Bill Waddell | The Dangers of Good Marketing
Many companies embrace the lean philosophy and seek business excellence. But best practices aren’t just something you can plug-and-play. And it’s not all about efficiency and cost-cutting for its own sake.
Consultant and lean manufacturing expert Bill Waddell says before you do anything to your process, you have to look at how critical aspects of your operations are handled, including some you might not expect.
We discuss what exactly to be looking for, as well as…
- What your best customers will give you – and it’s not just more money
- Why distributors should be worried
- The danger of marketing not matching value
- Identifying the balance point when a company is most profitable
- And more
Mentioned in This Episode: www.bill-waddell.com
Michael Webb: Hello, this is Michael Webb. Welcome to The Sales Process Excellence Podcast. Many people focus on reaching senior level executives, brand value, and marketing to help companies reach their financial objectives. Other people focus on data and evidence and eliminating waste. In this podcast, we talk about both in order to motivate people and create value for everyone.
My guest today is Bill Waddell. For those of you in the Lean industry, have been around Lean, you probably know Bill Waddell. People who may not know him are also largely in my audience because we come from a sales and marketing background. So Bill, please, take a couple of minutes here and describe your background and how you got where you are and what you do today.
Bill Waddell: Well, glad to describe my background, how I got here, it’s mostly the hard way. I’ve been involved in Lean and business excellence, actually, since before the term Lean was invented. Back when we were all struggling in the mid-late 1980’s to understand what Toyota was doing, and back then we called it JIT. It was only in 1989 when the “Machine that Changed the World” came out that everyone then categorized it as Lean.
But those were pretty heady days in business and in manufacturing in particular, was in that same time period that Motorola conjured up Six Sigma and did amazing things that Eli Goldratt came out with. A guy named Tom Johnson wrote an incredible book called “Relevance Lost: The Rise and Fall of Management Accounting”, all of those things kind of played a part in my early development. And I was working for a division of Emerson, and happened to be working for a guy named Dean Louie who was a very idea oriented, very visionary senior executive. He gave me a tremendous opportunity to really study and learn all those things in depth.
And kind of based on that knowledge, had some early success with lean at Copeland, left Emerson to go be a part of some turnaround efforts at a company called Cincinnati Microwave and then with McCulloch chainsaw. Both of those were successful from a turnaround standpoint, not very much fun from an emotional standpoint. Hardcore turnarounds are kind of gut-wrenching activities.
I realized then that I really enjoyed helping companies in trouble. Kind of made a career decision that I’d like to help companies that weren’t so far in trouble that slashing and burning that turnarounds entail was necessary.
And so I’ve been consulting in the Lean area since the late 1990’s, I guess, a better part of 20 years. Along the way, really became more and more convinced that it’s all about how you manage the company, that the tools are great, there are a lot of people that are good with tools, but it’s really about those core management processes, starting with accounting.
But in how the supply chain is constructed and works out, the company fits together, how the strategy drives and connects everything. But I’ve really been focused more on the management and cultural end of Lean for the last several years. Along the way I’ve had great opportunities. I was one of the original thought leaders of the Lean accounting summit since 2005. Had an opportunity to be the technical chair at the international Lean Six Sigma quality conference for a few years. Met and learned from an awful lot of amazing people and had an opportunity to work with and learn from while I was helping some pretty amazing executives.
So, it’s been quite a ride and a long learning experience, but that’s kind of my background in a nutshell.
Michael Webb: Excellent. We met at the conference held by Lean Frontiers back in 2016, and I’m looking at the slides that you used back at that conference in and you mentioned Lean accounting. You also in here, lot of focus on product management, product development and how the product is designed because it kind of creates a waterfall of value down through the channels.
Is your background accounting, or is it primarily product development?
Bill Waddell: My college education is in accounting, and I tell people I worked in accounting for three or four years, but after 30-some years I’m fully recovered from that experience. I know enough accounting to be dangerous. My core background is in industrial engineering, supply chain operations management, and it’s only really in the last five or 10 years that I’ve been more deeply involved in the sales and marketing part of the organization.
