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Jeff Liker

Daniel T Jones: Why is lean in sales so hard?

By Jeff Liker, - Last updated: Thursday, December 20, 2012 - Save & Share - Leave a comment

I have struggled with this question ever since we compared the striking differences between car distribution in Japan, Europe and North America in the “Dealing with Customers” chapter of The Machine that Changed the World. I spent the next decade researching every aspect of car distribution in the International Car Distribution Programme (www.icdp.net) and helping the grocery retailer Tesco to pioneer lean in grocery distribution and sales. My colleague Dave Brunt spent time as the lean champion at the Porsche sales company in the UK and has more recently had considerable success in coaching lean dealers across the world, based on his book Creating Lean Dealers. On reflection progress has been slow for three main reasons.

The first reason is the deep silos in every organisation and the difficulties many organisations are having today to work cross-functionally to streamline their end-to-end processes from order to cash, and in this case beyond into service support through the life of the product. Indeed between 1950 and 1982 the Toyota Sales Corporation was an entirely separate company from the Toyota Motor Corporation. Until then no one understood the Toyota Production System in sales and few in manufacturing understood the innovations being made in their sales and service operations Japan. After they came together TPS principles were quickly applied to the Toyota Parts Distribution System, but their regional sales offices in Europe and North America remained very traditional. Outside Japan, Toyota dealers were effectively selling the reliability of the product rather than an innovative sales and service experience.

It is not surprising that lean folks have spent most of their time in operations. We have seen several attempts in Toyota and elsewhere to apply lean manufacturing techniques to sales and service activities fail because they did not spend enough time understanding the differences in these types of processes. Lean folks have also been used to delivering process improvements but not necessarily in following through to the actions that would be necessary to translate these into bottom line business results. These actions often require collaboration with other functions. Better quality has to be sold to grow sales, cash has to be freed up, unnecessary capacity has to be removed or used and capital projects for bigger assets need to be challenged. The lack of cross functional working actually reflects the absence of a good Hoshin planning process for prioritising cross-functional actions at the top and no one being given end-to-end responsibility for the horizontal value creation processes across the organisation.

The second reason is that it does not make sense to lean the customer facing activities until the upstream activities they depend on deliver significantly improved performance. Many banks recognised that until they leaned their back office processes there was little prospect of improving their retail operations. Doing so opened up new opportunities for improving retail operations and for developing new customised product offerings for different types of customers. I clearly remember when a cross-functional team in a global food producer showed the sales team how they would dramatically reduce lead times so they could meet every order in full, the sales team were inspired to come up with a plan to turn these process improvements into growing sales with retailers. Linking this to Tesco’s rapid replenishment distribution and to their flow-through warehouses and stores yielded significant growth for both parties.

For years Toyota struggled to engage their dealers outside Japan to lean their sales and service processes. In the 1990s they significantly improved the sales ordering process to better match orders on the factory with market demand and they pioneered overnight and same day parts delivery to dealers. This opened up opportunities to transform the cost and customer experience of servicing cars by pre-diagnosing the incoming work, pre-ordering (rather than stocking) the exact parts required and planning and streamlining the different types of service and repair work. It also led to similar improvements in the selling process for new and used cars. But getting dealers to engage with these improvement activities is a struggle!

As we discovered, the third reason is that many sales folk know they can make money more easily by negotiating the next deal and have little patience for disciplined processes improvement. Car dealers are usually from a sales background and indeed until recently many banks were headed by investment bankers, also driven by the next deal. The breakthrough is to find a dealer principal who understands how lean dealer operations translate into superior profitability and improved customer retention. Gradually across the world Toyota dealers are waking up and seizing this challenge. One of the best examples is Jaeger Automotive in Bergen Norway, coached by Dave Brunt, who won the Lean Prize in Norway last year and was recognised by Toyota as one of their best dealers outside Japan. Watch him tell his story to our Lean Summit on YouTube.

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