. Measure, Analyze, Improve, Control. Again in principle, there are similarities in the intent of what you would like to achieve, but can this process be applied to sales and marketing?
Another function that is sometimes raised is TOC. TOC (theory of constraints) is a method for identifying and overcoming key bottlenecks and constraints that inhibit an organisation from achieving its goal.
Having studied Six Sigma and readings on LEAN and TOC, it would be my opinion that in their current form, they are difficult to apply to sales and marketing. I would project that for most organisations, the processes are complicated, resource-hungry, and something that is not going to be easily adopted by an organisation unless you already have proven outcomes in other areas of your business. This is particularly in the case of Six Sigma, which requires considerable resources and, for that reason alone, is best suited to major corporations. The attempts of adjustment of these disciplines may far outweigh the investment of time and resources to the actual outcome achieved when looking at mid-size to larger organisations. You may well be writing a new road map every time you attempt to apply it, which incurs a considerable cost to any process.
A Six Sigma process is one in which 99.99966% of the products manufactured are statistically expected to be free of defects. A business process is improved to remove all defects is a similar aim. Six Sigma’s implicit goal is to improve all processes to that level of quality or better. Like its predecessors such as LEAN, the Six Sigma principle asserts that:
- Continuous efforts to achieve stable and predictable process results (i.e., reduce process variation) are of vital importance to business success.
- Manufacturing and business processes have characteristics that can be measured, analyzed, improved, and controlled.
Certainly, there are functions within any organisation where the intent of removing variation and error is a necessity, and the sales and marketing functions are not excluded from that requirement. However, the question is how frequently the tasks get performed and whether is enough to warrant a full assignment of Six-Sigma with black belts, green belts, etc. Probably not.
The requirement to have predictable process results in all processes is where the problem arises, and this is a constant in all methodologies. In sales and marketing, there is not a predictable result as you are dealing with human behaviour, so therefore, the ‘all’ becomes an impossible point. A customer is a mobile constant, and at all times, the control is in the hands of the customers and marketplace to a degree, so there is no finite answer. The difference in dealing with a fixed constant vs. a mobile constant remains a challenge.
It would seem that advocates of each of those disciplines are attempting to fit a square peg in a round hole which is ironically going to increase costs without necessarily having a clearly defined outcome and improvement for the business. Again, it may work in part but not as a whole.
The Lean Sales Organisation can exist
This is not to say that I don’t believe sales and marketing can be measured in much greater detail than what it currently is in most organisations. In fact, I have spent many years refining the processes that ensure you can remove waste (lost profit) from sales and marketing organisations whilst delivering increased top-line and bottom-line results.
The issue you have with the measurement of any of these areas is that there is no definitive outcome for many aspects of the processes performed. There are a number of supporting processes that can be collectively improved to a definitive outcome, but the primary ones remain fluid. You cannot set in place a process that guarantees a customer will respond in an exact manner (other than not purchasing, which is pointless). The customer is a variable that cannot be controlled but can be predicted to an improved degree than often is attempted to be measured.
If you also consider the variable of the market, the customer is a subset thereof. You can release the greatest piece of marketing on any single day, but you will be impacted by the market and customers of that given day. Imagine releasing billboards across New York, advertising in newspapers, press releases, and direct mail campaigns for a great new technology on the market. The same day an airliner lands in the Hudson River, and the pilot remarkably saves everyone’s life. Who got all the attention, press, and space in media that day? Who was the priority for attention for all those media customers? That is an unmanageable variable. An extreme situation, but everyone in the business can reflect on the campaigns that were just hit sideways with something else unpredictable happening in the market and stalling their campaign.
CEO’s greatest challenge now, and particularly in the current markets, is the constraints they have in their ability to plan, execute, and manage their sales strategy and remove all excess costs.
Most organisations have stripped and improved their operational capability, but the sales and marketing functions remain relatively untouched. There are obvious cuts that can be made through headcount and marketing funds, but that is not really serving the organisational goals well.
Traditional simple fixes in sales forces do not work
Sales forces and marketing departments have adopted a set of behaviours and practices that are costly, cumbersome to business, and blindly accepted as ‘the way things are done’. When attempts to remedy problems are started, the biggest constraint is that the processes are often not commenced far enough back in the function nor going deep enough into the organisation to have any real benefit back to the business. The sales and marketing function is often overly simplified by those who do not understand or those attempting to protect it from analysis, with the outcome being no business process is applied therefore, overall improvement is not realised.
