Jim is the Past President and CEO of iPower Technologies, a company serving the distributed generation market of electrical power. Luckman has worked in the auto industry for 34 years working at Delphi Automotive (formerly part of General Motors). Jim current efforts include leadership coaching, application of lean in R&D and application of lean to software development. He currently coaches companies interested in company-wide lean transformation. Jim is a partner in Lean Transformations Group, LLC

Jim will be the instructor for this LEI Workshop in Indianapolis on June 22nd – Value-Stream Mapping for the Office and Service: This interactive workshop demonstrates how to apply value-stream mapping, a fundamental and critical tool, to address what many companies find difficult to do: making a fundamental change in business processes such as administrative, professional, and transactional activities. You will see how the key elements of lean thinking and value-stream mapping apply to such activities by identifying key processes to tackle, drawing an accurate current-state map of each process, applying lean principles to envision a leaner future-state for each process, and implementing the future-state in a way that can be sustained.

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The pricing pressures we have faced in the last year or two has even added to the number of non-profitable customers. The rapid commodity of your product and increased Internet purchases are two more examples that has accelerated the decline of profit margins. I can use the analogy of a stream full of rocks (customers) and as the water is lowered more rocks start appearing. These unprofitable customers are appearing daily. However, in these economic times even a bad customer is valued because they seemed to help support your fixed cost. This puts additional pressure on your profitable customers and at a risk that you could hardly afford to continue. If you do, you may start losing the profitable ones.

Most advisors will tell you replace or remove these unprofitable customers. It is sound and prudent strategy, but who is going to give up a customer in these economic times? I certainly would not.

My strategy is to first; rate your customers by profitability. That can be a rather eye-opening experience. It may not only tell you who to value but also what they value about your organization. This of course is the marketing segment that you want to spend your efforts and more than likely your money on developing and maintaining.

Secondly, I encourage you to build your marketing value stream segmenting customers by profitability levels. You may end up with several swim lanes but try to put the marketing flow, your value stream in for each segment.

Thirdly, segmenting these customers will allow you to better see what they don’t value. You may see something they are not utilizing such as training, engineering support, etc. Not all people or organizations value the same thing. To build the unprofitable customer segment into a profitable stream may only take the removal of certain items, streamlining your offering. Other features may have developed into your product that became normal and just easier to include all the time. Strip these out and offer a lower cost model. I am not necessarily thinking about just the end product or service but also the overhead associated in operations, sales, and marketing.

Compressing this value stream may even create additional opportunities. Customers left to their own imagination on how to utilize a simple product that they understand create some of the best product innovation. You will even get better at distinguishing your customer’s preferences and anticipating their needs. Customers are moving to what I would call marketing singularity. Having marketing segments as small as one person may not be that far in the future. The key will be taking these simpler segments and still maintain profitability rather than just passing them on to your competitor.

Dell is an example of this as they build computers to exact customer specifications. The advantage is that you meet customer’s demands quickly even though you minimize your work in process and your inventory levels. Some will argue the validity of this concept as it may just move those components to vendors’ further downstream form the customer. In the truest sense, pull should happen throughout the entire value chain.

When I discuss pull in the marketing concept people immediately relate it to the Lean concepts that I just briefly described above. As I worked through the Value Stream Marketing Concept over the past year, I started with the above diagram. I was calling the Blue Space, the Indirect Marketing concept and the Red Space, Direct Marketing. I went on to explain the concept of Indirect Marketing as a way of describing the value(achieve) that a prospect /customer would recognize by your involvement(access) within their communities(attract). These 3 levels of engagement evolved to a much simpler term of “Pull Marketing.”

These three levels of Pull have been wonderfully described in the recent book, The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion. The authors defined these terms as Access, Attract and Achieve. A brief explanation condensed from the book on the three levels of Pull:

Access: The ability to fluidly find and get to the people and resources when and where we need them. It is not about “Stocks of knowledge” versus “flow of knowledge.”

Attract: Often we’re at a loss for what questions to ask, much less what to look for. Our success in finding new information and sources of inspiration increasingly depends upon serendipity – the chance encounter with someone or something that we did not even know existed, much less had value, but that proves to be extraordinarily relevant and helpful once we find out about it.

Achieve: To get better faster at whatever it is you do, you’ve got to be supported by a broad array of complementary people and resources from which you can pull what you need to raise your rate of performance improvement.

