February 2013

Issue link: http://read.dmtmag.com/i/107829

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Page 23 of 59

Do Your Best Practices Smoke the Competition – or Burn Opportunity? Management The reason best practice launches go up in flames – and most do – is not because it wasn't a true best practice. It's because management didn't tie it tightly to ROI, and also forgot to prepare the staff. By F. Barry Lawrence, Ph.D. Many firms believe that competitive advantage comes from finding something the competition does not do and your customer values. The assumption is there is some "silver bullet" out there that will devastate the competition. The cold hard truth is that you don't have to look further than your bookshelf to find these practices. Many authors (yours truly included) have described best practices like inventory stratification, customer stratification, pricing optimization, sales force deployment, and others in depth with many examples. The impact is impressive, in most cases unbelievable, so much so that consultants routinely understate the outcome to establish credibility. So why aren't all firms knocking it out of the park? Everyone sees the low standards and worries that oneday the whole industry will crash when a new entrant comes into the market. The problem is that well over 90 percent of best practice implementations fail. The reason they fail is because we don't determine Return On Investment (ROI) correctly from the start and continue to show progress to stakeholders. The progress becomes the "value proposition" for the best practice (why the firm should continue to support it). Almost every book on the subject will tell you that best practice implementation cannot succeed without "top management buy-in." What does that mean, however? Top managers often feel the need to be cheerleaders when new initiatives are launched, but the passion dies when the inevitable problems arise and no system to measure success is there to counter customer or sales force complaints that the best practice is doing more harm than good. A Cautionary Tale Here's an example from one of our early projects at Texas A&M. We were asked by a large firm to do inventory stratification for them. We did. Not only did we create it, we stayed around for the implementation at their request. Here's what happened: The stratification identified over $20 million (out of $80 million in inventory) that could be eliminated. Management was nervous about such a large reduction so they asked branch managers to "promote" items they felt could not be eliminated. They promoted all but $5 million. The first value proposition failure occurred because the branch managers were more motivated by sales than ROI. This problem was addressed with n (continued on page 24) 22 | www.cedmag.com | Construction Equipment Distribution | February 2013 22_Comp_Advantage_Feature_KP.indd 22 1/30/13 3:29 PM

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