17 - Henry Camp_TOCPA_USA_21-22 March 2016

8/18/2019 17 - Henry Camp_TOCPA_USA_21-22 March 2016

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23rd International Conference of the

TOC Practitioners Alliance - TOCPA

www.tocpractice.com 21-22 March, 201, Tennessee, !"A

Exploiting Market Constraints

(For those who use salespeople)

Henry Fitzhugh Camp, TOC Equity Partners, USA

March, 2016


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23rd International Conference of the TOC Practitioners Alliance - TOCPAwww.tocpractice.com

Your logo

Henry Fitzhugh Camp

Henry is an entrepreneur

who started a private equityfund specifically to earn

extraordinary returns using

TOC. His goal is to endcyclical recessions and

depressions worldwide.

(Who knows what the weird orange lines mean?)Contact info:

[email protected](502) 551-2359

Place for the photo of the

presenter


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Your logoMarket constraints

Most companies have the capacity they need to grow sales

And, if it seems they don’t, a dose of TOC expands their

capacity to the point that they can sell more

So, the real issue for most companies is:

How to exploit a market constraint?


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Your logoGoing to market

Some companies sell:

• through Retail Stores

• across the Web

• by Word of Mouth

• using Brokers

• by Catalog

• via TV

• by Direct Marketing

• through Referrals


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Your logoGoing to market

Some companies sell:

• through Retail Stores

• across the Web

• by Word of Mouth

• using Brokers

This presentation is for companies who have answered the

question “How to exploit a market constraint?”

By deploying a Direct Salesforce!

• by Catalog

• via TV

• by Direct Marketing

• through Referrals


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Your logoInertia

Even a great salesforce isn’t perfect.

You sense there is a better way to exploit your marketconstraint.

But, you aren’t changing

And, you can’t tell me why succinctly


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Your logoThe normal process

If your experience is like mine, everything seems fine at first.

1. You want more sales

2. Hire a salesperson

3. The salesperson gets some rudimentary training

4. The salesperson starts doing things that appear to beassociated with making sales

5. You move on to other initiatives


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Your logoWhat’s the problem

First branch:

The sales person doesn’t sell The sales person sells

• Train some more

• Ride with other sales people

• Other stuff you can think of

• Fire salesperson or they quit

This happens 2/3 of the time

• You offer praise

• Congratulate yourself

• Focus on other issues



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Later branch:

The sales person stalls low The sales person stalls high

• You ride their butt

• You coach them



• You offer praise

• Congratulate yourself




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#CAT$%O

&'

(AM$)

#CAT$%O

&'

(AM$)

#CAT$%O

&'

(AM$)

Salespeople


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Example Assumptions:

• Distribution Company

• Salespeople get commission which is of 30% of T


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• You want to grow so …• You don’t give new salespeople many existing accounts

• Beginning commissions are not enough to live on

• A draw against future commissions makes take-home pay reasonable

• The requirement to repay draws increases the incentive to sell fast

• When paying back draws, the salesperson keeps ½ of any overage


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• Since the salesperson is paid like a profit center, they must:• Do their own planning, marketing, prospecting, appointment setting,

travel, presentations, proposals, quotations, sourcing, problem-

solving, customer service, relationship building and, when necessary,

even collections

The lucky 13

Like a chain, only as strong as the weakest link


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Good Salesperson:1,000s

Year Comment # of Cust Sales T T/Sales Comm Draw Pay

1 Good growth tempered y ha!"ng to learn the products $ %$00 %1&0 '( %&) %' %*$

Great growth + h"gh conf"dence not totally warranted- *$ %1,100 %.$ $( %& %'- %..

& Good growth focus on "gger opportun"t"es $$ %1,'00 %*00 $( %10 %0 %10

* ocus on "gger opportun"t"es '0 %,000 %*'0 &( %1& %0 %1&

$ ocus on "gger opportun"t"es '* %,&00 %$0' ( %1$ %0 %1$

' ocus on "gger opportun"t"es '. %,$00 %$$0 ( %1'$ %0 %1'$

. Some ga"ns some losses + sl"ght growth ') %,'00 %$. ( %1. %0 %1.

