BERKONOMICS – Business insights from Dave Berkus

The fight for quality

Keep constant contact with key customers.

by on Aug.02, 2012, under Growth!, The fight for quality

An executive’s job is not easy, nor is there much time in a typical day for outreach of any kind. Especially in a growing company, the CEO is drawn into daily process issues by all of his or her direct reports, often responding to questions and problems, leaving little time for strategic thought.

And that behavior results in leaving little time for outreach to the most critical possible component in your chain – your key customers. During CEO roundtables which I attend regularly, fellow CEO’s analyze a compatriot’s use of time during the once-a-year personal presentations each makes in turn.  If the presenting CEO is honest in the analysis of actual time spent each week, it is often revealing to all to see how many hours are spent turning inward toward meetings, operational management, or responding to emails or texts sent by others.

As a group, we set a bar of fifteen percent as the minimum amount of time each week that a good CEO should spend reaching out to the company’s key customers in a proactive attempt to find issues, trends, unmet product needs, and of course create bonds that make their jumping to a competitor more difficult.

[Email readers, continue here...]  Do customers know what they want from their suppliers for future products?  We often ask our sales people to “find the pain” and show how our product solves that pain problem.  But it was Henry Ford who famously said, “If I’d asked my customers what they wanted, they would have said ‘a faster horse’.”   Some new products arrive with no frame of reference.  FedEx, the automobile, the Internet, and many more examples, prove that there can be a significant market for ground-breaking ideas.

Do customers know what they like when they see it?  Of course they do. So why not show a prototype, asking for input to improve it or adapt it to the needs of the customer?   With that kind of interaction, the customer becomes a partner in development, tied to the success of its outcome and much more willing to purchase it when completed.

Is business built upon good relationships?  Of course it is.  And who is best to create closer relationships at the top than two CEO’s speaking personally without distraction?   I have won deals after forming such trusting relationships, and have lost deals to those who have beaten me to the opportunity.

The challenge is also the opportunity.  A good CEO spends time with critical customers and values the feedback and relationships that result.

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Better is the Enemy of Good Enough.

by on Jul.26, 2012, under The fight for quality

Getting any product to market is an act composed of a series of compromises in quality, product perfection, feature-functionality, and cost effectiveness.  If every development engineer could control the release date of the component or product for which s/he is responsible, the dates for completion would certainly extend outward and vary from plan.

When there are multiple parallel developments of components to fit into the whole product, the slowest component determines the speed of completion for the final product.  One designer, one engineer, one developer seeking to achieve a degree of perfection to meet a personal level of satisfaction is capable of derailing an entire complex project.

And yet, who would not want the highest quality product to place into a competitive marketplace?  Who would not want a “better” component or product?  By its very nature, “good enough” defines the acceptable market level of quality, price, feature-functionality, and salability.   That standard certainly varies by any requirements for product safety which surmount all others.  That one standard aside, all of us must internalize the short mantra that is the subject of this insight: Better is the enemy of ‘good enough.’ 

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Plan for your R&D Tax.

by on Jul.19, 2012, under Growth!, The fight for quality

There is a life cycle for any product, and it is much shorter on average today than five years ago, especially in the technology world.

Companies that are successful with their first product must begin thinking about the costs of additional products or of that product’s replacement well before any evidence of a peak in sales is noticed.


There are rules of thumb for various industries in creating a reserve for research and development.  To attempt to find an average number, companies should “tax” themselves by reserving some percentage – say ten percent of their net revenues – for research and new product development.

It is a certainty that even with patent protection, a successful product will be challenged, duplicated, even exceeded by competitors, and within increasingly shortened time periods.  It is a difficult concept, but a necessity of the modern age, to plan to obsolete your own successful products before someone else does that for you.

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Move your team from competence to excellence.

by on Jul.12, 2012, under The fight for quality

When a new CEO or manager is hired into a company, for a while lots of energy flows from the top and new ideas seem to be generated daily.  It is one reason not to fear the unknown when upper level management long in place turns over, often leaving most everyone worrying over how they’ll ever do without their lost leader.

The problem seems to come after everyone settles back into some sort of normalcy and the new senior manager becomes comfortable in his or her position.  There is a natural momentum in most companies, one that is usually slow and deliberate.  New ideas are vetted carefully, run by a number of departments, considered from many angles and implemented with deliberation. The temporary enthusiasm for cutting through the old way of doing things calms employees into an acceptance that little has changed over time.