Really, just because one thing that I have learned and become quite convinced of is that the businesses is a completely integrated enterprise. The silos are the biggest obstacle in any business. And in far too many businesses, their Lean efforts, their improvement efforts are really segregated, almost two halves of the business joined by accounting. The sales and marketing folks are off doing their thing and the operations folk on the other side doing their thing, only connected by the terrible link of accounting, which is horribly inaccurate.
But in far too many companies, when you ask the sales and marketing folks what their plan is, I’ve found that they tend to be very eloquent speakers, and so they’ll give you a very impressive answer, but what it boils down to is, what are you trying to sell? Whatever we can. Who you trying to sell it to? Anyone who will buy it. How much are you going to sell? As much as we can sell.
Michael Webb: Aww man, absolutely, absolutely.
Bill Waddell: But that doesn’t fit too well with the people who are putting the cross-structure in place and setting the capacity of the company, that having this wildly erratic demand flow coming to them is challenging at best and doesn’t put the company in the best position. The most profitable a company can be is when they’re operating at full capacity. Not over it, not under it, but just right under what their maximum capacity is. That’s when the company makes the most money. So, it’s all about how you set the capacity in place and then manage demand so that it hits that level.
Michael Webb: And this brings us to a statement, a very bold, clear statement that you put on one of the slides, and it says, “Remember: marketing is a non-value adding function”. And I’m guessing that to a large degree, you would say sales, also, is a non-value adding function. Is that true?
Bill Waddell: I would. You and I chatted a little bit before, and sure, you might have some examples where marketing, you could convince me that there’s value for customers. And it’s important to remember, when we talk non-value adding, I’m talking value in the eyes of the customer, and value for the customer is a different proposition than necessary for the business. It might be valuable for the business or necessary for the business, but it’s not creating value in the eyes of the customer. I think with sales, that’s largely true too, although there are a lot of organizations, a lot of companies where it’s very consultant-sales processed, where the sales folks are working closely with the customer actually in configuring the product and honing in on exactly what the customer values. There are those cases where you can make that case that sales is adding value.
But for the most part, as I said, get two similar objects: you’re strolling down the aisle at Walmart, and one of them is five dollars and one of them is four dollars, then the core question is when the customer says what’s the extra dollar for, is your answer something that’s going to get them to say yeah, okay, I’ll buy it?
And typically, if the answer is we’ve got to pay for an ad campaign, or a big ERP system, or for a room full of accountants, the customer’s going to say no thank you, I’ll take the four dollar one. But if the answer is because of this product does more precisely what you need it to do, it’s made from better materials so it’s going to last longer, that it’s going to be more reliable, then the customer is apt to say yeah, I’ll pay the extra dollar.
And so, when I talk value adding or non-value adding with marketing and sales, that’s what I’m referring to.
Michael Webb: Alright, so, and in B to B, it tends to be, at least people try to be more fact-based and objective in their decision making, but still, using the B to C example of a product in Walmart, there are companies that the market perceives differently. Because of the promotion, or just the context in which in a value propositions that are in their promotions, in the way it’s displayed in the store. I’m trying to think of an example on a shelf in a Walmart, and a different example leaps to mind, unfortunately, but driving down the highway late at night, and you’re looking for a hotel, and one billboard says “sleep cheap”, right? At this hotel, and another one over here says “rest assured”, right? There’s different perceptions of quality that those communications give you and there are people in the market who would respond to either one, right?
Bill Waddell: Yeah, but you know, there’s no doubt that how the product is branded and how it’s advertised has an effect on getting people to buy it. But fool me once, shame on you. Fool me twice, shame on me. So, I’ll go to the “rest assured” place because I think that that’s going to be safer and I believe what they say.
Michael Webb: And if it’s not, you’re in trouble, right?
Bill Waddell: If the product doesn’t deliver, then I’m not going to buy it again. You can induce customers to do things, or to try a product, but you’re going to keep a customer with that product based on the value of the product.
Michael Webb: That’s right.
