Case Study - Cutting Waste
Cutting Waste: it keeps your team happy and improves your profits. What could be better?
When we think of cutting waste, we often assume it starts and ends with reducing materials wastage. However, wastage of staff hours and effort can be pernicious, not only eating into our profits but also dismaying our customers and demoralising our staff, as this case study reveals.
Case Study:
An e-commerce organisation offered its customers an initial installation of purpose-built hardware and software, with an associated support and upgrade package. This market-leading offer was extremely popular with its target customers, but the organisation failed to make a profit, and the delivery team always seemed to struggle to get things done.
When they called me in to investigate what was going wrong, four things became apparent when I examined their marketing, sales and delivery processes.
As a result, the delivery team spent a great deal of their time either developing another one-off bespoke installation for a new customer, or trying to support customised installations that had already been supplied. They had been informed that their team would not be enlarged, and that their sluggish delivery was jeopardising everyone’s annual profit-related bonuses. To say that morale in the delivery team was low is an understatement.
I recommended the business make three changes which streamlined the sales and delivery process and cut wasted staff hours:
So what happened?
Finally, the organisation’s profits improved and returned to the level they had achieved three years previously, a welcome increase which was reflected in everyone’s end of year profit-related bonus.
When we think of cutting waste, we often assume it starts and ends with reducing materials wastage. However, wastage of staff hours and effort can be pernicious, not only eating into our profits but also dismaying our customers and demoralising our staff, as this case study reveals.
Case Study:
An e-commerce organisation offered its customers an initial installation of purpose-built hardware and software, with an associated support and upgrade package. This market-leading offer was extremely popular with its target customers, but the organisation failed to make a profit, and the delivery team always seemed to struggle to get things done.
When they called me in to investigate what was going wrong, four things became apparent when I examined their marketing, sales and delivery processes.
- The marketing team was really a sales team. Their entire focus was on ‘making the sale’ because their bonus was based on how many £M of sales they’d made that year.
- In their drive to secure sales, they offered customers highly tailored variants of the standard offer, irrespective of the impacts these had on the profitability of the sale, and without considering whether or not they could be customised and delivered at all.
- The resulting delivery contracts were then ‘thrown over the wall’ to the delivery team for them to customise and deliver what had been agreed, often with very tight delivery deadlines.
- The large number of customised installations sold to customers was becoming increasingly difficult to support and upgrade, particularly when major software upgrades to the standard package became available.
As a result, the delivery team spent a great deal of their time either developing another one-off bespoke installation for a new customer, or trying to support customised installations that had already been supplied. They had been informed that their team would not be enlarged, and that their sluggish delivery was jeopardising everyone’s annual profit-related bonuses. To say that morale in the delivery team was low is an understatement.
I recommended the business make three changes which streamlined the sales and delivery process and cut wasted staff hours:
- To change their offer to a standard package with a limited, pre-defined set of potential customisation options, which were all priced as part of an ‘a la carte’ menu.
- All final offers from the sales team to customers had to be pre-approved by the head of the delivery team and the Finance Director first, so that they could confirm that what the sales team were proposing to offer was deliverable and profitable.
- The sales team’s incentive scheme was changed from ‘how much revenue you bring in’ to ‘how much profit you have generated for the organisation in new sales’. Changing the emphasis from revenue to profits encouraged them to see themselves as part of an organic whole, rather than an isolated department.
So what happened?
- Prospective customers loved both the standard offer and the limited set of potential customisation options because the product was still far superior to its competitors.
- The delivery team were able to spend more time on delivering a known set of installations, whilst also recovering their previously excellent reputation for support and upgrades to existing customers.
- The sales team (after a key personnel change) focused on making profitable sales, and became part of a unified sales and delivery team.
Finally, the organisation’s profits improved and returned to the level they had achieved three years previously, a welcome increase which was reflected in everyone’s end of year profit-related bonus.