It's five after eight when Lenny enters Scott's office. Gail and Maggie are standing near one of the big windows. Scott is behind his desk.
"Hey Lenny," Scott greets him. "Ladies, we can start."
When they're all seated together, Scott says to Lenny, "It looks like we're not doing a good enough job of communicating."
"I agree,' says Lenny.
Gail throws him a surprised look. Scott continues, "Gail and Maggie want to be kept informed on what's cooking in your development centers."
"It's about time," Lenny says harshly. "I send literature. I send documentation. I've tried everything except running naked in the corridors to draw attention. But it looks like everybody is too busy to notice." His voice gets deeper as he continues. "In a week or two all the code will be ready and we don't have a test site yet."
"What are you talking about?" Gail asks with irritation.
"What am I talking about?" Lenny repeats her words. "Don't you even read what I send you?"
"What is there to read?" Gail retorts. "In the past two months I haven't received a thing from you. Except more baloney on the Internet fad. As if I don't read the newspaper. Lenny, we are up to our ears with work. I don't need my mailbox filled with technical stuff about the Internet."
Lenny is about to explode. "You're calling my updates technical baloney?"
Gail doesn't answer. Scott puts his hand on Lenny's shoulder to stop him.
Looking at Gail, he reminds her, "We agreed that we need to work on improving the communication."
When no one comments, he continues. "While you and Maggie were doing an admirable job in the field, Lenny and I were working on the next steps. We were trying to anticipate our competitors' next moves. They're not going to just sit there, letting us take the entire market from them."
"What can they do?" Maggie speaks for the first time. "I don't believe that they can bring themselves to do what we do."
"I agree," Scott says. "But there are other things they can do."
Before he can continue, Gail interrupts. "Why are we so sure that they can't copy us? True, we caught them by surprise, but they're not dumb and they're not blind. They can see that what we're doing works. I'm sure that within the next few weeks many will announce that they too have the same software."
"Maybe so," Maggie answers. "But Gail, we discussed it several times, it's not just the software, it's the frame of mind."
Scott nods in agreement. "I agree with Maggie. The shift in paradigm that we decided on last December is much too big for most software companies to swallow."
"We switched from selling technology to selling value." Lenny puts in his two cents.
The last remark almost causes Gail to lose control. "For heaven's sake, you don't have to remind me of the slogan of my own marketing campaign."
Swallowing hard, she continues in a calmer voice. "I still think that we should not be fooled by our own words. Since when did we stop selling technology? We never stopped. We sell software. That's what we charge for. And as for selling value, please, give me a break. We didn't just start selling value this year; we've sold value all along. Don't tell me that the software we've been selling all these years was not bringing value, that companies bought it for no reason. Marketing slogans are nice, but let's leave them out of this room."
"Gail," Maggie says, "it's not just an empty slogan. It is the essence of what we did."
"Here we go again," Gail sighs, discouraging her from continuing.
Scott is shocked. Until this afternoon he was under the impression that the communication between the four of them was good. That they were all working from the same base. Nothing in the last few months gave him reason to suspect anything else. Their actions seemed to be in perfect synchronization. True, Gail may have her problems with Lenny, but that is to be expected when one deals with such different and strong personalities.
This afternoon he understood from Gail that there is something deeper then the usual friction, but only now does he realize how deep it is. Gail's last words reveal that she is not even on the same page.
What caused such a breakdown in communication?
Quickly Scott realizes that it is his fault. He didn't bother sharing his insight about what it takes for technology to bring value. He took it for granted. To the extent that since he spoke with Lenny about it, months ago, he never mentioned it to anybody. He decides to rectify it right now.
"Gail," Scott begins in a soft voice, "you're right that we still sell technology And you're also right that we always sold things of value."
"Of course," says Gail. "ERP systems bring a lot of value."
Scott agrees. "The value of the ERP comes from that fact that it diminishes limitations." Reacting to Gail's impatient expression he quickly adds, "Let me finish. What I'm going to say is important. At least, I think so.
"So, as I said, what ERP brings is the ability to do things that were not possible before. There were severe limitations on the amount of data that could be quickly transferred between different functions in an organization. And in cases where data was collected, there were also severe limitations on the ability to comfortably and quickly retrieve relevant information from the oceans of data.
"I know you know all that. It's what you've been preaching for the last who knows how many years. But Gail, did you ever think what an organization would be like if it didn't have ERP technology? I mean, how would an organization operate if data couldn't be quickly transferred? How would it operate with almost no real-time information?"
"Interesting question," Maggie remarks.
"Think about it." Scott is now talking not just to Gail, but to Maggie and Lenny as well. "To cope with these limitations, organizations had almost no choice but to adapt a mode of management that is based on 'do the best you can do within the area that you can see'; within your work-center, your department, your silo. Organizations had almost no choice but to adapt a mode of management that is based on local optima."
He waits for this to sinks in and then continues.
"To support any mode of management, many rules are needed. Some of them are formal rules, most are informal; the things people know they should and shouldn't do. Recently we've gained a lot of experience in production. Can you think of any examples of rules that are clearly focusing on local optima?"