Bill Waddell: And I mentioned before that you can certainly get a short-term boost from marketing and from brands, and it certainly is necessary, particularly if you got a new product or if you’re a new company or a growing company to get people to be aware of the fact that you’re out there. But in the long haul, it’s going to come down to whether the product is any good or not.
I think it’s also interesting in the times that we’re living in, that that’s becoming more and more true. That people are relying … they’ll read your ad, they’ll listen to the marketing campaign. But before my wife, a lot of people I know decide which hotel they’re going to go to, they’re going to look at TripAdvisor. They’re not going to listen to what you have to say about it, they’re going to listen to what consumers say.
And so, the ability to fact check and get other sources of information really just all drives towards the product itself having to have that value.
Michael Webb: And I agree with that, that the product itself, you have to have integrity to the promises that you’re making and to what the customer expects.
But the customers experience both sides of that coin. Sometimes they get a better experience than they expected for a product they thought, you know, well, let’s just go sleep cheap tonight, and they end up with a better experience. They may become committed to that or trusting that brand for a long time, but sometimes the reverse is true, also. So the value offered by sales and marketing communication, the landscape there is dramatically changing, because of things like TripAdvisor and the comments on the Amazon page. It’s truly a sea change in the way commerce is conducted these days.
Let me put in front of you an example, and I have several clients that are doing this, and this is a B to B kind of example, okay? A company makes, excuse me, they don’t manufacture anything, they distribute. They distribute the tiny little, they call it “popcorn” types of product parts that are soldered on to a circuit board. Resistors, capacitors, I don’t even know what they’re all called, right? That sort of thing. Very highly specialized, highly commoditized industry. And the … it’s a distributor, now, and this distributor has made its place in the market, it’s valued by its customers because they have this skill of finding sources of those parts that tend to be in short supply. And guaranteeing that what they sell is not a Chinese counterfeit knock-off. And so their sales-force is going to market to these buyers, small and medium-sized manufacturers (this is out in California), and, what have you got today? To these junior purchasing agents that have to source these parts.
And when the market is growing and these manufacturers are producing more and more, they could make a really good living selling those components like that. But when the market is not doing so well, then it becomes a very scarce, hard to make a living for this distributor. And he found a way to fix that problem, or to add more value. And it was to understand the needs of those manufacturers more thoroughly, understand not just their production-engineering requirements, but also their sourcing requirements, their inventory and supply requirements and be able to guarantee them they would have the right parts at the right time. In other words, outsource the purchasing function of all of that class of parts and supply that customer a bill of materials and do it at a lower overall total cost than they could do it before with their own junior purchasing agents out there sourcing the stuff. Do you see that as value-added on the part of the distributor?
Bill Waddell: Yeah of course. I think that what it sounds like is the guy is creating a great deal of value for his customer. The heart of it is he’s realizing that he’s not a resistor-capacitor distributor, but that he’s a supply chain outsourcing company. I think realizing his value is in his supply chain service, not necessarily in the parts that that customer can get anywhere.
And so clearly, the guy’s created a worthwhile value proposition for the company. That’s different from a similar company that doesn’t necessarily manage the supply chain as well, but who is a more impressive marketing campaign, advertising campaign who’s flooding the customer base out there with tales of their great capabilities. If those capabilities are superior, in the long haul, he’s going to win.
Michael Webb: Yes, he absolutely is.
Bill Waddell: So in that case, product management, it sounds like, is spun up to a pretty high level. They understand their product, and they’re managing it pretty well.
Michael Webb: And it’s interesting because the transition, the job of the salesperson in that company is drastically different. If you are being the traditional jobber and calling people up and saying, you got any parts for me today versus if you’re getting that customer to talk to you and open up about their business problems and open up about the challenges they’ve had when they discovered they had counterfeit parts or when they discovered that their inventory records were wrong and they didn’t have the product in supply and they had to shut down the production line. It’s a whole different caliber of sales activity and skill that goes into making customers behave in that way.
