Cliff Ransom | A Wise Individual, Who is Still Learning from Others
Today’s guest is Cliff Ransom. Cliff holds a unique position between the investment community, corporate management and the lean community. He has spent years following very successful companies and watching executives and front-line folks work. And, is very open with us about several lessons he has learned.
In our conversation we talk about:
- Examples of the power of lean in very different industries
- The importance of asking questions. And asking questions that don’t lead to a preconceived conclusion.
- Understanding how managers and leaders add value
- Mistakes senior leaders can make, and how to avoid them
Plus, Cliff shares the companies he has designated as super achievers and next generation Danahers and why. And more.
Listen now
Mentioned in This Episode: cliff@ransomresearch.com
Speaker 1: You’re listening to the Sales Process Excellence podcast with Michael Webb.
Michael Webb: B2B sales and marketing works to find the highest quality prospects, reach decision-makers and sell value. Operational excellence uses data and systems thinking to make changes that cause improvement and eliminate waste.
Michael Webb: My name is Michael Webb, and this is the Sales Process Excellence podcast. In the next 30 to 40 minutes, we’re going to destroy the myth that these two groups conflict and show you how to bring both strategies together to create more wealth for your company and your customers.
Michael Webb: Hello, this is Michael Webb, and I am excited today to introduce you to someone I’ve known for a number of years. His name is Cliff Ransom. Cliff holds a very unique position in the industry. I’ll let him give you his background, but he has this unique position between the investor relations and management community and the lean community. And what we’re going to talk about today, I think is going to be illuminating and quite interesting, especially for the senior executives in the audience. So Cliff, welcome here.
Cliff Ransom: Thank you very much, Mike. It’s fun to be here.
Michael Webb: Yes. Yes, we’re going to have some fun today. So, if you could give 30 seconds or a minute for the audience so they can kind of get the idea of where you’ve come from and where you’ve been and what you’re doing now.
Cliff Ransom: I’m going to try to put 47 years into 60 seconds. Here we go. I’ve been in the investment business, almost exclusively, with institutional investors for 47 years. Almost 30 years ago, I became deeply involved with Danaher, which became my prototype investment and my prototype corporate mentality. I have a very unusual, I can’t say unique, but unusual business model, and then I have three legs on my stool. One is 47 years of connection support for learning from institutional investors, portfolio managers, analysts, at some of the biggest and best firms in the world, quite frankly. The second leg is that I have very consciously built a deep presence in the lean community. That includes practitioners, the authors, the consultants, gurus like yourself who have very specialized knowledge of lean applications. And then perhaps most importantly, I’ve worked with several generations of C-suite corporate leaders, and they understand what it is that I do and make sure that I get the access that I need to learn, because I learned by going to the Gemba; going to the place where the real work is done. And we can elaborate on that later if you’d like, but that’s, in essence, what I’m doing today.
Cliff Ransom: For the last 15 years, I’ve run Ransom Research Inc., which works with a deliberately constrained group of senior investors, because they’re the guys who can afford me. And they want me to exercise those three legs of that stool. And I think, in a nutshell, that’s about as close as I can get.
Michael Webb: Okay, super. So, obviously you’re on a first-name basis with senior executives at the Shingo Institute, at the Lean Enterprise Institute, and a number of corporations.
Michael Webb: Tell me about why you think the senior executives don’t quite realize the power of lean, because I agree with you, but it’s hard to describe.
Cliff Ransom: Everything you ever say in this business, you’re changing constantly. There’s a webinar up on the LEI site that I’ve been trying to get them to take down for 15 years because I say, “Guys, I don’t believe any of that stuff anymore.” This continuous improvement has to be applied to your intellectual thinking, as well. In the ’90s, I counted the number of Kaizens. That’s how simple-minded I was.
Michael Webb: Yeah.
Cliff Ransom: And that was way before I understood that what Kaizens you did are really indicative. They pertain to how you think about lean. You can do 10,000 Kaizens and have a minuscule benefit. They’ll all benefit, but minusculely. Or you can do three things that have a profound change on your employees, your customers, your suppliers, yourself. I became quite adamant that this had to be a cultural transformation, because particularly as an investor, the last thing I want you to do is to start on this course of action, start in collocating these mindsets, and then give up on them, because you’ll only confuse your employees, your suppliers, your shareholders, your regulators. It’s the worst thing you can do, is to start and then kill it.