"Local efficiencies," Gail replies immediately. "The desire to make every work center as efficient as possible. Including non-bottlenecks. You see, Maggie, after hearing our presentation so many times, something rubbed off on me."
Scott smiles at her and says, "More examples."
Maggie gives another. "Forcing large batches on non-bottlenecks, to save on set-ups. Even though it inflates the lead time and causes other orders to be late."
Lenny contributes his share. "Assembling things and later cannibalizing those same assemblies. Or buying expensive machines even though neither total cost nor sales are affected."
"We can go on and on," Gail says. "But what are you driving at?"
"The point is," Scott says, patiently "that until recently we didn't consider that we, as an ERP provider, had anything to do with these types of rules. Actually, if we ever considered our clients' rules, it was in order to integrate their rules, as they were, into our software. Am I right?"
"And in the process, complicating our software beyond comprehension," Maggie adds.
"Tell me about it," Lenny sighs.
Gail thinks about it. Finally she says, "You're right."
"So you see Gail? Our technology diminished major limitations, but until recently we ignored the rules that resulted from the existence of those limitations. We left them unchallenged. So what happened when we installed the technology and those rules were still used? Look at the new production implementations. Could we hope for such excellent results if the plants where still chasing local efficiencies and large batches?"
"Of course not," says Gail. "We have thousands of old implementations to prove it. Okay Scott, I see what you mean now. Removing the 'physical' limitations of technology is not enough. The limitations, even when removed, are still there; they are there because the rules keep them alive."
"Precisely," Scott confirms, pleased. "To realize value, bottom-line value, technology is necessary but not sufficient. Since the beginning of the year we have concentrated on bringing value. We no longer confine ourselves to just technology, we provide everything that is needed to get the potential value, even if it means doing things that a software company is not supposed to do."
"Like almost forcing the prospects to change their old management rules." Maggie completes his sentence.
"By the way," Lenny comments, "realizing what rules have to be changed does have an impact on our software. In many ways it simplifies the code, but it does necessitate some important additions. Buffer-management is an excellent example."
Gail thinks about it some more. "On one hand I see why you say that we switched to selling value. But on the other, it is not correct to say that we switched from selling technology, because we still sell technology."
After a second she adds, "Forget it. The important thing is that I still don't see what prevents our competitors from doing the same."
"Their mentality," Maggie answers decisively.
"Here we go again." Gail sounds disgusted. "If you want to convince me will you please use arguments, not slogans."
"It's not a slogan," Lenny says in a harsh tone. "Software engineers have the mentality of designing code with one purpose in mind: to impress everybody with the sophistication and sleekness of their software. The impact it has on the bottom line of the user is almost nonexistent for them. Take our APS module for example. I explained and explained why, in order for our users to get good results, we should optimize just the bottleneck. Still, do you know how many fights I had to go through to force them to take out the oversophistication? And do you know why? Because optimizing a hundred work-centers is by far more impressive than optimizing just one or two."
"APS is a special case," Gail says.
Lenny doesn't accept it. "Special case?" he sneers. "Fine, what about distribution? Most of the changes didn't require writing more code, but erasing huge chunks of the existing code. You should have seen what a fight they put up. I almost gave up."
"Good thing you didn't," says Maggie.
"Thank you."
"So, Lenny," Scott says, "you are of the opinion that this mentality will block our competitors from catching up with us?"
"No way. Even if we give them our code then, I bet that within few weeks, they will sophisticate it out of usability."
When it comes to programming Gail has full respect for Lenny's opinions. No wonder that his conviction has a real impact on her.
She is still assessing it when Maggie breaks into her thoughts. "What Lenny said is correct, but I was thinking about the implementors' mentality."
"What do you mean?" Lenny asks.
"The mentality of ERP implementors is to start in the areas where the technology is most needed, where massive volumes of data have to be gathered and distributed. That means that we used to start the implementations with either the financial or the order-entry modules. The last thing that was implemented was plant scheduling and control. Now that our focus is on bringing bottom-line results, we have to do the exact opposite. We start in production and distribution.
"I know how difficult it is for them to adjust. We have problems with every new group of experienced implementors that we contract. My project managers have to practically force them to do it right, and they bitch and moan, at least until the results are clearly there."
"And what about the mentality of the salespeople?" Scott asks.
Gail doesn't answer. That provokes Maggie to say, "Listen Gail, until this year, how did we persuade companies to buy? We did everything to impress them with our technology. The value part was nothing more than just lip service; look at what we called 'business justification?' It was a joke; most of the items were not even related to the bottom line. Have you forgotten what the vocabulary of your salespeople was? It was all configurations and features."
"Unfortunately, to a large extent it still is," Gail admits. "I'm sure that we lost a few excellent opportunities due to it."
"More than just a few." Maggie is in high gear. "And we would have lost many more if not for the structured presentations we imposed on our people ... And for the fact that we invested so much in their re-orientation ... And for the fact that in the sales process we involved a TOC expert early on. These people know nothing but bottom-line value, the software they regard as a necessary evil."
