Leading ERP software for growing manufacturers

Categories: Theory of Constraints
Mafia Offers: Conclusion

Mafia Offers: Conclusion

By Bob Sproull

 

Summary

The Theory of Constraints tells us that in any business, there is always an internal or external (marketing) constraint that limits the performance of the system relative to the goal of your company.  In other words, the constraint limits your company’s profit margins. When you create a Mafia Offer, you are building a business proposal for customers and prospects that will guarantee the elimination of constraints and significantly increases their perception of the value of your products.  The Mafia Offer is seen as unrefusable and if it is written and delivered correctly, the acceptance rate by customers and prospects can be in the neighborhood 80 percent!

In all three examples presented in this series, the companies involved were required to examine their processes to identify and exploit or remove their constraints which permits you to give your customers what they want, while at the same time creating a condition that your competition is either unable or unwilling to match.

In today’s post, I will discuss why Gerald Kendall [2] believes it is possible to transform your total sales of today into tomorrow’s net profit in four years.

Complexity Versus Simplicity

In Dr. Eli Goldratt’s book, It’s Not Luck, he explains that “within any complexity, there is an inherent simplicity that governs the throughput of the organization.” Gerald Kendall [2] tells us that “the fact is, you simply cannot break the system down into parts to find this simplicity. In fact the opposite is true.” In order to get a rapid and significant improvement in performance, it is imperative that we look at the entire organization as though it was a single system.

In many posts I have written how important it is that we find the system’s leverage point (i.e. the system constraint) if we are to achieve huge jumps in system improvement.  Likewise, to take advantage of this leverage point, all parts of the organization must focus on this leverage point.  This is the essence of Kendall and Goldratt’s Viable Vision. The fact is, if you don’t have a Viable Vision for improvement, all you really have is a bunch of improvement projects.

Most companies address this idea of complexity by dividing the organization into small, bite-sized and “manageable pieces and then try to improve each individual piece.  And since each of these pieces (i.e. different functions and departments) are typically cost centers, the order of the day is to focus on reducing costs in each function and this approach often leads to huge problems.  Things like cost reductions in one part of the organization having a negative impact on another part of the organization is a common occurrence.

I explained in an earlier post, that creating a good Viable Vision, typically results in major improvements in profitability.  In fact what Kendall [2] tells us that your future profits could and should equal your current sales dollars if your Viable Vision is constructed correctly.  Kendall also explains that “in order to achieve the magnitude of results described by Eli Goldratt, we must establish a Viable Vision using a new frame of reference to manage the organization.”

This new frame of reference deals with complexity by finding the inherent simplicity, the leverage point.  As I’ve written about before, this guiding assumption is that improvement in the throughput of any system is governed by very few factors and it is these few factors are what drives the inherent simplicity. But the real question is, which factors must the management team focus their improvement efforts on to get the kind of results Kendall describes?

Next Time

In my next post, we’ll focus on Kendall’s idea of Viable Vision and discuss which factors are most important in governing a company’s throughput. This next post will begin a new series of posts labeled Viable Vision.  As always, if you have any questions or comments about any of my posts, leave me a message and I will respond.

Until next time.

Bob Sproull

References:

[1] It’s Not Luck, Eliyahu M. Goldratt, The North River Press, Great Barrington, MA 1994

[2] Viable Vision – Transforming Total Sales into Net Profits, Gerald Kendall, 2005 self-published

 

 

Bob Sproull

About the author

Bob Sproull has helped businesses across the manufacturing spectrum improve their operations for more than 40 years.

facebook-icon facebook-icon linkedin-icon linkedin-icon twitter-icon twitter-icon blog-icon blog-icon youtube-icon youtube-icon instagram-icon instagram-icon Bookmark this page Google +