Bill Waddell: My guess is that the sales people that are doing that, if they’re effective, yeah, sure, they’ve got to know the product. But if they are successful at that it’s because they are pretty smart with the supply chain. They can figure out how to integrate with the planning and purchasing and supply chain processes of those customer companies.
Michael Webb: Which is a whole different set of knowledge.
Bill Waddell: Yes it is, and recognizing that they’re selling a different product, than years ago, they probably didn’t know much about the supply chain, they were just in there, pitching resistors and capacitors. Now they’re in there pitching their ability to deliver on time and reliability and quality and they can reliably supply chain elements to the company. Yeah, there it’s just a supply chain outsource company and I’ve seen companies like that, I’ve had experience with them, and I’ve worked in supply chain leadership, and damn, when you find a company like that, it’s golden. Sounds like a pretty smart person running that company.
Michael Webb: He’ll be happy to hear you said that. So here’s another scenario-
Bill Waddell: He doesn’t need my confirmation, I’m sure his banker can give him all the confirmation of his intelligence.
Michael Webb: I’m pretty sure that would be affirmative there. But here’s another example of a company, similar condition only in the building materials industry. And I had a memorable dinner with a fellow who works there as one of the corporate officers of the organization and they are a supplier, and because it’s into the building materials industry, they’re supplying all sorts of contractors and you know, it’s a jumbled up people, out in the marketplace that they’re supplying.
In 2008, when the big recession hit, and the markets, especially in building materials contracted, that was very, very painful for people in the distribution industry and for the contractors who were taking jobs and building buildings and constructing things.
And what was big on his mind was, how do we survive the next recession? What do we have to do as a supplier in the supply chain in order to be sure that we don’t go under, because it’s like putting two people in a cage and have a cage match and say which one can reduce their price the most, because the customers are in the driver’s seat, right? The market is starved for people buying things. And so the customers take advantage of that by squeezing the prices and that’s very very difficult on supply chain companies. I’m sure you’ve seen that happen. How would you analyze that?
Bill Waddell: I think it’s … I mean, there’s a limit when something like 2008 or 2009 happens and the market just collapses, then there’s a limit to what anybody can do when it’s that radical. I’ve got to believe it’s also a challenge depending on how big or what percentage of the market the guy has. I have a son-in-law who’s a contractor in a small town in Illinois, that’s shrinking and dying and people ask him how, the number of new houses being built every year goes down and down. His view is as long as it doesn’t go below one, he doesn’t have a problem, as long as he gets that one.
And so I guess it kind of depends. But not knowing enough about his business, I don’t know how he would solve more problems for the contractors when it’s shrinking that greatly, but it’s just a matter of everybody didn’t die, you just want to make sure that you’re one of the last men standing when it contracts that far. But I can’t help him when the total economy collapses that way.
And I think he also maybe needs to take a hard look at, again, not knowing that much about that industry, mostly anecdotal from my son-in-law, but you know, the contractors that I know, when that happened, the market switched from new home construction to remodeling. Fixing the old place. And maybe taking a hard look at what’s he providing and is he as good a source for a lot of small remodeling jobs as he was for delivering for big jobs for new construction.
Michael Webb: There’s actually a lot of things that those distributors can do, and I think that there’s parallels between the residential construction and commercial construction. But consider that, and my client that I had dinner with I was mentioning was primarily in commercial construction and so I asked him: so all these contractors and people that buy from you, are they all created equal? Well, no. Okay, so how would you break them apart, how would you analyze which ones are best for you, and which ones are not so good. Could you define the observable characteristics of those things? He certainly could do that. That way you can begin to rank-order those customers and get the ones who respect value, who do business in an orderly way, who have really good credit, the ones who have the stamina to probably withstand the next recession, and you prioritize those people over the ones who might be overnight jobbers and maybe not proven. That’s one thing-
Bill Waddell: You bring up a great point there, Michael, and that’s something that I’ve worked with a number of companies over the years on is, what’s their criteria for taking on a customer? And far too many companies, the answer to that is if their check will clear, then we’ll sell to them. But being selective about customers, not just whether they can withstand a recession, but what’s their strategy, are they going to be around for a long time? Are they ones that are going to challenge you and make you be better? Not just grow your business, grow your sales, but grow your capabilities as a result of having to stretch to keep up with them.
