Get Flat and Fast to Compete

Minimize information sprawl to focus on the customer needs that drive your key metric: sales.

Enterprise digitization, often called the “paperless company,” has been pushing decision-making to the edge for years. By leveraging cloud-based tools and mobile apps, companies can empower front-line staff with access to the information needed to make quick decisions. This flattens the organizational need for intermediate layers of management. But that is only half the job. In addition to reducing the number of people involved, we must streamline decision criteria to focus on delivering what customers need.

The ancient Chinese philosopher Confucius is often cited as saying when everything is possible, nothing is possible. Producers of all sizes live in that world right now. Let’s explore what that means.

Material producers often have sprawling infrastructure technology (IT) “empires.” Hundreds of applications are onboarded by these IT empires to address endless legitimate but isolated needs. Artificial intelligence (AI) is only making it worse, and at an alarming speed. So, what should we do in our industry?

Focus on your key output metric—and what influences it
Amazon Web Services (AWS) is arguably the world’s largest data and information empire. Its original sister company, Amazon, is one of the largest online retailers. They have succeeded outrageously in getting flat and fast by combining the Six Sigma methodology with a concept developed by Amazon executives called “Working Backwards.”

The phases of Six Sigma are define, measure, analyze, improve and control. The Working Backwards process begins with the end goal and analyzes each step needed to get there, in reverse order. Syed Hoya of AWS put our entire senior management team through this training to help with product development—and it works!

The first step is to discover your company’s desired result (output metric) and then the actions needed to achieve it (input metrics). For instance, as a bookseller, Amazon wanted to sell more books (output). At first, they added a much more detailed description of each offering (input), yet sales (output) did not increase.

While looking at more inputs, Amazon found that sales were most influenced not by price cuts but by a combination of the percentage of page views of an item, its in-stock status and availability to ship in two days. This discovery led to Amazon’s transition from global bookseller to a warehousing and logistics powerhouse.

Working backward led to deconstructing and reconstructing the entire Amazon business model. Amazon became one of the most successful general online retailers by focusing on getting flat (identifying the real customer need) and fast (only focusing on the few business processes needed to meet that need).

To help fine-tune your key output metric, align your company’s desired results with your customers’ desired results. Think of the output metric as a succinct press release detailing an irresistible benefit for your target customers. Next, define in reverse order the steps needed to achieve that benefit. Finally, redefine your company’s business processes and supporting tools, especially your IT tools, to deliver results.

Translating Amazon’s success to RMC
Amazon found that potential customers did not respond to lower prices but to convenience. The entire company was restructured to relentlessly deliver this metric. Similarly, nearly every material producer’s customer will claim they want to pay less, but it’s likely they really want something else, like bigger profit or more successful bidding. Instead of joining the “race to the bottom” by cutting prices, seek to understand what your customers really need and provide it.

On-time, on-spec comes to mind. The automated flow of live information for ordering, quality control, delivery and billing reduces costs. The automated flow of historical information helps your customers bill, resolve disputes and mitigate the associated liability. The list goes on.

Hundreds of input metrics must be constantly discovered and refined, measured by how they impact the key output metric. You must deconstruct your company and be wise in the reconstruction.

Sprawl kills!
Invest heavily in research before you add the cost and friction of applications and new business processes. Ask how that shiny, new AI app helps fulfill your primary goal. If you buy it for the wow factor, you probably already lost. You must separate the sheep from the goats by the litmus test of what relentlessly binds your customers to you.

No matter how attractive the app is or how hard your trusted team lobbies for cool tools, an unbridled and isolated IT expansion will confuse and slow down your company. It will add layers of costs through disjointed, inefficient processes and personnel. To be competitive in the brave new world, especially with AI, you must clearly define and hold to your few key output metrics and stay laser-focused on constantly refining the input metrics and associated business processes to drive them.

If you are still in doubt, I leave you with two thoughts. First, Amazon/AWS founder Jeff Bezos is the world’s second-richest man (with a $197 billion net worth), even after a divorce, for a reason. His companies seek to find the few things the customer values and relentlessly deliver them through organizational and IT structure.

Second, even though he was born in the 5th century B.C., let Confucius guide your brave new IT strategy with this mantra: When less is possible, more can be accomplished.

Craig Yeack has held leadership positions with both construction materials producers and software providers. He is co-founder of BCMI Corp. (the Bulk Construction Materials Initiative), which is dedicated to reinventing the construction materials business with modern mobile and cloud-based tools. His Tech Talk column—named best column by the Construction Media Alliance in 2018—focuses on concise, actionable ideas to improve financial performance for ready-mix producers. He can be reached at [email protected].