2alance sh"fts from open"ng new accts to ma"nta"n"ng .0 %,.00 %$)* ( %1. %0 %1.

) Prolems "ncrease fear of loss ' %,'00 %$*' 1( %1'* %0 %1'*

10 Totally stagnant ') %,'00 %$*' 1( %1'* %0 %1'*

11 3ost a few of accounts '' %,$00 %$$ 1( %1$ %0 %1$

1 4or5ed l"5e dog to reu"ld .* %,.00 %$*0 0( %1' %0 %1'

1& Too many customer prolems to prospect much . %,'00 %$0 0( %1$' %0 %1$'

1* Too often "n the off"ce runn"ng "ssues down .0 %,$00 %$00 0( %1$0 %0 %1$0

1$ 3os"ng more than w"nn"ng, e!en though d"scount"ng '$ %,&00 %*&. 1)( %1&1 %0 %1&1

1' 3ast resort pr"ce "ncreases appear to help '* %,.00 %$'. 1( %1.0 %0 %1.0

1. 6ore losses and pr"ce decreases to sa!e them '1 %,$00 %$00 0( %1$0 %0 %1$0

1 3ower pr"ces and refocus on "g accounts '& %,'00 %*)* 1)( %1* %0 %1*

1) 3ost a "g account on pr"ce ' %,*00 %*$' 1)( %1&. %0 %1&.

0 7edoule efforts to replace "g account '* %,$00 %*.$ 1)( %1*& %0 %1*&

1 7edoule efforts to replace "g account ' %,'00 %*)* 1)( %1* %0 %1*

7edoule efforts to replace "g account .1 %,.00 %$1& 1)( %1$* %0 %1$*

& Good economy .& %,.00 %$1& 1)( %1$* %0 %1$*

* Good economy .. %,00 %$'0 0( %1' %0 %1'

$ Good economy .) %,00 %$'0 0( %1' %0 %1'

' 7ecess"on 0 %,$00 %*.$ 1)( %1*& %0 %1*&

. 7ecess"on * %,'00 %*)* 1)( %1* %0 %1*

2ad mut"tas5"ng a ma8or "ssue ) %,$00 %*.$ 1)( %1*& %0 %1*&

) 2ad mut"tas5"ng a "gger "ssue )& %,*00 %*$' 1)( %1&. %0 %1&.

&0 2ad mut"tas5"ng the "ggest "nh""tor of progress ). %,*00 %*$' 1)( %1&. %0 %1&.

&1 2ad mut"tas5"ng the "ggest "nh""tor of progress 100 %,&00 %*&. 1)( %1&1 %0 %1&1

& 2ad mut"tas5"ng the "ggest "nh""tor of progress ) %,*00 %*$' 1)( %1&. %0 %1&.

9 de!eloped a :story;

for a good not great-

salesperson o!er a &

yearlong career,

ased on my &$ years

of d"rect e


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Good Salesperson:1,000s


1 Good growth tempered y ha!"ng to learn the products $ %$00 %1&0 '( %&) %' %*$

Great growth + h"gh conf"dence not totally warranted- *$ %1,100 %.$ $( %& %'- %..

& Good growth focus on "gger opportun"t"es $$ %1,'00 %*00 $( %10 %0 %10

* ocus on "gger opportun"t"es '0 %,000 %*'0 &( %1& %0 %1&

$ ocus on "gger opportun"t"es '* %,&00 %$0' ( %1$ %0 %1$

' ocus on "gger opportun"t"es '. %,$00 %$$0 ( %1'$ %0 %1'$

. Some ga"ns some losses + sl"ght growth ') %,'00 %$. ( %1. %0 %1.

