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Units of Production

Production is work that creates something of value.  Farming produces crops. Manufacturing produces products. Sales produce customers.

Production requires input, a process, and output. It creates value in stages, and these stages need to be operationally defined and measured if the goal is to maximize output and minimize input. In manufacturing, the most rudimentary classification of the units of production is raw material, work-in-process, and finished goods.  In sales, you have to find or attract the people in the market with problems you can solve, win these individuals by getting them to buy from you, and then keep these customers’ business by delivering on your value proposition.  

What units of production should a team operationally define? How about something as basic as who is the “Customer?”

Suppose one department in a company (say, the sales department) thinks the customer is an executive at an end user who makes a decision to accept a proposal from your firm. Meanwhile, suppose another department in your firm (say, the marketing department) thinks the customer is the person at the distributor who signs the check to buy their product. Inevitably, the result ends up being products no one buys and collateral no one reads, and frustrations all around.

Clearly, the units of production in every stage of sales production are vital to define: what makes a qualified prospect? What is a qualified sales opportunity? Which deals belong on the forecast? Which are repeat vs. new customers?

It goes without saying billions of real dollars are lost annually to problems like these. Unfortunately, those billions in lost profits will continue due to the blindness caused by ignorance of Operational Definitions.

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