I have written (many times) about what it takes to profitably grow a production rental business. You need smart business processes, the ability to oversell, and a compelling value proposition. The “oversell” part of the equation – combined with the outcome-based language required to engage valuable customers – is rather scary to a lot of operationally-drive companies. The underlying concern is, “We need to know exactly what we are going to do before we promise to do it.” Unfortunately, that is not realistic or even supported historically in an industry that has universally shared sayings such as, “We will have an agenda as soon as the gig is over.”
In today’s Best Practices blog I want to explore how this three-pronged approach to growth affects the operational mindset.
Traditional operational constraints are institutionalized in the selling process through the use of product codes, availability checks, and design oversight – generally dictated by operations. The expectation is that the sales transaction will come with a clear definition of needs with a timetable. The order is then processed by allocating resources (and correcting all the hidden mistakes made in the selling process). When the operation reaches the limits of its capacity, the system is told to selling.
Philosophical changes are needed, specifically, operations must adopt flexible allocation planning. Organizers have to step back and look at all the projects at once and shift resources for the best possible outcomes for all jobs. This may appear chaotic to a step-by-step manager, but outcome-based operations have highly developed processes that anticipate dynamic changes. In best case scenarios for migrating to this new mindset, we can alter the order of existing processes to allow the selling process to proceed unimpeded. However, if the leadership mindset doesn’t evolve to a more holistic view of project flow, then a management change may be in order.
One of the scarier aspects of this growth model is the elimination of many traditional capacity constraints. (After all, you can’t grow without exceeding previous volumes). If capacity is not allowed to be a constraint, then operations will have to provide a much deeper pool of over-hire resources. For most service companies, this means flexible labor outsourcing. The standard push-back is, “It’s really hard to find good people at the last minute.” Yes, therefore finding good people needs to be a core competency along with better planning.
The arguments against outsourcing run deep. “We do not have freelancers or independent skilled labor in our market,” is typical. This is a chicken-egg problem: You have to develop and support an over-hire labor market in order for there to be one. To be more direct, most service companies are overstaffed because they failed to develop a temporary labor supply chain.
The idea is not that capacity is limitless. Rather, the philosophy is that operational constraints are the problem that management must continually strive to overcome. Every solution increases capacity, which in turn is challenged by more demand.
What can operations do to add to the firm’s value proposition? Given that the delivery of your service is the proof of a company’s brand promise – the answer is, everything. Let’s start with infrastructure. Software, tools, and facility are all part of the operational value proposition. They represent the intellect and commitment to the outcome. The second most valuable thing operations can do is training combined with career development. Even the smallest of firms can organize their training and codify career paths. Finally, consistency is highly prized as a value. Progress not perfection. For a company to grow profitably, operations must be consistently good rather than erratically perfect.
When owners and executive teams first look at this growth model, the expectation is that operational costs will have to increase. However, I find that most companies can migrate to an outcome-drive operational model in less than one year with dramatic savings in the process. Operations can’t do this alone. Both the sales and finance models have to adapt at the same time. They too have individual responsibilities to fulfill the growth model, which we will explore in future articles.