2alance sh"fts from open"ng new accts to ma"nta"n"ng .0 %,.00 %$)* ( %1. %0 %1.

) Prolems "ncrease fear of loss ' %,'00 %$*' 1( %1'* %0 %1'*

10 Totally stagnant ') %,'00 %$*' 1( %1'* %0 %1'*

11 3ost a few of accounts '' %,$00 %$$ 1( %1$ %0 %1$

1 4or5ed l"5e dog to reu"ld .* %,.00 %$*0 0( %1' %0 %1'

1& Too many customer prolems to prospect much . %,'00 %$0 0( %1$' %0 %1$'

1* Too often "n the off"ce runn"ng "ssues down .0 %,$00 %$00 0( %1$0 %0 %1$0

1$ 3os"ng more than w"nn"ng, e!en though d"scount"ng '$ %,&00 %*&. 1)( %1&1 %0 %1&1

1' 3ast resort pr"ce "ncreases appear to help '* %,.00 %$'. 1( %1.0 %0 %1.0

1. 6ore losses and pr"ce decreases to sa!e them '1 %,$00 %$00 0( %1$0 %0 %1$0

1 3ower pr"ces and refocus on "g accounts '& %,'00 %*)* 1)( %1* %0 %1*

1) 3ost a "g account on pr"ce ' %,*00 %*$' 1)( %1&. %0 %1&.

0 7edoule efforts to replace "g account '* %,$00 %*.$ 1)( %1*& %0 %1*&

1 7edoule efforts to replace "g account ' %,'00 %*)* 1)( %1* %0 %1*

7edoule efforts to replace "g account .1 %,.00 %$1& 1)( %1$* %0 %1$*

& Good economy .& %,.00 %$1& 1)( %1$* %0 %1$*

* Good economy .. %,00 %$'0 0( %1' %0 %1'

$ Good economy .) %,00 %$'0 0( %1' %0 %1'

' 7ecess"on 0 %,$00 %*.$ 1)( %1*& %0 %1*&

. 7ecess"on * %,'00 %*)* 1)( %1* %0 %1*

2ad mut"tas5"ng a ma8or "ssue ) %,$00 %*.$ 1)( %1*& %0 %1*&

) 2ad mut"tas5"ng a "gger "ssue )& %,*00 %*$' 1)( %1&. %0 %1&.

&0 2ad mut"tas5"ng the "ggest "nh""tor of progress ). %,*00 %*$' 1)( %1&. %0 %1&.

&1 2ad mut"tas5"ng the "ggest "nh""tor of progress 100 %,&00 %*&. 1)( %1&1 %0 %1&1

& 2ad mut"tas5"ng the "ggest "nh""tor of progress ) %,*00 %*$' 1)( %1&. %0 %1&.

6y data loo5s l"5e th"s=

0

0

*0

'0

0

100

10

1*0

1'0

%0

%100

%00

%&00

%*00

%$00

%'00

%.00

1 & $ . ) 11 1& 1$ 1. 1) 1 & $ . ) &1

Years on the 8o

Good Salesperson

T # of Cust


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Average Salesperson:

9 d"d the same for an

a!erage salesperson

1,000s


1 Good growth tempered y ha!"ng to learn the products 1$ %&00 %. '( %& % %*$

7eally good growth + st"ll a few th"ngs to learn *0 %00 %1) *( %$ %.- %$1

& Good growth + pretty good conf"dence '0 %1,000 %&0 &( %') %1- %$.

* ocus on "gger opportun"t"es '$ %1,*00 %&0 ( %) %&- %)

$ 2alance sh"fts from open"ng new accts to ma"nta"n"ng . %1,'00 %&&' 1( %101 %0 %101

' Prolems "ncrease fear of loss .. %1,.00 %&*0 0( %10 %0 %10

. Some ga"ns some losses + sl"ght growth )0 %1,.00 %&*0 0( %10 %0 %10

Some ga"ns some losses + sl"ght growth 110 %1,.00 %&*0 0( %10 %0 %10

) Some ga"ns some losses + sl"ght growth 1$ %1,.00 %&*0 0( %10 %0 %10

10 Totally stagnant 1&* %,000 %&0 1)( %11* %0 %11*

11 3ost a couple of accounts and one "g account 1&1 %1,.00 %&& 1)( %). %0 %).

