In part 2 of our project management series, Joe Knight our CFO talks about why traditional project management doesn’t work. Traditional project management uses accounting that measures revenue earned by the percent complete based on costs. We believe this idea is flawed and Joe explains why. Setpoint measures progress on a project by labor only, or by earned value rather than on a percent complete of materials spent. Stay tuned for part 3…
Catch up on Project Management Part 1
How do you manage projects? The Setpoint way of project management is different from that of most companies. We are a project based company and the standard accounting methods of tracking projects does not work for us. We have seen many competitors go out of business, not because they don’t have good engineers and can make the machines work, but because they are not able to do it profitably. In the first of five video clips, Joe Knight our CFO will talk about how Setpoint manages projects and what makes our way different from other methods.
Does your company play offense or defense, when managing cash? Cash flow management is always best when played offensively, rather than defensively. If there is a project on the horizon that is larger than normal and will stretch a credit line, calling vendors ahead of time to request credit limit increases or terms extensions is vital.
Over the last eighteen years, Setpoint has developed a great working relationship with their vendors. This has paid off more than once. Because we pay our bills consistently on time and/or take discounts, we have been told by most of our vendors that we are one of their preferred customers. If you have not been paying your bills on time, or you consistently drag them out – quit reading right now, you won’t have a chance. Occasionally when we have needed a little flexibility in our payment terms they take our calls and work hard to get us the help we need. When we go to the vendors with a request, without a doubt every one of them have said “Yes”. Sometimes vendors can’t provide the terms we requested, but they come back with something that we both can work with to help us during our crunch time. This can only be done if you are playing offense and know well in advance that you need the help. Calling when you are already 60 days overdue on your bills will not get you very far in negotiations.
These calls can be a difficult thing to make. Here is where the old adage applies, “if you don’t ask, you don’t get”. There are a few questions that need to be asked before calling on the aid of the vendors. For instance:
If you can answer positively to these bullets, you are prepared to go to the next step. Some other questions you should consider are:
Who do you call? No, not Ghostbusters. Who makes the calls? It is good to have both the purchasing and the finance department make the calls. Purchasing can start the dialogue with the sales department, while the finance department can contact the vendor credit department. Generally, the credit department will request information from their sales force to check on the customer’s stability and contract viability.
Any coach will tell you that their offensive team is the most important part of the team. In business this means that understanding your cash flow needs well in advance – will keep you out of trouble. Ask yourself this, are you ready to play offense?
Over the last 3 years I have been learning about what SEO is and how it works. So what is it? Search Engine Optimization, it’s how websites get found by the search engines, Google being the most popular search engine. Over the last few years we’ve used a few different companies but felt that our site was stagnant and we were ready for it to move forward again so I started to look around and find a new SEO company to help.
I started searching a few months ago and was disappointed by some of the companies that I found. As I searched for companies I looked through their websites; after all I wanted my website to be better so they had to have a great website. Some sites didn’t even answer basic questions as to the services they offered or what those services entail.
Some companies I contacted had a good website but on review of their proposal I realized that they were using old outdated information for the services they were providing. Coming from a company who goes out and searches for the newest technologies to integrate into an automated solution it was frustrating to see companies trying to push services that were considered outdated when I started learning about SEO three years ago.
The most frustrating was when I contacted a company to find out more about their services only to not have someone contact me back. There was one company that I thought would be a good match and I submitted a request twice, the second time I heard back saying the regular contact was out of town and that they would assign someone else to contact me, only they never did.
After reviewing the proposals I realized that some companies were very upfront with what their strategies were while some were vague. Those that were upfront seemed to be more trustworthy because they weren’t trying to hide what it is they were planning on doing. At what point would the more vague companies let me see what they were offering to do for me?
In searching for a SEO company I found ways to improve my website and our company. Do people come to my website looking for what we offer and leave feeling like I didn’t answer their questions? Does my company or my website use old outdated information or equipment? Do we follow up on the leads that come into our site? Are we giving them the run-around? Are our proposals lacking in the explanation of what services we are offering?
Bottom line is there are no silver bullets in finding an SEO Company. My feeling is that you must decide what direction or help your website needs and then go out and find that specific SEO Company that can help you. I have yet to find the SEO Company that can do it all.
In any organization that intends to exist for an extended time period, learning is critical. Not repeating mistake allows a business increased profitability. Someone once said (I can’t remember who) something like - “the school of hard knocks is a hard school to go through, but only fools return”.