Simple fixes are often attempted to be applied, and the most common default is sales training for a sales organisation. An example of this is when sales revenue is not reaching sales goals. If you consider the principle of TOC and the removal of bottlenecks, you can quickly see why sales training alone will not fix a problem. Sales training is about the interaction between a salesperson and the customer. But what about all the activity, processes, and procedures that had to occur as a business to bring that salesperson and customer together? What about all the occurrences that happen once that sale is made? If an organisation does not go deep enough and wide enough in its diagnostics for sales and marketing, no real outcomes will be achieved. Often sales training amplifies the problem by increasing the number of times a flawed process within the organisation is completed. Hence, most sales training fails to deliver any real outcomes.
The real question is, what lean principles do you apply to the sales process?
Where do you apply them within the business, and what is the process that ensures it is effective in the outcome? Also, what process can be managed comfortably and effectively around the mobile constant of the customer?
During the hundreds of reviews I have conducted on businesses over the past twenty-plus years, there are some common findings that are inhibiting additional profit and growth from being realised. Most people just consider the top-line of sales and marketing as a way to increase profit, meanwhile leaving a very large chasm draining cash resources from the business.
Through literally tens of thousands of hours of consultancy, I have developed a set of processes that can be applied across a business that will effectively deliver the outcomes of reducing costs and maximizing profitability whilst retaining the customer value for the sales and marketing functions.
When you apply the right Lean Sales diagnostic tools, you can take the sales and marketing functions through the following processes that are associated with LEAN, Six Sigma and TOC. Those being:
- Define, Measure, Analyze and Improve.
- Reduce: waste in human capital, processing, inventory, motion and scrap
- Remove: bottlenecks
The wording will be similar to those of the operational principles of LEAN, Six Sigma, and TOC however, the application of those processes will be vastly different for the sales and marketing function.
Sales and marketing functions have a legacy of dislike of being measured. They have kept measurement at arm’s length with a plethora of excuses and stories to CEOs and CFOs that, in reality, just don’t cut it in today’s world. Many sales organisations are antediluvian in how they are operated and managed. Once a CEO or CFO moves on past those legacies, additional profit and cash flow can be uncovered from the chasm that exists in most businesses.
Through Lean Sales diagnostic tools, we can identify a series of areas where considerable profit is lost. We can break the diagnostic areas down into four specific categories.
1. Selling price, sales and marketing process – Selling price is well documented on how to manage profit in the pricing structure you take to market. A quick fix to profitability issues. The area that is unmapped and leads to enormous loss is the sales and marketing process. This is the process that is measured from the concept of marketing being developed, tasks and resources applied, through to the final point of signing or purchase by the customer. Significant savings can be made throughout those functions.
2. Human capital – in most organisations, there is a lack of capacity planning when it comes to human resources in sales and marketing, and those functions are rife with unproven legacies from bygone eras. This is compounded even further by the lack of management having the right tools and measurements to ensure effective control of these areas. This area alone has repeatedly demonstrated to us losses of some 2-4% EBITDA. The area of skill sets of human capital are outside this phase and can contribute to further reductions in waste.
3. Operational – the day-to-day operations of sales and marketing are resource-hungry environments where costs can escalate quickly depending on the perceived challenge or demand of the day or week. Interestingly the more focus that is placed on increasing performance in these areas, the more typically they waste considerable profit. Often the increased effort does not realise increased profit, just costly sales revenue.
4. Post-sales requirements – once sales and marketing have completed their fundamental role in finding and signing/purchasing customers, considerable resources impacting the organisation both within and outside of sales are drained unnecessarily, again reducing profits.
Profitable outcomes can be achieved with Lean Sales Principles
As with all disciplines, where they are followed succinctly from start to finish and applied in the right sequence, the results are realised. Where a spasmodic approach is applied, the results are diminished significantly. We can work your business through a set of disciplines that will ensure that the profit chasm is reduced and bottom line EBITDA is achieved. The outcomes can range from improvements in EBITDA of 2-10%, depending on the functionality of your sales and marketing functions.
We would be pleased to discuss this process with you and how it can be applied to your organisation. Please contact our office.
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