Manage Your Business by Managing the Seams

---

Foundation

Before work starts on anything else there really needs to be a solid foundation on which to build. These skills and functions include finance, HR, IT, Quality, Lean/Six Sigma, and project management. These span across the functions of the organization and when implemented well help the workflow end to end. These are the basic Management Concepts.

Finance is the heartbeat of the firm. It is the turnstile for all information across the company, and can integrate and expose knowledge that is tucked away inside discrete functional areas. The most global view of the firm is through the finance lens.

Information technology enables communication and collaboration across functions, or it should. The main goal here should be to make available all the information piled on people's desks or saved on their computer, and make it available for consumption and use by all.

By HR we don't mean job listings, paperwork, and compliance. HR needs to play a strategic role by being a partner at the table in executive meetings. When the C-suite has a new initiative or a new project gets kicked off, HR should be able to build a team that can deliver. And one can not stress enough the importance of developing persons to enhance their careers and build a smarter more capable workforce. So many firms ignore the HR function, to their detriment. Ask the CFO what they spend the most money on, then decide what needs more focus.

Quality is not product or service quality that we're talking about. Quality is coming up with the best way to do something, and doing that thing the same way every time. A lot of time gets wasted if people have to figure out their job every day, and quality sets the standards in place to let the basics get done with ease so there is time left over to tackle the hard stuff.

Sure, Lean and Six Sigma are some good MBA buzzwords. But we can't emphasize how transformational integrating these disciplines in your culture can be. They drive consistent actions and thinking, and really help integrate people and processes. If one does not think of them as fads of the day, but rather as a common business language, one may realize some real benefit through aligning people and work in a very efficient manner.

Project management isn't about budgets and Gantt charts. It's about aligning the resources of the company to deliver the promise made to the customer.

Operational Modes

The operational modes roughly describe the complexity of product (service) delivery. The difference can be contrasted by thinking about a simple prepackaged commodity product bought for resale versus a complex product that the company has never even built before that needs to be designed, sourced, and built per customer spec.

MTS is Make to Stock. In fact, one need not even make it, and might not even stock it - imagine a simple good sold online and drop shipped. Imagine though this is as simple as it gets, maybe just buying ready assembled product, stocking it and fulfilling orders from what's on the shelf. A simple business that needs a little procurement and fulfillment, but certainly no production or engineering. The main functions are warehouse and fulfillment

ATO is Assemble to Order. It differs from MTS in that there might be the need to put pieces together to make a product. There is no manufacturing per se, but light assembly or repacking of bulk goods for example. ATO adds an element of production before the warehouse function.

BTO is Build To Order. It adds manufacturing complexity to the business. Here you are no longer buying and assembling ready made parts, you are producing your own parts to assemble into finished goods. If you have a machine shop to make product, you are BTO and not ATO. Procurement gets more complex, and some light engineering really starts to be part of the business.

ETO is Engineer to Order. You're moving more toward a custom shop. The customer knows what they need and gives you a design for a product, then engineering and procurement work together to give production the parts to build the product. The customer says here's what we want, you design and build it.

DTO is Design to Order. Now we've hit some real complexity. The customer does not even know what they need, they have an idea but it is up to your sales and engineering teams to work with the customer to discover the specs so the engineers can design the product. The customer says we have a need but don't have that defined clearly, you are the experts, you tell us what we need.

So we have seen the evolution of complexity from standard off the shelf products (MTS) to custom engineered "we have never even built one of these before" type of product (DTO). More complexity is found in more functions, which adds more people, which demands more teamwork and communication. If processes are not tight and integrated, the system strains and breaks as products become more complex. There is simply more that can go wrong, and more chances for miscommunication.

MTS / ATO / BTO are the realm of ERP systems. They are for the most part market demand based, and pretty standard products. The workflow is pretty linear and your ERP system should be set up to handle it. If some customization is needed, it is usually not complex and can be adapted. This level of customization is more specialization, like if you offer the product in red and green colors, but the customer wants blue paint instead. This should be fairly easily accommodated, it does not add complex sourcing/procurement nor heavy engineering. Now if the customer comes to you and does not even have a design or even specs in mind, then that true custom product. Meeting this customer demand takes a really good system, it involves many people working in unison and there are many processes, many of which are concurrent or parallel or even hierarchical.

Many businesses break down simply because they are set up in ERP world, and ERPs are usually not very good at handling truly custom product workflows. ERPs are set up to fulfill market demand - demand planning kicks off production to keep a warehouse full of safety stock and push product to market. ETO / DTO live outside of this world, and has to react to customer specific demand that is pulling from the system. These are very different modes of operation.

Product Lifecycle

Sales and Engineering

The first half of the product lifecycle moves a customer even being aware the company exists, to defining a perfect solution for the customer needs. Marketing and branding brings about awareness in the market and moves the customer toward an intent to explore solutions to their needs. It is then up to sales to define exactly what the customer needs and link that to the ability of the company to deliver that with agreeable cost and quality. Then engineering takes the customer specs from sales and designs a product that fulfills the needs.

Operations

The second half of the product lifecycle takes a product design, builds it, delivers it, then follows up on it with the customer. Procurement takes the engineers work and finds the component parts. If parts can not be sourced, they must be manufactured. Production takes these components then builds, checks and tests, and packages the product. Warehouse is in charge of the finished good and fulfills the order. Then there really should be some sort of after-sale relationship built with the customer, the goal here being that after the product sees end-of-life that customer comes right back into the sales funnel and becomes a lifetime customer of the business.

Organizational Structure

Every company will have a different org chart, obviously. We think two things will lead to a better operational outcome though. First, build strong collaborative teams in sales & engineering, and also in operations. These are the two broad teams that need to be in lockstep, and who will report to the executive team. Second, below these leaders define what each functional area is for your organization and put the best person in charge of that area and make it clearly defined what the boundaries of that job are. Be very discrete in job functions and responsibilities.

Manage the Seams

With the foundation in place, the product life cycle defined, the operational modes understood, and organizational structure laid out - now we can manage the seams.

What does that mean? Simple, as a manager of managers, you don't have to manage sales, or production, you hired the best person you could to manage those tasks, right? They had better know sales or production better than you, and be able to tell you what to do in those disciplines. Your job is now to manage the seams between functions.

You have to make sure ideas, information, communication and work flows from function to function. From Marketing to Sales. From Production to Warehouse. The seams are the vertical lines in the diagram above. And there is one red vertical line, between Sales & Engineering and Operations. In our experience, in almost every case, there is not a seam here, there is a high brick wall. Is that the case in your organization too?

You need to make sure the procedures and tools are in place that allow a functional manger to look left and right and see what's coming and know what needs to be handed off. And as the business becomes more complex, it's never a one way handoff, there is always interaction and collaboration. That's managing the seams, it's building a dynamic organization that streamlines and enhances end to end communication and work to allow a company to effortlessly deliver a specific promise to a particular customer.

It's not easy. And honestly it's never perfect. But we know after having used the framework laid out here - it works. These are the tools to methodically build out an organization that really stands out from competitors in terms of employee satisfaction, ease of doing business with, and financial results.

All About Communication

Worth stating again - most operational business problems are simply the result of bad communication. Many things can cause bad communication: personalities, bad processes, incomplete information, conflicting goals, almost too many things to start naming them all. But if one can instill a culture of communication, problems become fixable. And by culture we don't mean your quarterly bar-b-ques. Culture is the decision making process in your organization. Ready to change your culture by managing the seams?

Go get started.

---