These concepts are well explained and detailed in the book with the second part of the book discussing the elements of a successful journey towards pull, they discuss; trajectory (where you are going), leverage (the ability to mobilize the passions and efforts of other people), and the best pace (the speed at which you progress). Reviewing these concepts and if you are not new to my blog, you will definitely see the similarities that I discuss of Agility, Relevance Speed and Lean. If you are trying to get a handle on marketing trends today and in the future, I believe this book is a must read: The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion.

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The drawing is reflective of a Scrum sprint. Scrum is an iterative, incremental framework for project management and agile software development. The sprint is typical a two to four week process with the large loop representing the overall process and the smaller (top) loop representing a twenty-four period and the daily scrum meeting. In the Value Stream Marketing Process, I use the loops to demonstrate a higher level of intimacy with a prospect. The top loop is for existing customers to nurture an even stronger relationship.

The three separate areas of the diagram will have their own Kanban board, if there are separate teams working on them, or you could visualize each as a separate swim lane. Separating these three processes apart allow you to better identify the process steps and the tools needed to facilitate the value stream flow. And, of course, using a Kanban board for this process will help you identify where the process is not working or where the bottleneck is occurring.

The Kanban board is where the actual work gets done. We want to limit unnecessary work in process to be no higher than it needs to be to match the control point or pacemaker of the process (bottleneck). We will use these boards to limit Work in Process into each stage and as a result create a smoother work flow(Heijunka) with a goal of eliminating what Lean refer to as the 3 M’s, Muda (Waste), Mura (Unevenness or Inconsistent) and Muri (unreasonable). This way we maximize your marketing efforts to the fullest extent.

Scratching your head a bit? We will develop our Kanban Boards in later posts which will clarify things a bit. Don’t get hung up on process. All you really need to do is break down your present marketing systems onto a Kanban board and start.

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Short Excerpt:

Value Stream Marketing is not about developing a repeatable process. Repeatability means doing the same thing in the same way to produce the same results. Though repetition will allow you to convert your inputs to outputs with little variation, it also implies that no new information can be generated and used. Repeatable processes are not effective because precise results are rarely predictable in the marketing process. Reliable processes focus on outputs, not inputs. Using a reliable process, you can consistently achieve a given goal even though the inputs vary dramatically. Reliability is results driven.

Marketing cycles are not completely stable. They are subject to variations caused by new knowledge. They are constantly being improved. The emphasis of activities changes during projects from more emphasis on understanding the customer at the beginning to more constructing and testing marketing functions at the end. We are trying to eliminate variation caused by new knowledge. A marketing process that does exactly the same thing every time is useless, but we are trying to eliminate variation that we cause for no good reason. 

The eBook is available through my Ezine registration or part of the participation in the VSM 28 day program.  These can be found on the Business901 website.   

Picture was Adapted from a Lean Product Development Diagram by Eric Ries of http://www.startuplessonslearned.com

Dr. Robert Charente of ITABHI Corporation developed the principles of lean development (LD) in the early 1990’s as not only a strategic as well as tactical business approach for the creation of change-tolerant business software intensive systems, systems that can rapidly adapt to or help in the creation of business change. He sets these lofty targets in his developments:

• 1/3 the human effort
• 1/3 the development hours
• 1/3 the time
• 1/3 the investment in tools and methods
• 1/3 the effort to adapt to a new market environment

Why the 1/3 targets? These goals are meant to challenge status quo thinking. Without audacious goals, ones that seem impossible to reach business managers won’t bother to think about the issues of software development in entirely different ways.

Could your marketing achieve 1/3 targets? Could you achieve them while providing more value to the customer? Can you think about your marketing in a totally different way?

Bob Charente expanded the thoughts of Lean Development to these 12 principles:

1. Satisfying the customer is the highest priority.
2. Always provide the best value for the money.
3. Success depends on active customer participation.
4. Every LD project is a team effort.
5. Everything is changeable.
6. Domain, not point, solutions.
7. Complete, don’t construct.
8. An 80 percent solution today instead of 100 percent solution tomorrow.
9. Minimalism is essential.
10. Needs determine technology.
11. Product growth is feature growth, not size growth.
12. Never push LD beyond its limits.

You can read an expanded version of these 12 principles on the ITABHI Corporation website.

Lean Development focuses on the creation of change-tolerant software. Setting up this model for marketing could be quite interesting. How flexible, how change- tolerant is your marketing? Why are you marketing the way you do? Is it the way that your customer wants you too?

Photo Credit by hanneorla