Cliff Ransom: I was the Chairman of the Board of Shingo, so I love the Shingo Model. I used to get in trouble with the professional staff because they would ask me to give speeches all around the country, all over the world. I would say, “I don’t give a damn whether you ever apply for the Shingo Prize, I just want you to live by the Shingo Model. And I think everybody should understand the model.” And then the staff would turn to me and say, “Uh Cliff, you know we make our money by helping people apply for the prize.” I would say, “Yeah, yeah, yeah.”
Cliff Ransom: It’s like a friend of mine I ran into on the street this morning and she said, “We were one of the 12 finalists for the Deming Prize. We got interviewed and we just missed it.” I said to her, “Good” and she looked at me with a stricken look, she works at a hospital. And I said, “The Deming Prize is not what you want to do. What you want to do is live up to the Deming Philosophy. That’s what you want.” She said, “Okay, okay, I get it, I get it, I get it.” I said, “If you want me to come out to chat with your folks about why that is an important distinction, I will be happy to do it.”
Michael Webb: So to me, this is about helping companies learn to think more critically. All the people inside the company need to be enrolled in that effort. And most especially, the senior people. They have to lead it by how they ask questions, how they respect the accomplishments and failures of the people who work for them.
Cliff Ransom: You know, you talk about inquiring minds; an inquiring mind, by definition, requires the willingness to listen to alternative VCs, to gather data. Toyota says the data will speak to you, but you have to do it with an intention. I was working with LEI, they were doing sort of one of these CEO seminars. By the way, nobody in the lean business has yet broken the code on how to get CEOs to go to seminars. But I said, “You know, John,” to John Shook, who’s … Been a dozen people who have been incredibly patient and generous and giving of their time and sensibilities to me, and Shook’s one of them. I said, “You know, John, this business about asking questions really comes hard to me. My line is humility does not come easily to me. The idea of asking questions rather than barking orders; I always succeeded in life from the military on up by … ” You know, they’d say, “Take the hill,” I’d go take the hill. I might hire a bunch of North Korean mercenaries to do it, but I wouldn’t tell them that until I had the flag up there.
Cliff Ransom: But I said, “Just asking questions is hard.” I said, “But I’m really working at it. I’m really trying to do it.” And he said, “Yes.” He didn’t quite say, “Wax on, wax off, little grasshopper,” but he said, “Yes, Cliff, I can tell you’re working very hard at this, but you’re also asking questions that still drive people to your preconceived conclusions. It is like an axe right between the eyes. I do this all the time. Every time I think that I’ve gotten to kindergarten, one of my sensei very politely slap me right back down to kindergarten.” And that was the first time I realized it, and it happens, I don’t know, monthly now.
Cliff Ransom: But that’s good, because that allows you to draw on everybody around you. You asked earlier, and I didn’t answer, why don’t CEOs get it? When I used to give speeches, I guess I still do, but I don’t do it much, I had seven PowerPoint slides with seven bullets on each slide of why people didn’t do it. And the last slide was great big letters. It said stupidity. They couldn’t get how powerful this stuff was. They couldn’t give up, “I’m always right.”
Cliff Ransom: Now, I don’t blame them in many respects, because they got to be CEO or Executive Vice President by being a firefighter, by succeeding in the face of adversity, and by doing it and then driving other people to do it their way. I tell CEOs today, “Take your biggest firefighter and fire him, because he’s probably your biggest arsonist. He sets the fire so that he can watch it and so that he can put it out, and those are not the helpful people.” Those are not the helpful people.
Michael Webb: By the way, your observation … The first thing that leapt to my mind when you said, “You’re asking questions that drive people to your preconceived solutions,” isn’t that what salespeople do?