1 4or5ed l"5e dog to reu"ld 1$0 %1,)00 %&* 1( %10& %0 %10&

1& Too many customer prolems to prospect much 1$ %1,)00 %&* 1( %10& %0 %10&

1* >lways "n the off"ce runn"ng "ssues down 1*. %1,$0 %&&& 1( %100 %0 %100

1$ 3os"ng more than w"nn"ng, e!en though d"scount"ng 1& %1,.00 %) 1.( %. %0 %.

1' Pan"cy pr"ce "ncreases appear to help 10 %1,'00 %&0* 1)( %)1 %0 %)1

1. 6ore losses and pr"ce decreases to sa!e them 11$ %1,$00 %.0 1( %1 %0 %1

1 6ore losses and pr"ce decreases to sa!e them 11 %1,*00 %& 1.( %.1 %0 %.1

1) Some ga"ns some losses + sl"ght growth 11$ %1,$00 %.0 1( %1 %0 %1

0 Some ga"ns some losses + no growth 11 %1,$00 %$$ 1.( %.. %0 %..

1 Some ga"ns some losses + sl"ght growth 10 %1,'00 % 1( %' %0 %'

2"g new customer 11 %,100 %&$. 1.( %10. %0 %10.

& 7ela


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Average Salesperson:1,000s


1 Good growth tempered y ha!"ng to learn the products 1$ %&00 %. '( %& % %*$

7eally good growth + st"ll a few th"ngs to learn *0 %00 %1) *( %$ %.- %$1

& Good growth + pretty good conf"dence '0 %1,000 %&0 &( %') %1- %$.

* ocus on "gger opportun"t"es '$ %1,*00 %&0 ( %) %&- %)

$ 2alance sh"fts from open"ng new accts to ma"nta"n"ng . %1,'00 %&&' 1( %101 %0 %101

' Prolems "ncrease fear of loss .. %1,.00 %&*0 0( %10 %0 %10

. Some ga"ns some losses + sl"ght growth )0 %1,.00 %&*0 0( %10 %0 %10

Some ga"ns some losses + sl"ght growth 110 %1,.00 %&*0 0( %10 %0 %10

) Some ga"ns some losses + sl"ght growth 1$ %1,.00 %&*0 0( %10 %0 %10

10 Totally stagnant 1&* %,000 %&0 1)( %11* %0 %11*

11 3ost a couple of accounts and one "g account 1&1 %1,.00 %&& 1)( %). %0 %).

1 4or5ed l"5e dog to reu"ld 1$0 %1,)00 %&* 1( %10& %0 %10&

1& Too many customer prolems to prospect much 1$ %1,)00 %&* 1( %10& %0 %10&

1* >lways "n the off"ce runn"ng "ssues down 1*. %1,$0 %&&& 1( %100 %0 %100

1$ 3os"ng more than w"nn"ng, e!en though d"scount"ng 1& %1,.00 %) 1.( %. %0 %.

1' Pan"cy pr"ce "ncreases appear to help 10 %1,'00 %&0* 1)( %)1 %0 %)1

1. 6ore losses and pr"ce decreases to sa!e them 11$ %1,$00 %.0 1( %1 %0 %1

1 6ore losses and pr"ce decreases to sa!e them 11 %1,*00 %& 1.( %.1 %0 %.1

1) Some ga"ns some losses + sl"ght growth 11$ %1,$00 %.0 1( %1 %0 %1

0 Some ga"ns some losses + no growth 11 %1,$00 %$$ 1.( %.. %0 %..

1 Some ga"ns some losses + sl"ght growth 10 %1,'00 % 1( %' %0 %'

2"g new customer 11 %,100 %&$. 1.( %10. %0 %10.