Over the years Setpoint has been, is, and will continue to be an engineering centric business. Most of the projects we build have never been built before; most are completely clean sheet designs, meaning that no one is quite sure what this machine will end up looking like. This means that there will be multiple iterations as we develop the machine. It is critical to our success that we discover our mistakes as soon as possible to reduce our costs. The table below illustrates how critical it is to discover the problems as soon as possible.
|
When Mistake is Discovered and Fixed |
Relative Cost to Fix |
| Designing at the white board | $1.00 |
| Designing in CAD system | $10.00 |
| During build of machine | $100.00 |
| During debug phase | $1,000.00 |
| After installing at customer site | $10,000.00 |
Over time we have developed some unwritten rules that we use to help us down the development path. For this blog we sat down and wrote down the ones that matter to Setpoint. These are in no particular order:
I am only one member in a mechanical design team of seven engineers, together we are neck deep in machine design and mechanical problem solving. I started reading this book with hopes of picking up good ideas to apply in a group setting when we are at the whiteboard solving design issues. I have found the book to be somewhat interesting, but not enough to press my colleagues to read it. The book has some good ideas in it, such as the SQVID method of imagining. In summary, the SQVID method gives you five questions to ask and mentally process before drawing a picture. These five questions are:
Dan is not simply suggesting “a few good ideas” in The Back of the Napkin. He has created a text book to guide you into learning a powerful and disciplined approach to visual problem solving that works well for Dan. Trying these ideas once isn’t difficult. To implement these into your person, make them habit, and integrate them into your mental framework, and restructure your ability to solve problems may take years of self discipline. For example, the <6><6> rule: “For every one of the six ways of seeing, there is one corresponding way of showing. For each one of these six ways of showing, there is a single visual framework that serves as a starting point.” Email me when you’ve managed to get a good grip on that one. Next, consider Dan’s Four Cardinal Rules for Better Looking:
These four things make perfect sense, but memorizing them in one day is not enough. Carrying around index cards with notes to remind you how to do it is impractical. The challenge of rebuilding your mental stairways to solve problems, to restructure your thought process and become fluid at this can be the challenge of a lifetime. The truth is, you probably already do these four things and just don’t realize it because it happens so fast. But Dan did an excellent job of capturing this process on paper where you can read the steps and do a self evaluation.
Many times as I have pondered Dan’s ideas, the recurring message I get is - in summary: “You don’t think very efficiently, try my way, it’s better.” If you consider yourself an efficient thinker, this book will make you reconsider because Dan illustrates how his methods can be applied universally. The book is not compelling to the merely curious, there is nothing ground-breaking for the visual thinker, and the ideas are not easily accessible in many ways to the analytical thinker. For example, the Bird Dog Drill on page 75. If any analytical person makes it to page 75 of Dan’s book, they will find this drill to be a tall challenge because it’s an exercise in endurance and continuity of visual thinking. That being said, I am about 75% through the book and still not sure if I have already passed the “meat & potatoes” of Dan Roams’ core message. If I did . . . what was it?
It’s almost like Dan is telling me: “This is so easy, if you could just be cleverer by using a bit of visual ingenuity, you could draw a picture and this complex problem would suddenly become clear.” Or “Why are you making this problem so difficult, just draw an efficient, well conceived, simple yet calculated, and well diagrammed picture.” . . . My thoughts exactly, “do what?”
To be honest, I don’t know if I will finish it anytime soon. Not that the book isn’t good, it’s just not groundbreaking and easily applied. But it’s interesting if you are a visual thinker. In reading this book I feel like I am being told that to be a good problem solver I must remove my old problem solving tool belt and strap on a new one that only has a single marker in it with instructions that simply say, “Think differently, and draw more efficiently.”
In the mid 1990’s I read a book that connected with me. It was The Discipline of Market Leaders authored by Michael Treacy and Fred Wiersema. In a nutshell it said that companies need to pick their marketing strategy from one of three choices, those choices are Operational Efficiency, Product Leadership, or Customer Intimacy. A company that believes they should do all three will fail.