Are they people who are going to work with you in the long term or are they ones that are going to dump you as soon as somebody will sell it to them a nickel cheaper? And that means having the discipline to say no, we’re not going to sell to that guy. And far too few companies have that, somebody’s dangling money out in front of them it’s awfully tough to say no. But you’ve got to have the discipline to say no.
Michael Webb: So you said a really important thing. If they’re going to make you better, and in order to do that they’re going to challenge you, and for a distributor it takes us into the next subject; the issue of managing one of these distribution companies. What part of the work that we do truly adds value for the customer, and what part doesn’t? Does having order entry clerks entering orders for your customer, does that add value, or would the customer like to have their own purchasing people just enter orders in exchange for longer-term commitments and maybe price agreements, but certainly service level agreements over time.
It’s something that you wouldn’t give to every one of your customers, but to the preferred ones, why wouldn’t you consider doing something like that? And most people in the distribution industry, anyway, they don’t really look at, nobody’s really showed them how to look at what they do as a value-added enterprise. They just get a thrill out of being on the road and finding a deal and being salesmen and finding the big deal and let’s go do it again kind of thing. And I think that that jeopardizes that whole industry.
Bill Waddell: I think that whole industry is at risk anyway, unless they stepping up to this. One of the oldest and most on-point adages in business is cutting out the middle-man. And if the distributor isn’t doing anything other than buying it from one company and selling it to another, they’re not doing anything much beyond that. Then they’re at enormous risk. I think a lot of distributors survive as a result of the fact that an awful lot of CEOs don’t look beyond their own company at the overall supply chain.
I remember having a conversation with Jim Womack, the guy who’s kind of the big name in the … coined the term “lean”, and he told me about their experience at Lean Enterprise Institute when they wrote “Learning to See”, which was the book that first explained value-stream mapping, how to map processes throughout the company, which is kind of integral to Lean’s success. It was a hugely successful book, can’t remember the numbers, but he sold tens of thousands of copies, they made a lot of money and big, big success. And he thought, if they like that, they’re going to love what I’m going to do next. And he convinced Ford let him work with them. They basically developed a book called “Seeing the Whole”, but it was on developing a value-stream map that goes from one end of the supply chain to the other. In Ford’s case, from a tier three supplier all the way through to the customer. It’s showing how all of these companies connect, and how your whole supply chain works.
He couldn’t give away copies of “Seeing the Whole”. Nobody was interested. They were interested in what was going on within the four walls of their business, but getting executives to pay attention to the overall supply chain was a tougher challenge.
Michael Webb: But do the why, why on that. Why do you think is?
Bill Waddell: Distributors exist as long as CEOs think that way. As soon as CEOs start looking at what are all the links in this chain, and what’s this distributor really doing for us, and can I just buy direct from the factory, distributors that are not creating any value are at enormous risk. I think that they’re living on borrowed time, it’s a matter of time until executives figure that out.
Michael Webb: I’ve another story for you, Bill. That is the flip-side of that exact coin. I did work with a manufacturer that grew large and successful on the back of its distribution channel. Because in the beginning, they had an excellent product that outclassed anything else in the market, it performed better, it was about the same price but it lasted a lot … it was filtration, okay, and lasted a lot longer, and there was a … it was just a much better solution for restaurants and hotels that needed better water quality. And so they grew and they grew and they grew but then one day the chairman of the company happened to be on the golf course with one of their big customers, a big, big, retail chain of restaurants and they said, hey, can we go direct?
So of course, they’re going to say yes to that customer. And pretty soon they had a strategic account department, with four people in it. And the strategic account department wasn’t growing. And we got brought in to help them. And when we did a Kisan event to try and map out what do they do and where are the bottle-necks, people were sort of chagrined and shocked because of one salesperson’s story that they all had lived. He was a new guy, he had been there about six months and he landed about a 600,000 dollar order with a chain called Wendy’s, right? You know, hamburger place.