Cliff Ransom: I know you know this, because we’ve talked about it, but I’m going to bring it up and I’m going to start with when I was the Chairman of the Shingo Institute. And we were really trying to get healthcare involved in lean thinking, because I mean, I felt that healthcare is the second biggest problem in this nation after education, but nobody wants to try to change educator’s minds. Doctor’s minds are hard enough to change. Medical administrator’s minds are hard enough to change. But we found … We did one of two things. We either … Not we. I’m a Senior Advisor, one of those amorphous capital letters, non-corporate titles for five different lean consulting firms. And to get the administrators to believe it, we’d go in and, in a week’s Kaizen activity, in the pharmacy of the hospital, you’d take out $20 million worth of stuff you don’t need to have. You know?
Michael Webb: Yeah.
Cliff Ransom: Aspirin. They’d have three years of supply of aspirin, when you can get aspirin in 24 hours, any place in the country. Or they’ll have six weeks of some very fancy HIV drug, which is going to be obsolete in four weeks, and it’s $15,000 a dosage. And you suddenly dropped $20 million in their lap with the cost of a couple of people during the week, they get it.
Cliff Ransom: Then what we did is we went to the nurses. We. I’m going to have to stop saying we. They went to the nurses and they said, “Why do nurses go into nursing?” They don’t go in for the reasons that doctors do; to make a lot of money, to get social status, to become famous. They do it because they want to keep healthy people healthy and make sick people well. They know that if they are not touching physically, if they don’t have their hands on that patient, it’s almost impossible to add value. It has to be two feet away. Every minute, you teach them how to value stream map, and they suddenly say, “Wait a minute, I’m spending 80% of my time chasing pillows, asking for the maintenance guy to fix the valve on that oxygen line, sorting the bloody pill cups? That’s not adding value. That’s all derivative stuff.” And when you go to a salesman and he says, “Oh, this is my territory. I’ve been doing this for 30 years. I know everybody. I played golf with them,” and then you get them to value stream map and they say … Because they know that unless they’re face to face with that customer, they ain’t going to write a ticket. They’re not going to have an order.
Michael Webb: Right.
Cliff Ransom: And you say, “Do you know you spend 40% of your time driving around in your car? Do you know that you spend 40% of your time delivering late products? Do you know you spend 20% of your time chasing down an order that’s fallen through the cracks somewhere?” And they go, “Wait a minute. Tell me how to tell me how to spend 90% of my time doing value added work.” And they become real zealots. Real zealots.
Michael Webb: Right. Right, you have to show what’s in it for them.
Cliff Ransom: Absolutely.
Michael Webb: And just as in a factory, just as in a hospital; in sales, it has to do with the assumptions that we walk around in our head, the assumptions about reality, some of which may not be true.
Cliff Ransom: Absolutely.
Michael Webb: And that’s the hard part to break through. So you, as the lean practitioner, like back to the quote of what John Shook said, you have to ask the questions that are based on the context that the other person has presented, because you’re trying to stimulate their insight about how to get better.
Cliff Ransom: And there’s no better place to apply the five whys. You know?
Michael Webb: Yeah.
Cliff Ransom: Well, why do you do that? Why do you do that? Why do you do that? Why … 200 days a year I spend on the road. I tell people I’m really only 37 years old, but I look like this wreck because of my travel schedule, which is a lot of time gone, so that I can watch. They say genchi genbutsu, go to the Gemba, the place where the real work is done and see.
Michael Webb: Right.
Cliff Ransom: I’ve sort of expanded that to say, “Go and watch,” because you have to be able to understand the flow and the velocity. If you can’t see it in the HR department or on the factory floor or in the new product lab, if you can’t see the dashboards. If you can’t see whether they’re ahead or behind for the day, they ain’t doing it. They may think they are or they have some fancy electronic board, but they’re not thinking that way.
Michael Webb: So-
Cliff Ransom: They’re not building those habits into their everyday actions.
Michael Webb: So would you say that a key role of the senior executives is to try to get, or to help the employees, the middle management especially, to make their assumptions and their thinking more visible?