& 7ela


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Bad Salesperson:

Th"s t"me the person

@u"ts or gets f"red ut

"t doesnAt happen r"ght

awayB > total washout

m"ght complete four

years uchB

1,000s


1 a"r start troule learn"ng product l"nes 1 %00 %* *( %1* %&1 %*$

Good growth + many th"ngs st"ll to learn 0 %$00 %11$ &( %&$ %10 %*$

& Good growth + pretty good conf"dence &0 %.00 %1'1 &( %* %- %*.

* a"r growth d"s"ncented y ow"ng %&.B$5 "n ac5 draw *0 %00 %1.' ( %$& %*- %*)

$ Eu"ts doesn?t th"n5 pay"ng ac5 draw "s fa"r

'

.

)

10

11

1

1&

1*

1$

1'

1.

1

1)

0

1

&

*

$

'

.

)

&0

&1

&


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Bad Salesperson:1,000s


1 a"r start troule learn"ng product l"nes 1 %00 %* *( %1* %&1 %*$

Good growth + many th"ngs st"ll to learn 0 %$00 %11$ &( %&$ %10 %*$

& Good growth + pretty good conf"dence &0 %.00 %1'1 &( %* %- %*.

* a"r growth d"s"ncented y ow"ng %&.B$5 "n ac5 draw *0 %00 %1.' ( %$& %*- %*)

$ Eu"ts doesn?t th"n5 pay"ng ac5 draw "s fa"r

'

.

)

10

11

1

1&

1*

1$

1'

1.

1

1)

0

1

&

*

$

'

.

)

&0

&1

&

0

0

*0

'0

0

100

10

1*0

1'0

%0

%100

%00

%&00

%*00

%$00

%'00

%.00

1 & $ . ) 11 1& 1$ 1. 1) 1 & $ . ) &1

Years on the 8o

2ad Salesperson

T # of Cust

The prolem "s often the

same salesperson whonegot"ated for a draw

aga"nst future earned

comm"ss"ons to ga"n a

reasonale start"ng

"ncome feels d"s"ncentedand :underpa"d; wh"le

repay"ng these

accumulated draws


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Comparison of Good and Average Salesperson:


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Analysis:

• As the salesperson exhausts his or her capacity, their

production of T tails off and even declines.


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Analysis:


production of T tails off and even declines.

• Why would a salesperson’s capacity be exhausted?

• They must do some work for which they are ill suited

• They switch between 13 different jobs due to changes in priority• Customers change a salesperson’s priorities

• Coworkers change a salesperson’s priorities

• Bosses change a salesperson’s priorities

• Suppliers change a salesperson’s priorities


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Analysis:


production of T tails off and even declines.• Why would a salesperson’s capacity be exhausted?

• They must do some work for which they are ill suited

• They switch between 13 different jobs due to changes in priority• Customers change a salesperson’s priorities

• Coworkers change a salesperson’s priorities

• Bosses change a salesperson’s priorities

• Suppliers change a salesperson’s priorities

• Salespeople suffer enormously from Bad Multitasking


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Holistic analysis:

I built a model from the above assumptions by rolling dice

Roll Outcome

1. Bad salesperson

2. Bad salesperson

3. Bad salesperson

4. Bad salesperson

5. Average salesperson

6. Good salesperson


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Holistic analysis:

I began with a start-up deploying 3 salespeople

Complement Result Odds

1. Bad + Bad + Ave Company failed 7%

2. Bad + Good + Bad Company failed 7%

3. Bad + Bad + Bad Company failed 30%

4. Ave + Ave + Bad Company failed 2%

5. Good + Bad + Bad Company failed 7%

6. Bad + Bad + Bad Company failed 30%

7. Good + Ave + Bad Company survived! 2%


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Holistic analysis:

As profits accumulated, I added salespeople

Complement Result Odds

7. Good + Ave + Bad Company survived! 2%

• In year 2, I added another salesperson

Good! 17%

• In year 4, I added another salesperson

Good! 17%

This was unbelievably lucky

no wonder so many startups fail


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Your logo

Holistic analysis:

Early Results:

What’s the problem

*OE = Budgeted in years one through three. 13% of sales in years four through

six, plus a random variation of 0% to % of sales

4hole Company

Year

Total

Sales TAput Sales Pay F GP (GP

1 %1,.00 %$0 %1** %$0* %* 0B#(

# %#,)00 %.'0 %##& %')$ %'$ #B#(

& %*,100 %)& %#0 %&1 %1$# &B.(

* %$,.00 %1,&$# %&# %1,##1 %1&1 #B&(

$ %',$0 %1,'.# %&)& %1,&1) %&$& $B#(

' %.,&$0 %1,'$* %*.0 %1,$0' %1* #B0(

1,000s

H


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Holistic Analysis:

• I took the simulations out 50 years:• I added salespeople when I thought it financially prudent

• Recalculating the spreadsheet gives different results depending on

the random fluctuations of OE, 0% to 2% above that year’s base


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Holistic Analysis:

• This calls into question the title of the last 25 slides• What the heck is the problem with this?


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Your logo

Assumptions:




even collections

!irection "or #olution


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Your logo!irection "or #olution

Assumptions:




even collections

13 separate jobs. Why imagine anybody could be suitable for all?

Creat"!e

>nalyt"cal

9nformal

F


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Assumptions:




even collections

13 separate jobs. Why imagine anybody could be suitable for all?


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the salesperson is paid like a profit centerWHY?

• Because my dad and his dad did it that-a-way?• Because unlimited potential pay attracts the best?

• Because it wouldn’t be fair to pay them so much unless

they self-manage?• Because it gives them the incentive to grow Throughput?


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IummJ


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IummJ

ecessary

ecause the

8o "s so

d"ff"cult


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IummJ

ecessary

ecause the

8o "s so

d"ff"cult

9s selfmanagement al"gned hol"st"callyJ

l


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IummJ

ecessary

ecause the

8o "s so

d"ff"cult

Then, why to they

all stall outJ

9s selfmanagement al"gned hol"st"callyJ

Y l


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Your logo#olution

the salesperson is paid like a profit centerNot only should salespeople not be paid as profit centers,

companies should evolve away from salespeople!

WHY?


40/48

Your logo


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Your logo#olution

Does this mean fire the salespeople?

• No• Segregate jobs based on skill sets not functionality

• Find people whose personalities fit the jobs (not vice versa)

and apply people along their strengths

Your logo


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Your logo#olution

Lets start with a conventional start-up company,

restructure it,

work forwards again in time and

see if it works better

Your logo


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Your logo#olution

Conventional Starting Point Year 1

Sales %1,.00 Sales %#,)00 Sales %*,100

T %$0 T %.'0 T %)&

Sales F

/7 Cler5

Your logo


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Your logo#olution

Division of Labor Company Year 3

9n year & th"s company earns more than

the con!ent"onal one d"d "n all & years

Sales %#$0 Sales %1,1' Sales %',0*0

T %'0 T %#0 T %1,*$0

Sales F


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Your logo#olution

Comparison after 17 years

Your logoManaging $ithout using %


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g

This is a serious challenge that needs its own presentation

1. Build Trust (listen and act on what you heard)2. Enjoying the Job

3. Autonomy (align authority with responsibility)

4. Mastery (allow people to become true experts)5. Purpose (help employees know how they contribute to the

global picture)

6. Pay fairly (plus a little bit more, when you can afford it)

Managing $ithout using %To bribe employees



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g

Material to investigate:




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Material to investigate:


Documents

17 - Henry Camp_TOCPA_USA_21-22 March 2016