Maggie, being a first class passenger, is one of the first to board the airplane. Waiting for Scott to arrive she reviews the notes that her implementation team had given her just before leaving the office.
Maggie's project manager, George, had reported only minor difficulties in the implementation project, but nothing significant enough to warrant a summons to appear in person. The project is on schedule and on budget—what could be wrong? Compared to a number of other projects where time or budget or both were doubled before the project was over, this is a real success in the making. It had better be! Maggie hand-selected George for this particular job because she and Scott had personally sold it. George has been with her longer than any other consultant. His strong background as a successful practitioner made him an excellent consultant.
A successful implementation here would surely leverage more business for both her and Scott. A strong reference from a very large company with a recognized name goes a long way in selling to companies lower down the Fortune 1000 list.
As she expected, Scott takes his seat, well before the door is closing.
After they reach cruising altitude, and the airplane engines idle down, the two begin to talk about the strange call she received from Craig yesterday. Craig is CEO of Pierco, one of their largest customers. His request was so urgent that they both agreed to clear their calendars and take the first flight this morning. Craig did not go into any details during the call, but they both know that such urgency cannot possibly be good news.
"What did your people tell you about Pierco's implementation?" Maggie starts to compare notes. "How many bug reports and feature requests are still open outstanding?"
"Craig didn't call us both over there just for some minor programming tweaks and questions." Scott brushes her question aside. And then half jokingly he adds, "So it must be about your project team. Have you overcharged them for something? More than usual, I mean."
Maggie smiles and quickly responds, "That last upgrade, with all the goodies that you promised Pierco, sure made us scramble. But we still got it installed in time to support the Pierco conference room pilot on schedule last month. You would think that with that release being three months late it would have worked when we got it. We spent a significant amount of overtime, which we didn't even bill for, to fix all the bugs that we found when we tried to use it."
"Now that I think of it, I should send you a bill for that," Maggie jokingly adds.
The flight attendant interrupts. "Would you like the cereal or the omelet for breakfast?"
"Cereal and black coffee/' Maggie replies.
More implementations and increasing project complexity require her to travel more than ever before. The hectic routine is beginning to show in her waistline. She had better start being careful or none of her expensive suits will fit anymore. She learned to splurge on new clothes when she was promoted to head the BGSoft implementation division six years ago. That was just before KPI Solutions was spun off as a separate company. At the time, the new clothes were more than she could really afford, but if you are going to be successful, you have to look successful. And looking successful requires constant investment. Still, shopping was something that she did not enjoy. Maggie is glad she has somebody to take care of that for her now.
"Seriously Scott," she picks up the conversation, "Thank God for Lenny. Without him, I don't think it would be running yet. I myself had to put some pressure on him because I know that when he gets personally involved, the work gets done. 1 know, I know, he's busy with version eight. Too bad your other programmers can't seem to figure it out without him. If they could, then the software would work right the first time."
"There is no such person," Scott says flatly. "And I don't think that Craig called us in to talk about trivial things like the conference room pilot or the latest release, either. Something must be very wrong. Maybe one of your macho consultants did something that offended Craig's people?"
Maggie shakes her head again, "KPI Solutions people are too professional for that. If I hired kids straight from college, I would expect some difficulty until they learned how to act in the business world. However, my people are all experienced professionals." She grins at him. "Besides, I checked. It must be something else."
Maggie continues, "Craig is never that abrupt on the telephone. Usually he talks about his golf game, his wife and the kids first, but this time he went directly to the point and asked to see both of us—personally. He really has me wondering what this is all about."
No closer to an answer about what they would find when they arrived at Pierco; they both opened their laptops. One good thing about flights, you can catch up on backlogged e-mail.
Their driver meets them at the gate and they are soon out of the airport and on the familiar route to Pierco. When they arrive, Craig's secretary immediately accompanies them to his office. He is behind his huge desk, but quickly moves to welcome them. Craig tells his secretary to hold all his calls, he wants no interruptions.
He's a big man and when he shakes Maggie's hand, her hand totally disappears into his. Maggie never feels totally comfortable around him. He's always impeccably dressed and groomed, right out of the pages of GQ. Always in control of everything. And although he has a slight smile on his face, Maggie knows him well enough to see that today he is tense.
"How good to see you again, Maggie. How was your flight?"
Then, turning to Scott, "It has been a while, old man. How is business for you? I see your name in the journals from time to time. Have a seat."