Gail feels the need to protect her people. "What do you expect when we turn everything around? It takes time to adjust."
"Precisely my point." Maggie rests her case. "A lot of time."
"Switching from selling just technology," Scott summarizes, "to selling value needs the synchronized change in all functions, system engineers, salespeople and implementors. On top of it a new function must be introduced, the change agent, the TOC expert. This is why I'm not afraid that our competitors will soon catch up. We have just started to open a significant competitive edge. Gail, do you agree?"
"Yes, I do. I'm now convinced that it will not be easy for them to close the gap. But Scott, why do you say that we have just started? What else are you planning for us?"
"Nothing to be afraid of," he smiles in assurance. "We are over the hump. But there is still a lot to be done. Let's not forget that our ERP covers all aspects of an organization, not just production and distribution. And what we've said holds true everywhere. If we don't bother to change the inappropriate rules, our technology is not going to bring all the benefits it is capable of."
Maggie and Gail nod in appreciation.
Scott continues. "Locating which rules are based on local optima is not a trivial task. Finding appropriate new rules is even harder. Just ask Brian how difficult it was to find the correct rules for distribution. He tried everything—changing the plants' measurements, changing the targeted levels—and it was far from sufficient. We were lucky, unbelievably lucky, that all this work was already done. Just waiting for us to capitalize on."
"You mean the body of knowledge of the Theory of Constraints?" Maggie asks.
"Of course," Scott replies. "So, as you know, I started by studying everything and anything that I could about TOC, while Lenny turned his attention to an area in which we had very little to offer, engineering."
"Where do we stand on the engineering module?" Gail asks.
"Whenever you want it, it's ready," Lenny answers. "We tested it. It's excellent. Actually, all our development work is now planned and controlled by this application. It makes a big difference; we are able to develop almost twice as much in half the time. But Gail, other companies are already offering Critical Chain software."
"Yes, I know," she says. "But is our module ready?"
"Yes," he answers. "Regular progress reports were sent to you. And you should be getting the manual this week. Make sure it doesn't block your mailbox," he adds sarcastically.
Before Gail has a chance to snap back, Scott says, "My first priority was to complete our package for the entire supply chain. Production we had. Engineering, Lenny was working on. So I started studying distribution. By the end of January, I was able to pass the information to Lenny. He picked up the ball and ran with it. Lucky for us, otherwise we would have been in a deep hole by now."
"You can say that again," Maggie shivers. Then angrily she turns to Lenny. "You jerk. You were sitting on the solution not saying a word. Not even when George called you, begging for help."
"But Maggie," Lenny is almost desperate, "what do you want from me? You were informed about our distribution module. You were sent full documentation, I checked. We even got comments from your people."
"So how come you didn't want to help George?" Maggie is still on the warpath.
"Come on, Maggie." Lenny starts to become irritated. "George didn't say a word about distribution. He just talked about the forecast module, demanding the impossible. How was I supposed to know that inventories were swamping Brain's warehouses?"
"It's my fault," Scott says softly "I should have predicted it much before it became such a big problem. I knew that a change in rules in one function might have an impact on another function. I'm sorry, I was looking for a connection between the rules, and that was my mistake. I neglected to look at the impact, the impact that a sharp improvement in one function might have elsewhere."
"That's okay, Scott," Gail says softly, "In hindsight everybody has twenty-twenty vision. But what I'm worried about is the future. What similar things are we going to clash into in the future?"
"After the Pierco scare, you can imagine that I gave it a lot of thought. I have good news. So far I haven't come up with any other such devastating cases. It looks like from now on we are sailing in calm waters."
Gail is still not entirely relaxed. "So what's all the noise coming from Lenny's kingdom? What are they frantically developing there?"
"It's just that Internet stuff." Lenny gives her a diabolical grin. "Just trying to be one step ahead of the competition."
Gail looks at Scott.
"As we said earlier," Scott starts to explain, "we're not really worried about our competitors embarking on the value route. Not for a long while at least. So Lenny and I racked our brains to try and figure out what else they might do."
Lenny picks it up. "Being technology oriented, we thought that they would look for a super-duper technical solution. Something that would impress the market."
"And the Internet is the obvious answer," Maggie smiles at him.
"Of course. What is more natural than enabling the ERP to work over the Internet? What is better for our industry than a blend of advanced technology and a real business need? Of course, we have a unique approach. We don't look just at the technology, we also look at which rules acknowledge the limitation we are about to diminish. So I asked Scott to look into it. He came back with the 'trivial' answers and we wrote the code. You have it all in your mailbox, so don't ask me to repeat it here."
"Please don't," Scott chuckles. "If Lenny starts talking about it, we'll be here till morning. But we need a beta test. I was thinking of Pierco, they're the most advanced client we have. What do you think?"
"It's a natural choice," Gail agrees.
"And to Craig, you are second only to God," Maggie adds. "Whatever you want to implement in his company he will be more than willing to pay you for it. So you know what? Just to prevent you from using dirty words like beta test, let me read Lenny's documents and I'll prime Craig for you."