It goes like this:
The table below summarizes the concepts of the book:
|
|
OPERATIONAL EFFICIENCY |
PRODUCT LEADERSHIP |
CUSTOMER INTIMACY |
|
Core Business Process |
Sharpen distribution systems and provide no-hassle service
|
Nurture ideas, translate them into products and market them skillfully |
Provide solutions and help customers run their business
|
|
Structure |
Strong central authority and a finite level of empowerment |
Acts in an ad hoc. Organic loosely knit, and ever changing way |
Pushes empowerment close to customer contact
|
|
Management Systems |
Maintain standard operating procedures
|
Reward individuals’ innovative capacity and new product success |
Measure the cost of providing service and of maintaining customer loyalty |
|
Culture |
Acts predictably and believes that “one size fits all” |
Experiments and thinks “out of the box” |
Flexible and thinks ” have it your way”
|
|
Company Examples |
Wal-Mart - McDonalds |
Intel - Nike - 3M |
Nordstrom |
Over the last few years I have heard nothing from these authors. I wondered are the concepts no longer valid, what has changed?
My feelings are they are as relevant today as they were 10 years ago, with two caveats.
First: it doesn’t matter what strategy you are pursuing, you need to continually look at ways to lower your costs and add more value (from the customers view not the companies) for lower costs. This is a fact in the world we live in today with no exceptions that I am aware of.
Second: adding more features and functions after a certain point where the customers aren’t demanding them will open up the possibilities of a disruptive product coming in and interrupting your strategy. This disruptive concept was originated in the book The Innovators Dilemma by Clayton M. Christensen, it is worth reading.
The Discipline of Market Leaders is still a relevant book today to help companies chart their path, but remember the two caveats.
Companies that remain static and don’t evolve will eventually lose their profit margins and sink into oblivion. At Setpoint, as we try and adapt to the changing landscape I have noticed several things in dealing with deciding our company’s direction.
First, change is hard. It is much easier to continue doing what has been done in the past, even if it is not getting the results it used to, and rarely have I seen an idea that just works right out of the gate.
You can’t do everything, and if you try to, it will result in spreading your resources (money, time, people) so thin that you cannot be successful at anything. One of the hardest things is, deciding what not to do. It is difficult because you tend think that you are potentially leaving money on the table, and you may be – but you are doing it to pursue a better idea with more potential.
We have found that some feel more passionately about an idea than others, so we have developed a rule that is simply “whoever has passion about an idea gets less than 50% of the vote”. This helps us make more objective decisions. Key message is, don’t be so in love with a strategy or idea that you can’t dispose of it when all the facts point that way.
You never have perfect information before a decision needs to be made. As a result, assumptions are made in order to make progress. The problem is, unless those assumptions are tracked and noted they tend to become facts over time, and often those assumptions are wrong. You have to revisit assumptions to validate, modify, or eliminate them to reflect new information you now have. Not doing so can lead to less than desirable outcomes.
At Setpoint we try and follow the philosophy of “fail faster”. In other words, if something is not going to work the sooner you identify it the cheaper it is for the company in terms of money, time, and people. Most ideas can be validated or eliminated without much cost or time if the key issues have been correctly identified. The few key remaining ideas can then claim your valuable resources.
The shorter iteration cycles the better; the clearer the objectives, the easier it will be to identify the key issues that need to be proved out in order to validate the direction.
These are some of the techniques we are using at Setpoint to decide our companies direction.
This process is an ongoing part of a healthy company’s life. So get on with it.
Engineers are typically detail oriented, introverted problem solvers that techno-babble about the latest advances and can’t imagine how the previous generation accomplished anything without the modern tools that are available today. So, what does this mean? If we start with introverted…sometimes I’m certain that our virtual world that has been brought to fruition by engineers is just a selfish result because we really didn’t want to actually talk to each other in the first place. How about latest advances, we spend significant time and effort learning, trouble shooting and maintaining the latest software tools. Remember, engineers are problem solvers, given enough time and money we can make anything work. I’m going to rant for a moment: how often do we end up with an annual software upgrade that requires nearly double the hardware capability that was fine for the previous release along with significant install, debug and training for no real ‘core’ improvements, just new look and feel. Done ranting and back to latest advances, we spend significant effort on the latest CAD tools.
What does this add up to? It is all too easy when starting the design process to work on our own with the latest software tools. Generally goes something like this: there is a preliminary design review in two weeks, who has time for daily internal reviews not to mention the customer is expecting to see a beautifully shaded and textured virtual model…I just have to get this done. There are a few things inherently wrong with CAD on the front end of the design process.
How do we combat this at Setpoint?
Don’t misunderstand me, CAD is a valuable tool in design; however, it’s not always the best tool.