Cliff Ransom: It almost always goes the other way. I make the comment, and I’m trying not to be absolute here, I have never seen a lean transformation be sustained unless the Chairman, the boss, the CEO, Head of the Board or the owner was the champion. Never. I’ve seen enormous improvement, but I’ve never seen it stick unless that person is the boss. You need a George Sherman at Danaher. You need Larry Culp moving from Danaher to GE. I think he’s going to do it at GE. This is 215,000 people he’s going to have to change. It takes a Bill Kassling at Wabtec. It takes Michael Lamach at Ingersoll Rand when he told his folks, “Now that I’m the Chairman and CEO, we’ve been messing around with this lean for 15 years. But as of today, it’s non-negotiable.” And he said to me, “I’m going to work on one lean activity a month.” And I said, “Oh my God, Mike, you’ll kill yourself. You’re running a,” at the time, “$12 billion company.” And he said, “If I don’t set the model, not to lead the Kaizens, but to be on the team, these boys and girls are not going to believe me.”
Cliff Ransom: I just went and spent a week in a pump factory for Gardner Denver in Princeton, Illinois which is in the middle of soybean and corn fields that go for tens of thousands of acres in all directions. I kept saying don’t these folks know we are at war with China, who are they going to sell all of this stuff to? Anyway, they had a, let me think of what they called it, Inquiry to Order, they had to configure these products, that was like 45 days. And, everybody else in the industry was at 30. And when you are buying a $10,000 pump you are going to buy it from the guy who can get it to you in 20 days instead of 30, or whatever it was.
Cliff Ransom: Well, we took it to 4 days with 3 days of Kaizen work, 4 days. Now, we built a room, we put everybody who did it around the same table. I mean it wasn’t easy, but we did it. And the fact of the matter is we had sight lines to make that a day. When they get to be a day, they are going to get so many, I said to the operations guys, “You better get ready because you are going to get so many orders you are not going to know what to do with them all.” And that’s a nice problem to have, isn’t it Michael?
Michael Webb: Oh yeah.
Cliff Ransom: I try not to put myself as a role model, because I’m still learning so much, but I’ve only got four things that I do that add value. I visit companies, I am called upon by my clients, and this is a mantra for them, and it’s been the hardest thing for me to do for a lot of reasons we don’t need to go in them today. I should write short, bulleted, inclusion-oriented reports, not magnum opuses. I should travel to see … Or, most importantly, the third thing is, travel to see or carry my clients with me when I visit facilities, meet with managements, go to trade shows, industry events. And then there’s a fourth one, which is build my lean presence. That one’s pretty amorphous, but it reflects the fact that’s how I’m going to learn.
Cliff Ransom: And I work out of a 200-year-old house in Baltimore, and as I have 1.2 ladies who support me, and we work out of two great big rooms, wide open. The entry between the two is probably 15 feet wide. And if I hang up the phone, one of them will ask me, “Well, now, Cliff, that sounded like an interesting conversation you had. Can you describe to me how that will add value for this client, or that value, or some other client?” And it’s again, that axe right between the eyes. And I’ll say, “Dammit, I’m allowed to have dinner with my friends every once in a while.” But the rest of the time, I have to concentrate on what adds value.
Cliff Ransom: So you and I have talked about this, but I got a lot of … My tagline for my business is the way of lean investing. It’s just, feel that sort of zen-like portion of the Toyota way, but call it lean investing, very specifically, and all kinds of people, I note most of the time it was people who aren’t my clients, but people interested in lean, say, “You got to write the book, you got to write the book.”
Cliff Ransom: So I started writing the book, and we reorganized my time and the ladies picked up stuff and we filled a lot of stuff that was non value added, and I was going to spend 20% of my time on the book. I wrote 10 chapters, and I sent them off to all my long-suffering sensei mentors. And the first guy to come back was Jim Womack and he said, “What’s your purpose?” The second guy to come back was John Shook and he said, “Who’s your audience?” And the third guy who’s one of my major supporters said, “What’s your voice?” And I realized I couldn’t answer any of those questions.
