Got a Problem?

The book Thinkertoys by Michael Michalko is one of those business books that is so full of great ideas, you feel like taking action on many of them as soon as you read them. One of them is called “Phoenix.”
Say you have a problem, a really serious problem within the organization. What to do? How to approach it? According to Michalko, The Central Intelligence Agency (CIA) developed a series of questions designed to drill down into problems, in part to make sure that a problem is looked at from many different angles. The list of questions presented here should not be viewed as “the last word,” but rather “yours to improve.”
Getting you mind wrapped around this technique may be more effective if you consider for a moment a problem – a tough one – that you face. Write it down so that it is clear what exactly you are saying the problem is, not something vague. Now, answer these questions about the problem:

The Phoenix Checklist
1. Why is it necessary to solve the problem?
2. What benefits will you receive by solving the problem?
3. What is the unknown?
4. What is it you don’t yet understand?
5. What is the information you have?
6. What isn’t the problem?
7. Is the information sufficient? Or is it insufficient? Or redundant? Or contradictory?
8. Should you draw a diagram of the problem? A figure?
9. Where are the boundaries of the problem?
10. Can you separate the various parts of the problem? Can you write them down? What are the relationships of the parts of the problem? What are the constants of the problem?
11. Have you seen this problem before?
12. Have you seen this problem in a slightly different form? Do you know a related problem?
13. Try to think of a familiar problem having the same or a similar unknown
14. Suppose you find a problem related to yours that has already been solved. Can you use it? Can you use its method?
15. Can you restate your problem? How many different ways can you restate it? More general? More specific? Can the rules be changed?
16. What are the best, worst and most probable cases you can imagine?

Presumably your brain has been exercised by this process, but I think this approach works even better when done by a team. The idea is to harass the problem so much, that it “gives up its secrets” and becomes easier to deal with. In a group setting you could write the answers on big sheets of white paper and attach them to the walls as you work through the questions. This way people looking around the room could continue to keep coming back to what has already been said, letting the information soak in by repetition. Seeing different aspects of the problem side by side may cause a flash of insight or realization.

Now that the problem has been identified, how about a plan to deal with it? Here is another set of questions designed to uncover the solution or solutions:

The Plan
1. Can you solve the whole problem? Part of the problem?
2. What would you like the resolution to be? Can you picture it?
3. How much of the unknown can you determine?
4. Can you derive something useful from the information you have?
5. Have you used all the information?
6. Can you separate the steps in the problem-solving process? Can you determine the correctness of each step?
7. What creative thinking techniques can you use to generate ideas? How many different techniques?
8. Can you see the result? How many different kinds of results can you see?
9. How many different ways have you tried to solve the problem?
10. What have others done?
11. Can you intuit the solution? Can you check the result?
12. What should be done? How should it be done?
13. Where should it be done?
14. When should it be done?
15. Who should do it?
16. What do you need to do at this time?
17. Who will be responsible for what?
18. Can you use this problem to solve some other problem?
19. What is the unique set of qualities that makes this problem what it is and none other?
20. What milestones can best mark your progress?
21. How will you know when you are successful?

As with so many things, the time and effort invested in the process will have a lot to do with the value derived. But it seems like a good methodical approach to solving problems. Asking good questions, and constantly striving for better questions, seems an unbeatable approach to dealing with problems as opposed to living with them.

What is Your Conversion Rate?

In his book “Why we Buy,” Paco Underhill tells the story of senior executive of a multibillion dollar chain who was asked “How many of the people who walk into your stores buy something?” This executive knows a lot about his business. He knows the total sales, the average sale amount, the sales in any given store vs. last year, profitability by item, and many other things. His answer to the question was, “Damn near all of them.” Since their stores were “destination” stores he reasoned, people didn’t go there unless they had some very specific purchase in mind. The reality was 48%, which, as it turns out, is a very good rate for stores of its kind. Underhill’s book is filled with stories about how many things are “hidden in plain sight,” and how obvious some things are once we can “see” them.

