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Rest of the Story – Part 3 : ICMS – Success is NOT Logical
Rest of the Story – Part 3
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8 August 2013 - 23:34, by , in Customer Profitability Analysis, No comments

“An estimated 10,000 business books have been published worldwide over the past three years,” reported The Wall Street Journal May 21, 2001, “many touting management tools promising to make their users incredibly successful by showing them new ways of doing business.”

That is an astounding number of books. I read a book a week, but at this rate I’ll never catch up. Why are there so many new business books? Here are my thoughts…

Top 10 Reasons for 10,000 Business Books

  • The need for new and improved business practices is growing exponentially.
  • Managers have developed an insatiable appetite for the combination of lattes and books.
  • Publishers believe, “If we publish them, they will come.”
  • Layoffs of older, wiser managers leave remaining employees one resource for common sense… the bookstore.
  • Today’s managers prefer gathering ideas than implementing ideas.
  • Increased amounts of flight delays are causing travelers to purchase books to pass the time.
  • com made it easier to buy books.
  • Global competition has stretched the capabilities of companies, creating knowledge voids.
  • Managers “change” books instead of “changing” their organizations.
  • Dummy books have doubled book volume, e.g. “Six Sigma” followed by “Six Sigma for Dummies”.

Consumer Reports for consultants
Until recently, there’s been no Consumer Reports for the tools and techniques recommended by business books, workshop facilitators and consultants. To address this need, Bain & Company, a global consulting firm, surveyed 5,600 senior executives asking their usage and satisfaction with 25 tools. While the average company used 10 of the 25 in 2000, 81% felt that most management tools promised more than they could deliver. The Wall Street Journal reported greatest dissatisfaction with Corporate Venturing, e.g. growing a mature company by funding new, autonomous businesses and technologies. On the other end of the scale, executives rated Strategic Planning as the most valuable tool.

The rest of the story…
Not reported in the paper, but found on Bain & Company’s web site, is the high acceptance and rating of Activity Based Management (ABM). Of the 5,600 executives surveyed, most reported using ABM during the past eight years. And more importantly, the executive’s satisfaction ranking of ABM was a mere 10% lower than the highest rated of all tools, Strategic Planning. The primary uses of ABM were reported to be re-pricing products, optimizing new product designs, reducing costs, operational planning and strategic planning.

According to survey respondents, the success of any tool is determined by its repeatability. Was ABM/ABC a one-time pilot project in your organization or is it an ongoing process that continues to contribute to your improvement? To transition from a project to a process of improvement, the surveyed executives offered three recommendations:

  • Recognize that every tool has strengths and weaknesses.
Tom Akright, leader of ABM at Ralston Purina, has always spent time educating management of what ABM does and does not do. Tom stresses that an ABM system does not think for you, perform work for you or fix problems by itself. ABM still requires knowledgeable, talented people to read, interpret and use the information from an ABM system to make decisions and implement improvements.
  • Learn to apply the right tool to the right problems in the right way.
ABM does not solve every business problem. Six Sigma may be the right tool if your processes are consistently producing poor quality products or services. Or Business Process Re-engineering (BPR) may be the right tool if your organization takes too long to respond to the customer. ABM complements and enhances these tools, but ABM does not replace them. Senior management have responsibility for defining the “right problem”, middle managers have responsibility for defining the “right tools” and employees should be taught how to use the tools in the “right way”.
  • Use proven tools prudently rather than trendy tools hastily.
ABM is 15 years old. Therefore, it is inappropriate to call ABM a “trendy tool”. ABM has proven itself over and over to be the best practice cost management tool for all types and sizes of organizations. Nonetheless, I have seen well-intentioned people implement ABM hastily, e.g. done too quickly to be accurate or wise. My grandfather wisely taught me to measure twice, cut once. The most successful organizations measure their needs, measure ABM’s relation to that need and then cut waste using ABM/ABC.

“Ideas, not gold, govern the world. Machines do much of the world’s work, but machines are born of ideas. A human worker without ideas is only a machine.” These words of wisdom are from “Onward to Fame and Fortune” by William Thayer, a best seller in 1897! Both old and new books can be resources for good ideas. Bain & Company’s survey is a new reminder of an old method to sort through those 10,000 books… the right tool applied in the right way to the right problem will consistently produce the right results.

Send your comments to Tom Pryor via e-mail: TomPryor@icms.net.

Does your organization need to perform an ABC Customer Profitability analysis in 2001?

If yes, ICMS can help you with planning, training, onsite coaching or software. Send an e-mail totompryor@icms.net and ask us for a free implementation plan.

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