Competing Against Time

I first heard George Stalk, at the time a Boston Consulting Group Director, speak about time-based competitiveness in 1990. This was shortly after his article "Time -- The Next Source of Competitive Advantage" won the 1989 McKinsey award for the best Harvard Business Review Article of the Year (1989) and the publication of his 1990 book "Competing Against Time". Subsequently, forty-five books have cited this work.

And yet it's still a profound lesson today. Briefly, the premise is this: There are a number of things you can measure and try to manage. In fact, sometimes so many that a manager just gets overwhelmed. The one big thing you can measure and manage that will affect all others positively is the duration (total elapsed time from beginning to end) of any business process.

For example:

• Time from Order Entry to Shipment
• Time from Shipment to Billing
• Time from Billing to Collections
• Time from beginning of development to first production delivery

Note that there's nothing in this list about man-hours, about productivity, about utilization of manpower or machinery. It's just about the hours, days, weeks or months of elapsed time it takes from the start of an activity to the end.

Think about it. Have you ever had a sales cycle stretch out, and the outcome get better? Ever had a building project stretch out and the costs go down? Ever had a manufacturing process that got longer and the quality improved?

Actually, there's a decent argument that taken down to the basics, there are really only three levers on a manager's control panel:

Quality, Time and Cost -- sometimes translated as "better", "faster" and "cheaper" (the mantra of the electronics business and the metrics of Moore's Law).

Stalk asserts (in my experience, correctly) that if the only one you pay attention to is time, the rest will take care of themselves.

Projects of shorter duration are less likely to take on additional scope & baggage, less likely to suffer from the effects of project team turnover, and less likely to lose focus on the original goal. As a result, they cost less and deliver more of the intended benefits.

Let's talk about inventory -- have you ever seen anything good happen to something that sat in inventory longer? In fact, the common metric of "Inventory Turns" is just the reciprocal of "average days on the shelf". Days Sales Outstanding (DSO) is a measure of average days in accounts receivable.

What about work in process? One of the things I look for when visiting someone's factory is the number of wire baskets full of parts sitting around on the floor. By definition, wire baskets sitting still are not getting better. They're waiting to get damaged, lost, or for 1 or 2 to go "missing", whereupon the final production run will be 1 or 2 finished items short. In an ideal world, a part never stops and waits anywhere from the time it arrives from the supplier until the finished product is headed out to the customer. This is the origin of the concept of manufacturing cells, an idea that's dramatically reduced cost, improved quality, and shortened cycle time in thousands of factories.

How can you reapply this time-proven principle? Look at your business processes. There's surely one of them that your customers (or you) wish happened faster. Go back to the basics. First, chart it -- what are the steps and sequences of steps required to get the process accomplished? Now, here's the important part. On the flow chart, write in the "do-time" for each of the steps (the actual time a part is being "touched" or worked on in the fabrication or assembly process). Then, write in the "wait" time between steps. You'll likely find that the total wait time is 2x to 100x (yes, 100x) of the total "do time". Draw a laser-beam focus on reducing that wait time.

Examples include machine changeover time -- totally lost production, manhours and machine capacity that you'll never get back. We'll never again get to produce the parts we could have produced during those lost hours.

How about the time a sales order waits in a basket for approval, order entry, technical validation, etc.? Time that a customer is waiting and wondering what's become of his order. And, in almost every case, time to make a mistake, lose the paperwork, for the customer to change his mind, or a competitor to stop by and make a sales call.

So, if you have to choose which of several balls to juggle, make it time. Look at everyday processes within your business, measure the total elapsed time of each from beginning to end, and then set a goal to reduce that by half. In many cases you'll find you can reduce it even more than that. You'll be amazed how many other things will get better by having done so.

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com
864 527-5917

Ignore the Scope Definition -- Pay the Price

Ever had a project that wildly exceeded your estimates of either cost, time, or both? There are lots of reasons that happens. In my experience, however, one of the most prevalent is failure to define the scope of the project before starting, and then finding that you're too far down the road to either reduce the scope or get the project done on budget. Otherwise known as "biting off more than we can chew."

Here's a metaphor, or word picture, you might use with your own management team as a memorable parable. It's about something familiar to almost everyone -- building a house.

Let's say you have a $200,000 budget to build a house (you already own the lot). Depending on the part of the country, a "starter home" can be built for about $100 per square foot. So, a rational person who understood construction costs would lay out a 2,000 square foot foundation (about 50 feet by 40 feet) and begin building.

A person less knowledgeable might, on the other hand, go out to the site and lay out a 50'x 60' foundation -- 3,000 square feet. So he starts building and gets the walls all framed up. At that point, he has either a house with no roof and he can afford to finish the interior OR a house with a roof and an unfinished interior. He's unwittingly put himself in an impossible position -- he can't shrink the "footprint" of the house, and he's $100,000 short of what it will cost to finish a 3,000 Square foot house. Then what??

How often does a project go down that same road? And it's generally for the same reason -- failure to scope the whole project, resulting in failure to estimate the full cost of execution. So, the project starts off with overly-ambitious goals and in midstream we discover that the few choices available include bailing out with nothing finished or slugging it on to the finish line with massive cost and time overruns.

The outcome of these projects can be disastrous. Best case, they get finished and deliver the expected benefits despite their huge cost overruns. Worst case, they break the bank, don't get done at all, and the entire project becomes a sunk cost (sometimes with a sunk career or two included). The middle ground is more common -- cost-cutting at the end compromises most of the project goals and objectives, resulting in a finished product that's not only expensive but also ineffective. Think about trying to finish that 3,000 square foot house on 2/3 the necessary budget.

Again, this parable is about the failure to define scope. Just how ambitious is the project at the outset, and do we really have the budget, the talent and the time to do everything within the defined scope?

What are some good practices in scoping and estimating longer-term projects? A friend of mine who had just remodeled a kitchen (notoriously vague scope) told me what he learned: "Ask three contractors what they think it'll cost, and add them all together". Hopefully you can't personally relate to that experience. Seriously, when you're talking about investing any amount of money into the business that you consider "large", whether that's $10,000, $100,000, $1 million or more, stop and put together a rigorous description of the expectations, plus a rigorous estimate of the cost and schedule. "Rigorous" means talk it through with others knowledgeable of what you're planning to do, and build a line-by-line listing of expectations, tasks, cost per task and time duration per task.

You'll find, I believe, that it's not the mis-estimation of a task that kills an estimate. It's a missing task -- something you forgot entirely. In my experience with analyzing errors in construction estimating, it was never that it took 3,000 feet of conduit and we'd estimated 2,500. It was that we left out the conduit line item (including all the associated labor, of course) entirely!

If you do similar projects regularly, take the time to build an estimating check list -- a rigorous listing of all known possible costs. Just the "reminder" value of that exercise will save you a multiple of a month's pay some day.

So, set your internal threshold for the dollar amount of a "large" project , and whenever one of those comes up, insist on a rigorous, structured, carefully reviewed scope definition and estimate.

If you have experience with a large project overrun, click "comments" below and share your story with us. What would you do differently, knowing what you know now?

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Terry Weaver


CEO
Chief Executive Boards International
http://www.chiefexecutiveboards.com/
TerryWeaver@ChiefExecutiveBoards.com
864 527-5917