The next 12 months he spent trying to make sure that the right pieces and parts and fittings reached the right restaurant with the right service technician at the right time. Because there was nobody else in the company whose job was to do that. It had all been managed by the distribution chain in the past, and the company was blind to all that labor. And so now, they had these highly paid national account managers who were running interference to make sure that their customers got what they wanted. And it was not working, it was ugly. These guys are spending 90 to 95 percent of their time on service issues, and that was the bottle-neck.
Bill Waddell: That’s right at the heart of the whole concept of value stream management. Most of my consulting practice, meanwhile, is restructuring companies, from functional organizations, getting them out of their silos and aligning them by value streams. The companies that I work with … and if I were working with those people, then my advice to them would’ve been to tell them that no, you can’t just have a different salesperson coming from the same distribution and service operations that are taking care of everybody else. You’re not going to have a one-size-fits-all distribution operation and a one-size-fits-all service group and think that they’re going to be configured to provide value to this big national account which has a completely different value proposition than whatever the mom-and-pop places you’ve been selling to through other channels.
Companies I go through, I work with, one big consumer products manufacturer who if you went in there and asked where’s the purchasing department or where’s the engineering department or where’s the sales department they would say we don’t have that. We’ve got a Walmart department, and we’ve got an all other consumer products department, we’ve got a professional products department, and every one of those has all of the necessary technical skills within it to deliver from beginning to end, based on those end-customer value propositions. So, I think the guy was foolish to think that he was going to be able to create value for those big strategic accounts through the same supply chain processes, the same warehouse distribution, the same service …
Michael Webb: So, so, wait, wait, wait.
Bill Waddell: Buy the same thing that General Electric buys, you know? You know, you have a small company here, as small as they get.
Michael Webb: Senior executive of a big company who’s kind of foolish sometimes, what a surprise.
Bill Waddell: Frustrating.
Michael Webb: That hurts people.
Bill Waddell: The big problem is none of us know what we don’t know, and it wouldn’t surprise me if the senior executive from that company came out of accounting or sales. Didn’t really appreciate the significant differences back in the warehouse and with the service people running around and the … I think that it’s important that the senior people really understand the details of those parts of the company, where the core of the value proposition is created.
Michael Webb: It goes to a lot of the people in those … in management positions, generally, I would say, they sort of know we need a better process, you know? I was with one last week. They sort of felt in their bones, we just need to know what the best practices are out there, and then, we’ll just start doing that. And I had to tell them, I don’t really know of any case ever in my career, where somebody went out and found a best practice and was able to import it into their context and actually make it work. That’s not how it works. They think they need a new process, but what they really need is a way to improve the process they already have. And most companies are profoundly … they don’t have a way to do that. Would you agree?
Bill Waddell: They may or may not need to reinvent their process, but I think that without knowing the process, maybe the whole thing does need to get blown up and reinvented. But more often than not, you’re right.
But I think that gives it another key point with Lean that I learned a long time ago that you’re never going to improve by running around looking at other companies and viewing it as a cafeteria where you’re going to go take something somebody else is doing well and like, plug and play your own company and think it’s going to work.
Someone told me that you don’t become lean by looking at Toyota through your own eyes, you become lean by looking at your own company through Toyota eyes. How do you learn to look at your company and recognize where the waste is, recognize where the inefficiency and the delay is, and where the cultural breakdowns are.
Michael Webb: And engaging your people to see it as well and to volunteer improvement.
Bill Waddell: Absolutely. It’s the culture of the company. But the culture of the company can be, can only be effective if the senior folks really understand what we’re trying to do here and learn how value is created and where waste is. And then instill that vision in people, that this is what we want you to look at. These are the kinds of ideas we want. If you just go to the employees and say hey, we want your ideas for improvement, they are going to come back with a list of better things to have in the company lunchroom. What do you mean? Get better at what? Improve what?
You’ve got to channel that vision, that get better, or eliminate waste, or cut cost, that means something different to everybody.
So the senior folks have to start, and they have to be able to see their own company and it sounds like the senior folks at that company weren’t able to see what they were doing very well. My take on that is always that’s because they’re so tunnel-visioned on cost.
