Focus on Strategy:

Thriving in a Complex Worldby H. William Dettmer

Destroying Shareholder Valueby Rizzo & Button

Case Study: “The Hog”by R. Steven Schmidt

First Look:Accidental Buspreneur & Conductor

Book Reviews:Certain to Win by RichardsEpiphanized by Sproull & Nelson

Open Source Leadership™

www.PurpleCurve.co

Purple CurveE L E V A T E Y O U R R E S U L T S™E L E V A T E Y O U R R E S U LT S

Volume 1 - Issue 3November 2012

THE LOGICAL THINKING PROCESS

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Contents9 Thriving in a Complex World Applying Systems Thinking and Principles of Maneuver Warfare to achieve Speed, Agility and Flexibility

4 Editor’s Note Strategy

8 Book Review: Certain To Win

25 Multitasking is Destroying Shareholder ValueKnow the Link Between Executive Policies and Financial Performance

5 “The Hog”: Case Study

21 Accidental Buspreneur & Conductor

48 Book ReviewEpiphanized: Integrating Theory of Constarints

Editor’s Note

Without good strategy, the unanticipated can defeat you. Without good strategy, you can lose focus and defeat yourself. But, what is strategy and what makes a strategy good?

Some may tell you that strategy is fluid and fundamentally about keen awareness; the ability to recognize obstacles and adapt quickly. Some may tell you there’s no set formula for developing strategy, and others may insist that strategy is all about identifying trends.

Simply stated, strategy is the planned route you take to a goal. Arriving in a timely fashion without incident is what makes a strategy “good.”

Let’s say your goal is to drive to Disney in Florida. What’s your strategy to get there? Do you call your local AAA and order a TripKit®? Do you consult Yahoo maps online? Do you go to a store and buy paper maps? Or, do you just jump into the car and confidently press the OnStar® button because you trust that the satellite you need is not experiencing technical difficulties and that you won’t get an adviser in Canada who tries to help you by stretching what she can see from a different satellite. Planning the planned route just got complicated –what’s “simple” isn’t necessarily easy.

Assuming your set goal is attainable – we road-trip junkies would all like to drive to Hawaii but there’s an ocean in the way – you’ll first need to identify your available options and weigh them. You can let your gut dictate, or you can choose a couple of options that attract you and compare or combine them, or you can explore all the possibilities and base your decision on comprehensive research. How well you identify the possible strategic options – not some of them or just the ones you like, but all of them – and how well you weigh them will determine the outcome of your strategy. Remember that lurking

within an option you would typically disregard, there just might be an overlooked component that will fortify your outcome.

Now it’s time to fill the toolbox with what’s most likely to help you seamlessly implement the strategy you’ve selected. Readily available today is everything from a simple can of flat tire fix to a wide range of high technology to keep us connected and safe and even help us foresee bumps in the road ahead. What else do you need? What could help you respond quickly and accurately if something absolutely unforeseen comes at you from out of the blue?

Let’s look to the military for help. The late Colonel John R. Boyd (USAF retired) developed the OODA (Observe, Orient, Decide and Act) Loop to keep fighters winning in any competitive situation by following these steps:

1. See what’s happening.2. Process that information against

what you believe should be happening.

3. Decide what to do about it.4. Act.5. Repeat the process until the gap

between what is happening and what should be happening narrows and/or closes.

The OODA loop works as well for business as it does for the military.

For a better understanding of Boyd’s contribution to sound strategizing as well as a host of other extremely useful in-depth insights (the heavy duty kind that you can apply with great success in your business or industry), be sure to read the article in this issue by H. William Dettmer:Thriving in a Complex World.

Enthusiastically, Thayer Bennett, Executive Editor editor@mymagapp.com

StrategyPublisher Jeff ‘SKI’ Kinsey

executive Publisher Tom Montelione

Art Director Lana Lewis

executive eDitor Thayer Bennett

oPerAtions consultAnt R. Steve Schmidt

community liAson Greg Loo

contributors H. William Dettmer R. Steve Schmidt Tom Montelione Anthony Rizzo Scott Button Kimberly Kinsey

Premier Issue: Volume 1 - Issue 3November 2012

No part of this magazine may be copied, faxed, scanned or otherwise reproduced or transmitted in any form, mechanical or electronic without written permission from the publisher, except for small excerpts of no more than 140 characters for promotional use.

Purple Curvec/o myMagApp.com242 E. Liberty StreetWooster, OH 44691

Phone: 210.701.1754E-mail: PurpleCurve@myMagApp.comURL: http://myMagApp.comTwitter: @PurpleCurveMag

© 2012 myMagApp.com. All other trademarks are the property of their respective owners. All rights reserved. Portions of TOCreview magazine ©2001 reprinted with permission.