They sit down. Craig doesn't. He starts to pace around his office. "You are probably both wondering why I called you in on such short notice. I do appreciate that you were both able to clear your schedules and get here so quickly. I need your help."
Maggie smiles and responds, "I must admit that we have been wondering."
Craig nods and says, "Well, you see, I had my board of directors meeting yesterday To say it was not pleasant would be an understatement. I cannot remember any other instance when I was chewed up so badly. And for no real reason."
This does little to clarify for Scott and Maggie the real reason for their presence here. Craig is not the type who looks for sympathy.
"I have a new director on the board," Craig continues. "A young, aggressive fellow who thinks the way to make an impression is by rocking the boat. And he picked your project as the target. At the meeting before last, he raised the concern of so many companies experiencing huge budget overruns on their ERP implementations. He quoted from a survey, case by case, where companies had paid hundreds of millions of dollars more that they had originally planned. I assured him that we are not one of them, and that I would report in more detail at the next board meeting, which was yesterday."
Maggie interrupts, "That should have been a short briefing since the project is on time and on budget."
"Exactly. Actually," Craig winks, "it wasn't so short, since the project, thanks to you, is running smoothly, and I wanted to show off. Well, this little weasel let me go through all the details. When I finished, he dropped his bomb. In his squeaky voice he asked only one question, one which has been echoing inside my head since then.
"I'll quote him verbatim: 'You have invested three-hundred-and-twenty million dollars of this company's money in this project, what can you show us for all that money?'"
Craig stops. There is an awkward silence in the room. He takes a deep breath and continues, "All the board looked at me to answer. As if they had nothing to do with this project. As if they weren't the ones who pushed me into it and approved it. And I was left sitting there not knowing how to answer."
His tone hardens. "I called you here because I still don't know what the answer is." Craig stresses his last point with his huge hand, flat to the table. Just the size of his hands makes the noise louder than expected.
"I don't understand." Maggie is apparently confused, "What can be such a problem? This project has had a solid business justification right from the beginning. I would think all the acquisitions you have done since have only strengthened the justification. Isn't that so?"
"Maggie, when the banner is 'what can you show for it,' and everybody around the table takes that to mean 'show us on the bottom line,' the hard dollar return, then most items in our fine business justification somehow evaporate into thin air."
"I still don't understand," Maggie insists. Turning to Scott, she asks, "Do you?"
"I'm not sure," Scott admits.
"Look," Craig says. "On the original business justification that you helped us with we had, for example, an item indicating a benefit like—'better visibility into operations.'"
Maggie interjects, "I'm sure that at the time the board was asked to approve the project, 'better visibility into operations/ was a strong argument."
"Correct," Craig confirms. "But so what?"
"I suspect," Scott says, "that this board meeting was not the appropriate forum to show what better visibility actually boils down to. To present the entire data flow; how the computer system actually integrates all of it. How when an order is entered in one of the sales offices, the ..."
Craig doesn't let him finish. "Scott," he says in a harsh tone, "you too are a CEO."
When he is sure that he has caught Scott's full attention, he continues. "What do you think will happen to you, with your board, when they question you about impact on the bottom line, and you respond with gibberish about data flow and integration?"
Scott laughs nervously as he paints that picture in his mind. "My head would be handed to me on a silver platter," he admits.
"With or without an apple?" Craig inquires.
"Cut the jokes guys," Maggie interrupts impatiently. "Of course at the board level you can't use the language of system configurations and computer screen options. But that doesn't mean that better visibility is an empty phrase. Craig, why didn't you give them an example of better visibility. Something that they all can relate to and care about."
"Like?"
"Like the improvement in the time it takes to close your quarterly financial reports." Maggie replies. "One of the biggest problems of the chief financial officer, in every large company and your company is not an exception, is to be able to report the actual financial results as close as possible to the end of the quarter.
"Since we completed the accounting module roll-out across the company two quarters ago, you are already seeing improved financial information being available to all managers. The financial close cycle has been drastically improved. What used to take over forty-five days is now done in about ten days. Not to mention that the cost and effort required to prepare those reports is dramatically reduced."
"Good point," Scott confirms. "I know that my board would not like seeing the actual figures until a month and a half after the quarter is over."
Craig agrees. "You should have heard their comments when, for the first time in history, they got it only two weeks after the end of the quarter. They were delighted."
"So?" Maggie pushes on.
"So, of course I brought up this strong point. But the weasel just asked, 'what is the bottom line impact,' and all the chickens nodded."