If you went into them and said, look, we need to break your service department into two, we need to have a service department for these key accounts, and a different service department for all of the, the rest of the cats and dogs. Because it’s a different requirement. Most of them would come back and say, but that’s inefficient. I want to save the travel money when I have that service guy out there at a Wendy’s. I don’t want to just drive past some other small place that he could’ve stopped at, you know, I want to have low travel cost.
Michael Webb: It’s called optimization, isn’t it?
Bill Waddell: Yeah, it is, but that just comes back to something that I’ve come to believe for the last several years, that cost reduction is the strategy for companies that don’t really have a strategy. If that’s all you got, we just want to keep doing what we been doing, we just need how to figure out how to do it cheap, then that’s not much vision, that’s not much strategy, and you certainly don’t need to be paying an executive a lot of money to come up with that.
But that’s kind of the world we live in, and that’s what you get when you have people from an accounting and finance orientation, an intense one, more often than not, running companies.
Michael Webb: Right. So to me, in the whole world of sales and marketing, the challenge has been that it’s all invisible, and value added is invisible, the salesperson’s working in an account for six months and hasn’t gotten an order yet, is he creating value, or waste? You have to have a way to know that. And when you define the terms and just follow logic and proper rational definitions and start measuring things, a world of valuable things can happen. We’re almost out of time here, but one of things we did not get to that I wanted to get to was this whole issue of forecast accuracy. You had some charts I really liked that demonstrated the capacity of production in a manufacturing company, kind of like a step function as they invest and increase manufacturing capacity. And then the sales number is a zigzag on either side of that capacity over time, and that is very, very costly. So how do you get more in alignment with your customers and what they need to purchase when and the sales and the marketing function are key to being able to do that.
I have had clients with 94, 96 percent statistically measured forecast accuracy by following this method of defining the observable things that make customers more or less likely to buy, and distinguishing the value that they would pay for versus what they would not.
Maybe you and I could set a date in the future to delve into a subject like that more deeply, would that be something that you’d be interested in?
Bill Waddell: Yeah, I most certainly would. Perhaps it’s nuance, but my view is that companies need to do less forecasting and more planning. If you have somebody with 95% forecast accuracy, then that really wasn’t a forecast, that was a plan.
Michael Webb: That’s a good point.
Bill Waddell: They knew exactly what they were going to do and then they went out and did it. Which is a far cry from people buying some expensive statistical model that’s going to take some wild guess at what we’re going to sell based on the sum of the least squares of math, and then putting in a cost base to do that, and then wondering why it didn’t happen.
Michael Webb: Exactly, that’s not based on reality, that’s for sure.
Bill Waddell: Yeah, I’d be more than happy to talk to about that. But it really gets into pricing and costing and how you use price as the dial to heat up and cool off the sales, and keep sales aligned with capacity. Keep sales at whatever the plan was.
Michael Webb: And I think there’s a couple of other levers, but we will have to pick that up at another time. Bill, if someone has listened to this and wants to get ahold of you, how would they do that, you have some sort of offer on your website or something, that so someone can get more of the way you think.
Bill Waddell: Sure, my grandmother used to tell me when I was young, a fool’s name and fool’s faces always appear in public places. And so I guess I’m something of a fool. I’m not hard to find, you can find me on the www dot bill dash waddell W-A-D-D-E-L-L dot com. Find me on Facebook, find me on Twitter, find me in YouTube. There are a lot of YouTube videos out there that get into a lot of this, but these kinds of conversations are what I do for a living, so if somebody’s got a question or is interested in something, just go on my website, it’s got my email address, my phone number. I’m not hard to find, and be glad to help anybody who wants to follow up on any of this, if they have any questions or concerns, or just want to. That’s my idea of a good time.
Michael Webb: Well, good, alright, thank you very much for your generous time and your insights today, I look forward to chatting with you again, and until then Bill, travel safe.
Bill Waddell: Well thank you for having me Michael, and I look forward to talking to you again.