4

Purple CurveE L E V A T E Y O U R R E S U L T S™

Purple Curve

The company involved is an interior architectural wood products company.Its product lines are:

• Displaywall• Plank• Interior architectural doors• Toilet partitions• Custom products (high-

end stained veneer panels for architectural uses)

• Machined FRP (Fiberglass Reinforced Plastic)

The company had a few different manufacturing departments under one roof in a plant of approximately 500,000 square feet. The departments, broken into process teams, were:

• Coating (coated board product primarily for Displaywall and Plank)

• Board Prep (Plank and Displaywall)

• Custom Products• Doors

MAINTENANCEAs Director of Manufacturing

my goals were two-fold: to make money, now and in the future, and help to develop my people. However, I must admit that while I knew about business methodology, I knew nothing of woodworking materials per se.

Because I was in charge of manufacturing, I had cause to attend a meeting with the owners, all of whom were former Sales and Marketing guys. The gist of the meeting was about not wanting to sell one of their most highly regarded products, Displaywall, for anything with less than a margin of 20% including overhead expense even though an overhead expense of 22%

of sales was already being covered by all the other products. And although overhead was unusually high as a percentage and an actual expense, the owners preferred to have it that way because the company was structured to have more salaried folks than hourly workers. I listened intently at the meeting, although I disagreed with most of what was said.

Shortly after the meeting, I had a hallway conversation with one of the owners, and I told him that I was confused. I asked him if their primary goal was to make a profit or to ensure a margin. He rapidly responded, “To make a profit. Why?” I explained that if I could show him how to sell below “cost,” the company could make more money. He listened. I zeroed in on “The Hog,” as it was affectionately called -- a machine that had 17 router motors and could rout out enough sawdust to fill a 40 yard container in just one shift. One of the most highly regarded products -- Displaywall -- was produced on “the Hog.”

Displaywall boards typically sold for an average of $110 each including models that were painted, models with aluminum inserts or plastic inserts, models that were laminated, unpainted, paint grade, etc. I discovered that one lone operator could produce 60 boards per hour, although with difficulty (the operator had to really hustle at a pace that was hard to maintain). At that rate of production the total revenues generate per hour by “The Hog” averaged $6600 (60 times $110). However, the Throughput generated was less than half of that due to high (more than 50%) material costs plus tooling wear, electricity, and forklift handling expense. Therefore, the

Case Study

“The Hog”By Steve Schmidt

5

Steve Schmidt

EMAIL

LINKEDIN

6

total Throughput generated for each hour was equal to only about $3000 (rounding for ease).

Several people on the team told me that two operators could produce 90 boards an hour but that would lower the efficiency measurement. Two people producing, on average, 45 boards per hour per person would lower efficiencies by 25%. So, in order to produce a total of 30 additional boards per hour, we’d not only lower our efficiency rate, but have to add $15 per hour for the additional operator. Typically, suggesting this type of “stupid” management initiative would be something that could get me fired. However, consider that we could sell every board we produced!For an additional $15 per hour, we could produce 90 boards per hour (albeit at 25% less efficiency) and garner additional revenue of $3300 (30 times $110). The additional Throughput generated would be approximately $1650 per hour without additional overhead expense.

I got the owner’s permission to add the extra person and the owners soon found that the tactic worked in their favor. This new program was called “Feed the Beast” to the marketing and sales people. It allowed the sales group to sell Displaywall at a lower price to select customers ‚Äì thereby segmenting the market without changing the current pricing structure. Not every customer would be treated to lower pricing at first, but select customers would be entitled to a discount with proper authorization. I assume commissions were not affected. Of course, the sales people soon realized that their livelihoods were dependent upon their ability to increase gross

sales, so as the sales numbers grew, they dropped pricing across the board. Dr. Goldratt said, “Tell me how you are going to measure me, I’ll tell you how I will behave.”

Within a very short time we were able to grow this product line to two shifts with 3 additional operators required for both shifts ‚Äì at an incurred operational expense of about $45 per hour. But each hour, the throughput generated was $1650! Every hour “The Hog” machine operated, it generated around $1600 in cash! The Displaywall product line became a star performer within a few weeks, and the positive impact to the Company was approximately $7 million dollars -- net profit! And, more people were employed. We improved Throughput far exceeding the additional operational expense and total variable expense, lowered inventories and, as a net result, made incredible profits. The moral of the story is that maximizing efficiencies does not necessarily earn the company more money. In fact, it could have an opposite effect. PC

“The Displaywall

product line became a

star performer within

a few weeks, and the

positive impact to

the Company was

approximately $7

million dollars --

net profit!”