"I see," says Scott. "Everybody wants the actual numbers as quickly as possible, but we don't know how to pin a dollar value onto getting these numbers earlier."
"That is exactly it," Craig says, "Most of the original justification is composed of such items, things that everybody will agree are nice to have. But when you ask what the real benefit is, in dollar terms, then they evaporate. Do you see my problem? I'm now stuck in a corner."
"But there is a bottom line impact." Maggie is far from giving up. "The cost to prepare those reports was dramatically reduced."
"Was it?" asks Craig.
"Of course it was." Maggie shuffles through her papers. "Take for example the cost to process a transaction line. According to your numbers, it was twelve point seven cents per line. Now, after installing the ERP system, it's only three point two cents. Here are real savings of almost ten cents for each line. Now multiply it by the number of transaction lines that have to be processed to prepare one quarter's financials. It must be mammoth savings. It's in the high millions."
Craig stops pacing and looks at her. He sighs. "These cents and fractions of cents that you are quoting, what are they based on?"
"On your numbers," Maggie answers.
"Yes, I know. But don't you see that they're based on the fact that our good ERP system enables our people to waste less time processing the transactions?"
"Correct. That's a savings you realize from using our ERP."
Craig shakes his head. "There is no real savings here. True, it takes less time to process each transaction, but it still requires the same amount of people."
"How come?"
"Because we didn't lay off any of those people. That's reality Maggie. There was no head count reduction in the financial department."
And then he adds bitterly, "These financial people are very good at demanding cost reductions everywhere, but when it comes to their own turf, they are even better at protecting their people. What money did we save? We still pay the same salaries."
When Maggie doesn't answer, he continues, "Don't confuse cost accounting terms like reduction in the cost of a transaction line, or item-cost, with real cost reduction. No head-count reduction means no real cost reduction, no impact on the bottom line."
Maggie feels her cheeks flush.
Scott tries to summarize. "Information flow is streamlined, and even the board is enjoying it. Still, you can't translate those improvements to bottom line impact. That's one aspect. The other point is that making overhead personnel jobs easier is great, but there is no bottom line impact if we still employ the same number of people."
"You hit the nail on the head/' Craig agrees, and begins to pace again. "Talking about head-count reduction? What we are seeing is just the opposite. There are more technogeeks running around here than ever before. We now have temporary trailers in the parking lot to hold all the extra people. The weasel must have noticed it when he came in for a board meeting. That's probably why he brought up the issue in the first place."
Craig stops and looks at each of them. "Obviously this is not something that we could talk about over the phone, you needed to be here in person. I need your help in identifying where the bottom line results will come from. There must be something convincing that we can come up with." After a second he adds, "And I need it soon!"
Maggie hears Scott take a deep breath before beginning to answer. She is glad that he's going to step in. Maggie is very uncomfortable with this situation. She's faced unsatisfied clients before, but for other reasons. Usually a customer has a right to be concerned. She gets called in personally when her team is over-budget, or late, never when the project is on time and within budget. This implementation is going so well, but Craig still has a real problem. A big problem. And if Craig has a problem, they have it too.
Scott begins, "You and I both know that the trailers are for temporary people who will go away when the project is completed."
"I know that, and the board knows it," Craig replies. "But when the trumpets call for blood, and the cry 'bottom line' is in the air, any cheap shot is allowed."
"Was it as bad as that?" Scott is sympathetic.
"Basically, yes." Craig finally settles into his chair.
"Let's go back to the issue of better visibility," Scott says confidently. "I agree with Maggie that it does have an impact. Craig, don't tell me that having the financial report much sooner doesn't have an impact. It does." He raises his hand to prevent Craig from commenting. "I also agree with you that it's hard to quantify the impact. So my suggestion is to look at other aspects that are impacted by the presence of better visibility. Maybe there it will be easier to connect it to bottom line impact."
"Agreed," says Craig. After a second he asks, "Like what?"
"Like the fact that sales information coming from the dozens of regional warehouses is now streamlined to the production plants."
"That's an excellent example." Maggie can't stop herself from jumping in. "In the past, how much time did it take from the minute a regional warehouse sold a product until the plant which produces that product knew about it? First, all the regional warehouses were reporting their sales, on a weekly basis, to the main office of their continent. Then each main office would sum it all up and pass it to headquarters. Then the professionals at headquarters would analyze the data, and finally, they issued a revised production forecast to the various plants. If I'm not mistaken, the time that elapsed between a sale in a regional warehouse and when it translated to a production schedule in a plant was how long? Three weeks?"
