The full title of this book by Richard Klapholz is
“The Cash Machine: Using the Theory of Constraints for Sales Management“.
In my review at Amazon.co.uk, I gave the book a Four Stars rating. This means I think it’s good.
Here is my book review.
Explains the idea of using constraints to improve the sales process and increase sales revenue.
This is a business novel which explains how the Theory of Constraints (TOC) can be used to find ways to increase sales revenue.
It is set in a large ($700 million turnover) digital imaging company which has a seen sales revenues reverse, from growing progressively they have dropped for the last three quarters. The hero has a job swap, from vice president of marketing to the hot seat, VP for sales. Fortunately he had agreed to be open-minded and consider TOC after it had been used effectively elsewhere in the business.
If you’re not familiar with the Theory of Constraints, it was developed by Eliyahu Goldratt in the 1970s onwards, originally looking at improving production planning to improve delivery performance and to reduce stock and work in progress. The idea is that a business is a complicated system but, because output isn’t unlimited, it must have a constraint. This constraint must be identified and it becomes the focal point for how the business is managed. It was first explained in the business novel The Goal: A Process of Ongoing Improvement.
The company is probably the worst managed business that has ever existed as it seems to have a total blockage on effective key performance indicators (KPI).
– when the sales problem first started, the business rushed to recruit more sales people, spend more on marketing etc but ignored information in its customer relationship management (CRM) software that there was a bottleneck in their sales process. Their actions didn’t make any difference until the bottleneck was identified and exploited. This is an important point, improvements away from a bottleneck don’t have much impact on the entire system and may even be a waste of time and money.
– sales and production disagree on their due date delivery performance after orders are received. The difference was that operations looked at the lead times between the date they received the order to make/pick from stock while the sales department looked at the date the order was taken and the date promised to the customer. The difference was due to a policy decision that introduced significant delays into the process.
– after visiting customers, the VP of sales discovers that installations are never completed on time. This introduces the TOC ideas for project management.
– a financial crisis develops after more than 100 “super swanky” new machines are sold but not one is signed off by the customer over nine months and therefore no customer has paid for the machines. This time we’re back to looking at processes and in particular the new product launch process.
From my perspective, as a small business coach who has TOC thinking in my toolbox, this is a very interesting book because it serves up examples of how constraints impact on businesses outside the operations departments.
However if you’re responsible for sales in your business and you’re new to the Theory of Constraints way of thinking, the examples may be too extreme to feel convincing. Of course, obvious issues in other people’s businesses are not obvious in your own. You may also struggle with the idea of constraints. It is most easily seen in a manufacturing process where any machine that is a constraint has a mountain of work in progress waiting for it to work on. It’s obvious that feeding more in at the start of the production process is going to increase the mountain and make things more complicated to manage.
Another way to see the bottleneck is driving on the motorway when two lanes are closed. What is normally a fast, free flowing road becomes a nightmare bumper to bumper stop start journey as your car edges forward at a snails pace until you get to the bottleneck. Once you’re past the road ahead is much quieter than normal.
The TOC is a very important way of thinking as it helps to highlight many things that cause problems in the business. The book isn’t the entire answer and you will probably need some help implementing the ideas but if it helps you start thinking in the right way, that’s a big help.
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