From The Publisher

“Do you think strategically or tactically”

Consider it a query along the lines of “left or right brain thinker?” For every study that proves this is no longer a valid stereotype, there are 10 that prove it is valid. This month’s issue is all about Strategy – with a capital “S” – with a few tactical treats thrown in for good measure.

Most mornings you will find me at the nearest coffee shop, thinking – just thinking stuff up – or thinking about stuff that I should be thinking up – or thinking about things that could easily be corrected in businesses around me, if only the owner knew what I know about producing results. No, it’s not my ego or self-centeredness talking, but simply my life in business. I have a track record of more than 30 years of making things happen; things such as this magazine – and just like the startup that produced this magazine, often as quickly as in just 90 days.

In our premier issue we reprinted my original Letter from the Publisher from TOCreview magazine from March 2001, so this is really my first chance to tell you a little more about Purple Curve Magazine and the team that pulled it off – from first the idea to “Go Live” in the Apple iTunes Store in just 90 days. My friend and business colleague Dan Hanlon, Founder, CEO and visionary of the re-launch of the Excelsior-Henderson motorcycle brand circa 1999, like Martha Stewart, suggests that it is always best to “go with the ‘A’ team” when building anything. As Jim Collins points out, it is also very, very important to get the “right people on the bus” first, and then figure out the seating assignments.

So it was with Purple Curve Magazine. Take a sneak a peek at our masthead on page four (4) and read the names. My business partners Thayer Bennett (a colleague for more than 14 years including on TOCreview and our book, Purple Curve Effect)

and Tom Montelione (who I met over a year ago via Darryl Doane and Rose Sloat by way of Greg Loo because of his passion for Bob Burg and David Mann’s book, The Go-Giver) deserve metals. Thayer and Tom have not only figured out how to do the impossible, but also how to do so mostly on my terms. They have been deferring to my way even though both have accomplished any number of impressive feats on their own. Consider, too, Lana Lewis who owns her successful UX business and threw in with us to make this

a reality. Steve Schmidt, a contributor this month, was implementing Dr. Eli Goldratt’s Constraints Management approach in my backyard (Dover/New Phila, Ohio) while I was out traveling the country preaching it. It was my pleasure to help him complete his Jonah training earlier this year. Last but far from least, are the contributors who put a lot of thought, sweat and equity into this month’s articles. There will be a test over this material, It is called Life.

Finally, let us know what you think. Let us know which are the greatest strategic insights from the Magazine, and which are the best tactical insights you’ve gained and applied.

Jeff ‘SKI’ Kinsey

P.S. Did I mention that most of our contributors are willing and able to come out to your place of business and help implement these ideas? Guess I just did.

7

Book Review

Certain to Win

What a great title for a book, yet little did I know of the content’s true value. If you didn’t know, it came to my attention highly recommended by none other than H. William Dettmer. What is it? Both a tribute to an amazing “larger than life” figure: Colonel John Boyd and, a very methodical look at Boyd’s unique brand of brilliance. But first, there is a concern among some in business community that the use of military examples should not be used in business. Me? I brought some of that baggage with me when I skimmed this book. Yes, as a USMC veteran I have used military examples for profit in my businesses and those businesses of my clients. Yet on more than one occasion I have heard world renown business educators share of their concern, “that business is not war.” Perhaps they seek to reserve the term “war” for describing the death and destruction that accompanies war. Allow me to simply suggest that I am sensitive to the issue. Regardless, let’s jump into the book:

“Not only were their processes quicker, but Honda knew or learned how to exploit this advantage to achieve a decisive result in the marketplace” —Page 27, Certain to WinThis passage was in regard to Yamaha’s 1981 attempt to become the world leader in motorcycle manufacturing. As you may recall, during this battle for the marketplace (approximately 18 months), Honda introduced over 110 new bikes to Yamaha’s 37. In the first chapter, Richards’ point that victory is not

always to the strong is well taken. His introduction of “time” as a construct throughout the affairs of all business starts to take shape. The highest praise that I can bestow is simply that upon a thorough reading of this book, I began to read it afresh the next morning. We owe Richards’ a big thanks for taking the time to share his unique insights with the world through this book.

How unique? Here from the Preface of the book:

“This book began in 1988 from a briefing on maneuver warfare and business. Boyd read, commented on, and corrected every draft until his death in 1997.”

As I read, I began to understand how little I have understood the power of Boyd’s work. Richards’ makes it come alive in ways that might just change the world. If enough people picked it up and took a few hours to read it.

I know of no other book that has the potential to reshape one’s very thought processes so thoroughly and profoundly [and correctly] as Certain to Win. PC

8

By Chet Richards