Cliff Ransom: So I tore up those chapters, and I outlined on one, two, three, four, I’m looking at them, big whiteboards, with three by five cards, 22 chapters of the book. And I looked at it and said, “I don’t know who’s going to derive value from this. It’s not really for corporate executives. It’s not really for lean practitioners. It’s certainly not for investors. So why am I writing it if I can’t define the people who are going to add value?” People, for years, would say, “Well, it’s part of your legacy.” I’d say, “I’ll be dead! What do I care about my legacy?” And so I killed the book.
Michael Webb: Wow.
Cliff Ransom: Of course, I wound up spending about half my time instead of 20% of my time. But these are all learning opportunities. Right, Mike?
Michael Webb: Absolutely.
Cliff Ransom: When I look at companies, I have three categories. One is the super achievers in my universe. These are people who are very process-driven; process-driven to the extent that it becomes a bonafide culture. And then I have a group of companies, inelegantly named, a good implication in the name, and I call them next generation Danahers. There are only nine super achievers, in approximate order of ascension to my list. That was Danaher, ITW, United Technologies, GE, and we can come back and talk about that if we want to, because I’ve got a lot of egg on my face. Well, I will say, because most people do start laughing, I didn’t start buying GE in my 47-year career until 2008. I looked brilliant between ’09 and, I don’t know, ’11 or ’12. And then, of course, I looked stupid again. Now I’m back to looking okay because I’m about back to my average cost.
Cliff Ransom: The point is that the others added, later, Roper. I would comment that Roper and ITW are not classically lean thinking companies, but they have extraordinarily disciplined and well-articulated and well-followed practices. I added, later, I added Roper, as I said. I added Honeywell. I added Fortive when it was spun out of Danaher, because obviously it’s the same DNA.
Michael Webb: Yeah.
Cliff Ransom: And I added Parker Hannifin and Crane most recently. I find it instructive that in 15 years of running my own firm and using that categorization, I’ve only got nine companies that I can call truly world-class practitioners of organized thinking.
Cliff Ransom: I’ve got about 50 names that fall into the next generation Danaher category. I sometimes frustrate those organizations because they can stay on the list for five or ten years before I’m convinced that they’re really sustained. All but the first four, of the super-achievers, started on the next generation Danaher list. So I would say there are very few people that do it.
Michael Webb: One last question, and then we’re going to try to wrap it up. I had a fascinating conversation from a gentleman, he was in his early eighties, and he had founded a company, it was up in Ohio, and they were a company that had made a huge impact in the market with organic fruits and vegetables. They served high-end restaurants. And he made a comment, he said, “We need a sales process, because our eight salespeople … It’s just not working the way it needs to. And I’m getting old.” And he said, “I hear this lean stuff and empowerment kinds of ideas,” but when you’re starting a business, you have to be a dictator because you’re the only one who knows what the customers want and how to give it to them, and you hire a bunch of people who are coming in to do stuff so that you don’t have to do it all. He says, “There’s just no other way to do it than being a dictator in the beginning.” And then-
Cliff Ransom: And how did you answer that?
Michael Webb: Well-
Cliff Ransom: I know what my answer would be. I want to hear yours.
Michael Webb: Well, so what I thought from that, my conclusion was, “Well, that makes a lot of sense, but there has to be a transition, at some point.” There has to be a transition, at some point, where you are engaging people for their ability to think and not just as pairs of hands to go do your bidding. So sometimes, like in a corporate turnaround situation, this is what I thought, and I’d be real interested in your thoughts; is corporate turnaround, sometimes managements must make dictatorial decisions just because they have to, it’s an emergency, like in combat, or something. But most of the time, they shouldn’t rely on that. Most of the time, we need to be developing the people in order for these emergencies not to happen. That was my answer, so-
Cliff Ransom: Well, what he was really saying was at the beginning, at the beginning, at the beginning and I would ask, “At the beginning, you obviously had … You grew half an acre of vegetables, you sold to restaurants, you decided you wanted to go to 2,000 acres and sell it to restaurants, you need 100 sales people.” I would say, “Why wouldn’t you have a dialogue with the people that you’re going to hire?” Hopefully hire some good ones first and say, “This is the way I look at it. What do you think? What is your experience been?” Or, go visit some guy who’s growing organic vegetables in California, selling them to restaurants who you’re never going to be a competitor to and say, “How about if we exchange … I brought two of my salesmen with me. How about if we exchange … Swap laws,” as I call it, “And learn about each other’s business?” Why wouldn’t you reach out and see if somebody had a better idea?