"If we were lucky," Craig agrees.
"Now," Maggie continues, "already in three divisions, that information is available at the plants the same day of the sale."
"And the bottom line?" Craig doesn't lose sight of the target.
"Not so fast, bear with me," Scott continues in the the line. "Let's trace the impact according to what we know about the workings of your organization. Due to our system, the plants know each day how much every distribution center, anywhere in the world, has sold of each product. Having the data of what has been sold in the distribution centers three weeks earlier than they used to means that the plants know three weeks earlier what is demanded of them. Not only does it improve the forecast, now they can plan their production according to actual market consumption."
"That makes sense," Craig says, and Maggie nods in agreement.
"Now what can we speculate about the impact of improving the response time from the plants to the distribution centers? Cutting it by three whole weeks?"
Nobody answers.
"Come on you two." Scott is a little impatient. "You have spent all your life in the industry. Don't tell me that all the pressure on me to supply systems that will improve forecast and reduce lead times is there for no reason. There must be an impact."
"Faster response from the plants means," Craig thinks aloud, "shipping more of the right stuff to the right places." His expression starts to brighten. "That means that there will be fewer incidences of a warehouse running out of a product. Scott, you're lucky. You don't sell commodity products. We do, so almost every time a distribution center doesn't have a product that there is demand for, we lose sales to the competition."
Craig confidently concludes, "Fewer shortages in the distribution warehouses mean more sales. And more sales is more money Real bottom line impact!"
"That's not the only impact," Maggie adds. "Having information about the actual sales immediately at the plants also means that the plants are shipping less of the wrong stuff to the wrong places."
"Good point," Craig says. "And that means less unneeded inventory in the warehouses."
"And having less unneeded inventory in the warehouse," Maggie is on a roll, "also has an impact on the bottom line. A big impact. Craig, how much inventory does Pierco hold in their warehouses?"
"Over two billion dollars. And if you ask me, most of it is the wrong inventory in the wrong places. So if the ERP system reduces it by let's say, only twenty percent, on that item alone I have the bottom line justification." He turns to the intercom and then stops. "Maggie, do you have any numbers to confirm that inventory did go down?"
Maggie looks through her papers. The others are silent.
After a while she says, "For the division that went live on 'order entry' six months ago, I see a reported reduction of eighteen million dollars. On the other two, that went live last quarter, less than a million."
"Less than a million is nothing/' Craig says, waving his hand. "It's background noise. But eighteen million is a good start. What about sales lift? Do you have numbers on that?"
"I don't think I have it with me. Besides, we don't have all the numbers yet. Remember, we're still in the early phases. Two of the divisions have just started, and three more aren't scheduled to go live on the order entry module for two months."
"I know, I know," Craig says impatiently. "But we can safely extrapolate from the results of the division that has been using the system for quite some time," Craig half states, half asks.
"I don't see any reason why not," is Maggie's answer. "I think we should look into this. I can get an assessment team on it right away."
She glances at Scott to ensure that he is with her on this. "We can give you a full report of the expected improvement areas, and the timing when the cost reductions can be expected."
"Will you concentrate on all bottom line impacts, not just cost reduction?" Craig asks.
"Of course. I can have it ready for you in thirty days. Will that do?"
Craig shakes his head, but starts to smile. "Actually, the day before yesterday would have been much better. As it stands, my next board meeting is a month from yesterday. I need a few days to review it before the meeting. Let's say by July seventeenth. Can you make it?"
Realizing that she's just landed a very nice follow-on opportunity Maggie confidently smiles and says sweetly, "Of course. That won't be a problem at all. Shall I put this on a change order to the current contract, or would you like a new one?"
Neither Scott nor Maggie say anything until they are back on the main highway.
Maggie sighs heartily and says, "That went better than I expected."
Getting no response from Scott, who is just humming to himself, Maggie continues with growing enthusiasm, "We are in the best situation we can hope for. Here's a CEO of a very large company, and we're saving his butt. Once I give him the ammunition he needs, startling bottom line justification, he will owe us. Personally. What a reference!"
Determined, she adds, "This implementation will finish on time and on budget—even if my company has to eat the difference in cost from what it really takes to get it done. In the end we will have here a terrific reference, with the CEO himself willing to testify. Grand. How do you like it?"