The concept of the conversion rate, implying as it does that shoppers need to be “transformed” into buyers, was alien to his organization. That changed when the company realized that by changing some things about the store, they could improve their conversion rate.

Our Batting Average

Most component manufacturers I know can quote their sales figures for any given month. Sales totals and gross profit figures, viewed together, seem to be the most basic indicators of the overall health of the business. Fewer are as conscious of their conversion rate, or “Of the opportunities we had, how many bought something?” It’s the “batting average” for the business.  If we know we sold “100” this month, was it 100 out of 300, or 100 out of 1000? The conversion rate is a third very fundamental way the health of the business can be measured, and also carries with it important intelligence about the market we are operating in.

Keeping Score

If we are tracking quotes and have some kind of a way of calculating what percentage become orders, we have the basic information needed to calculate our conversion rate. We also need to know, “Among the quotes that have not turned in to orders, which are still ‘in play,’ and which went to competitors?” Even better information can be gathered if we also record why they did not become orders. Although many will go in the books as lost to “lower price,” the ones that don’t will be instructive. We might see “Couldn’t meet delivery date,” “Loyalty to other supplier,” “Project was cancelled,” “Other supplier was able to include wall panels” - and others. Gathering this information will, over time, uncover some new insights into the market. Imagine, for example, the market intelligence we’d have in observing the percentage of quotes where the “Project was cancelled” increase over time from an average of 5% a month to 15% month.

Is there any reason not to record and review “Why we didn’t get the order” or “Why we got the order” (!) on every quote? Among those lost to the competition, why shouldn’t we find out and record who the competition was that beat us out and “keep score?”

What we Might Learn

Although looking at the numbers alone would tell us some things, even more revealing might be seeing changes in the numbers over time. For example, if we see that we were getting a conversion rate of about 40% for the 3rd quarter, but it went down to 30% in the 4th, it tells us that something is changing. What is it? Has a new competitor come into the market? Is there less work out there and competitors are lowering their prices (more than we are?) If we track the fate of every quote, the reason we got or lost the job, and who we lost out to, we’d have great insight into the current market.

In a general way, we use conversion rate information to look at:

1) the extremes – the biggest and the smallest conversion rates in any sample and ask, “Why?”

2) the biggest changes over time and ask, “What’s going on and what (if anything) should we do in response?”

25 Questions

1. A piece of lumber travels _____ feet between the time it arrives in the yard and when it goes out the gate as part of a finished component.

2. How do you measure the quality of the components you build?

3. On average, our prices are ____ % (above/below) the competition.

4. This Fall, the work we have had has kept us working at about ____ % of our maximum capacity.

5. We stock ____ sizes of plates and the plate we use the least is the _____ plate.

6. The one thing I would change about our plant layout is _________________________.

7. In the past 24 months I have visited ____ other component manufacturers.

8. The reason most of my customers would say they buy from me is ______________________________.

9. If our order backlog doubled next month, we (would/would not) be able to handle the work.

10. Plates represent about ____ % of the selling price of the trusses I make.

11. The most knowledgeable person I know in our industry is ______________________.

12. Are your sales reps positively or negatively affecting your sales?

13. Our average job site is ____ miles from the plant.

14. We have to deliver additional materials (to replace broken or missing ones) on ____ % of our jobs.

15. The one piece of equipment that I think would help us the most is __________________ because ___________________________ .

16. Designer productivity is measured by ____________________________ . Designer quality is measured by ______________________ .

17. Who arrives first in the morning more often than anyone else?

18. We have quoted ___________________________ (name whoever is #1 in this category) _______ times and never received one order.

19. The most satisfying thing I have accomplished at this company is _______________________ .

20. How do you reward yourself and what do you reward yourself for?

21. It takes an about ____ minutes to set up a 40’ common truss on my main table.

22. For a business, what are the three most important ‘keys to success?’

23. The biggest obstacle I ever overcame in this industry was then I _____________________ .

24. If stocked half as many skews of lumber it would cost me $ ______ (more/less) per month to operate.

25. Over the Winter we are going to tackle that _________________ problem.