Cliff Ransom: Michael, you and I both know it’s not that we’re smart. Or, maybe we’re smart, but it’s not that we’re experts.
Michael Webb: Right.
Cliff Ransom: Because I’ve already told you how I feel about that. You go into a plant and you say, “Well, why do you do that?” And 90% of the time they’ll say, “We never thought about it.” It’s just fresh eyes. And I would say you don’t have to start by demanding that they do it your way, because God bless you, you may have been successful, but by definition, it wasn’t the best way. Because continuous improvement says there’s always a better way. So if you’ve been successful with a dictator, just steal it, find the two or three things that really were important to it; eliminate the four or five or 50 things that actually detracted from it that you didn’t realize it until you had some fresh eyes.
Cliff Ransom: I cannot disagree more with that guy’s statement, because I think there’s a better way to do it. There’s always a better way to do it. You know? That’s the difference between the United States Army in the US Marine Corps. I was in the parent company of the Marine Corps, the Navy, so good, I’ve just irritated everybody who was in the military. If the General on the battlefield gets killed, the Colonel can take over. Maybe the Major can. Captain probably can’t. In the Marine Corps, you could kill everybody down to the PFC and he’ll go take the hill because he knows what to do.
Michael Webb: Yeah.
Cliff Ransom: And he doesn’t need to have a whole lot of people telling him what to do. That independence of action, first with independence of thought … I have to tell you, based on the thousands of companies that I’ve been in, 99% of the people that I talked to want to do better job.
Michael Webb: Yeah.
Cliff Ransom: They want to better bosses. They want to have more impact on their customers. They don’t want to go home and say, “Hey, honey, we made 2,000 cars and 3,000 of them are in the rework shop.” They don’t want to go home and say, “Oh, Fred just lost his other arm because the light shield on his 150 ton Minster press failed, and they chopped it off.” They want a safe, productive environment. And if you tell them the difference between empowering to do it, which means they’re allowed to do it; and telling them that’s their bloody responsibility to do it, that it’s imperative that they do it better every hour, every day, every minute, I think most people rise to that occasion. So that guy … I’m picking on a man who was 80 years old and God bless him, he had a bigger business than I do, but I think there would have been a better way to do it.
Michael Webb: I think that’s a fascinating response. I had not come up with that on my own. And so, thank you. This has been a great deal of fun. Thank you very much for being here.
Cliff Ransom: Thank you, sir. I love talking about this stuff. You know? So, there it is, how I learn.
Michael Webb: Super. So if someone wants to learn more about lean, or if someone wants to get ahold of you, what would you recommend?
Cliff Ransom: Well, I have to say, by regulation, by law, I’m allowed only to talk about investments with institutional investors. That’s just an SEC kind of thing. But I love talking about lean. I would say either call me, 410-522-0061; email me at cliff@ransomresearch.com; you can Google me. But if you Google me, Google Cliff Ransom lean, because otherwise you’re going to get all of the references to my son, who has the same name but a different number and he looks like a brilliant Renaissance man, Editor in Chief of Popular Science, Senior Vice President of Science Magazine and Nature Magazine and Scientific American, the excavations in the Yucatan for Mayan temples. I’m just a dull lean guy, so put Cliff Ransom lean in, and that’ll tell you … It’s kind of everything you need to know about me.
Michael Webb: All right.
Cliff Ransom: But if you want to contact me, do that.
Michael Webb: Excellent. Well, I hope they do, because you’re a fascinating fellow and not very many people have been in the corners of the world or had the fortitude to withstand all the challenges and changes that have taken place. So thank you very much for being here, and I would look forward to our next chat.
Cliff Ransom: Thank you, sir. Very kind. Bye-bye.
Speaker 1: The Sales Process Excellence podcast is sponsored by Sales Performance Consultants. Discover how to improve your B2B sales with systems thinking at salesperformance.com.