Scott is still humming. It doesn't bother Maggie even though she knows it means he has heard little of what she just said. She has learned over the years of working together that when Scott hums, he is working on something. Something important. It's okay When he's ready, he will talk.
No, that won't do. They will arrive at the airport in less than half an hour and she's not flying back with Scott. She has to catch a flight to LA.
"Let's hear it," she prods him.
"I was just thinking ..." Scott begins, and stops.
"Yes?"
He looks out the window.
"Scott!" Maggie insists.
"I think that we were just handed the key piece of an important puzzle."
"Which is?"
"For a long time I've been wondering why the sales efforts required to sell to a mid-range company are almost as massive as the efforts required for a large company. Yet the chances of success are even smaller. It shouldn't be like that. In a smaller company there are fewer managers that have to agree, fewer management levels, fewer committees that have to decide. Still it takes about the same time to close a deal, anywhere from six to eighteen months."
"That's a fact," Maggie states.
"Yes, but why?"
"Do you have an answer?"
"I'm not sure." Looking at her at last, Scott says, "I'm still trying to digest today's events. Have you noticed that when Craig asked for justification, my first inclination was to respond in computer system terms. I instinctively started to think and speak in terms of configurations and data flows. To force me to speak his language, to address his concerns, he had to practically hit me on the head."
"That's a fair description," Maggie says, adding salt to his wounds.
"Listen, Maggie, this is important. Don't you see, if I'm making this mistake, my people, who are less familiar with a top management perspective, are surely doing it as well. We are talking our language, the computer systems' language, not the clients'. That's a violation of the most basic rule of prudent sales."
"This is the first time you've noticed it?" Maggie is surprised. "What do you think the main function of my people is? They are literally the translators between your system and the client. To know your computer system inside and out is important for us," Maggie states. "But no less important is knowing how to speak the client's language; cost reduction, productivity improvement, lead-time reduction—the whole jargon."
Scott thinks about it for a while. "No Maggie. It's true that your people speak differently than my people, but..."
"Carry on," she presses him.
"Now I realize that we are dealing here with three different languages. There's the system language of configurations, screens, and options, which is very different from the middle level management language of lead-time reduction and productivity improvements."
"Of course," Maggie says.
"But there is yet a third language; the bottom line, the top manager's language. And that is the most important. They are talking dollars, net profit, return on investments cash. Neither my people nor yours are talking that language." Then he adds, "Of course these three languages are interconnected, but what became so evident today is that the translation is not trivial. As a matter of fact, we, or at least I, am ignorant of most of the translations."
"My people talk bottom line," Maggie argues. "Is 'cost' not bottom line terminology?"
"Maggie," Scott says softly, "have you forgotten the lesson on the cost reduction of a transaction line?"
Maggie blushes a little as she reconstructs Craig's words, "Don't confuse reduction in the cost of a transaction line with real cost reduction." "You're right, Scott. I agree. System integrators don't talk and think in terms of bottom line impact. Now explain what you mean by translations."
Scott gives an example. "We know, more or less, the connection between our system and the ability to close the quarterly financial books earlier. But the translation from closing books earlier to bottom line impact, I don't know. And neither do you or Craig."
Maggie doesn't answer.
"Don't you agree with me?" Scott is surprised.
"I do. Of course I do," Maggie winces. "I was wondering why the fact that our people don't speak top management language might be more important to smaller companies. Maybe they're even more risk averse and conservative than the big guys since they can less afford to make a mistake?"
"That's what I was thinking about. I still haven't figured it out. But I'm getting closer."
After a minute of silence Maggie says, "You know Scott, doing the business case for Pierco will be more tricky than I thought. I'll have to supervise it myself."
"Yes," Scott agrees. "Your staff is accustomed to using the standard templates. That will not do here."
"That's all right," Maggie says. "I'm sure we're going to learn a lot from doing this work."
"For sure. Please keep me informed."
"United," the driver announces.
As she picks up her bag, Maggie says, "Scott, one more thing to think about. I wonder how much the fact that we don't concentrate on bottom line benefits has distorted our implementations?"
"What made you think of that?"
"Just think what would happen if we could achieve bottom line results early in the implementation. How much easier it would be to handle the project!"
To the closed door Scott whispers, "Thanks Maggie. That's an important point."
Twenty minutes later, boarding his flight, he adds, "And how much unnecessary complexity has crept into our ERP system?"
He hums throughout the entire flight.