The real opportunity for a leader to raise the bar is in the consistency of his or her vision and willingness to accept change for the benefit of the organization.  This is true especially when the company is making its numbers and problems are few.  There is nothing wrong with consistency. It brings a normalcy to everyone’s jobs that most people welcome.  But that normalcy often comes inside a creative vacuum.  Competitors often jump into holes created by slowing innovation.

[Email readers, continue here...]  I’ve told the story about Bill Conlin before, but it is worth repeating.  Bill was the CEO of CalComp, a Lockheed company.  Most every Monday morning as he drove to work, he’d force himself to think: “What if this was my first day on the job, and I could make changes without worrying over the past?”  Bill’s managers feared those Mondays they say, because that hard-driving enthusiasm for change, for excellence, was like a lightning bolt upsetting the old way on occasion and bringing fresh ideas to the front for consideration and execution.

How many of us fall into the comfortable routines of management, thinking that we have this job down to a science, with the operation running smoothly and without need for much intervention?  How many of us have fallen a few notches on the excellence scale over time, accepting our environment as of the last change, happy with ourselves for past achievements toward upping the enterprise?

What would you do if you were new at the job and had no restriction upon the changes you could make for the good of the company?  Is there redundancy in levels of management that you’ve tolerated too long?  Has the product or service not gained ground against its competitors of late?  Are you sure of your marketing and pricing positioning? What about the training and competency of your operational staff?

Want to reinvigorate yourself in your job?  Make next Monday morning’s drive a creative thinking exercise in upping your game in your personal fight for excellence.

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Get to your goal by the most direct route.

by on Jun.11, 2011, under Growth!, The fight for quality

There is more money lost in businesses today from inefficient processes than any other single area.  Yet this is not a place where most managers feel comfortable deconstructing and rebuilding.  Somewhere out there is a consultant or future employee (or even suggestions from present employees) that will provide the roadmap toward making your processes run more smoothly, more quickly and more inexpensively.  As a byproduct, process quality is likely to improve as well. 

 No matter what your company produces, there is surely a more efficient way to approach the process.  Start by carefully restating the goal for the process, such as “produce 500 quality units per day” and create metrics to measure the present output and quality (rejects or time lost) with this goal.  Look inward, forming a “tiger team” from within your organization to define the steps presently taken to reach the goal, and make improvements in increments that can be put into effect and tested quickly.  The best reward for those involved in improving a process is to receive the kudos from management and themselves for making dramatic improvements in their internal processes. 

[Email readers continue here...] If internal resources cannot handle the solution, it is time to find an outside resource that can.  Either way, someone must start with creating a map of steps from start to completion, breaking it down to measurable sized increments.  Look first at whether some steps are creating a bottleneck or quality breakdown affecting subsequent steps (see insight 81 following this).  If improving individual steps are not the solution, then scrap the process entirely and attempt to define a way to meet the goal through a differing route, such as outsourcing parts or the entire process, doubling the capacity of a segment of production, or redefining the goal itself.

All of these efforts will help you to better know the process to a degree you never expected to achieve.  And meeting the challenge of improving productivity is a great morale lift for all, as well as good business practice for the company and management.

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Review regularly and ACT upon results.

by on Jun.07, 2010, under The fight for quality

                Allowing small problems to escalate into big ones is simple.  Just ignore the signs for long enough and the job is done.  It takes far more energy to review regularly the key performance indicators you’ve established for each individual and yourself.  But a small excursion caught early and corrected saves massive corrective resources later.

                Take for example the manufacturing company with a small quality problem in one component, resulting in a test failure rate above the norm.  You can just reject the components, especially if coming from an outside supplier, or you can get to the root of the problem by examining the cause and reengineering the process or product quickly, saving you and perhaps your supplier time and cost.  Such a culture of quality engineering has an additional benefit in creating a higher bar for all to see, making the public statement that quality is a top priority.

                The same careful management applies to virtually every person and process in the organization.  If there are ways to measure successful output or execution, find them and use them regularly.  If one person or department is not pulling its weight, others notice and if no action is taken, often others are discouraged because of the lack of management interest and control.  The variant of “one bad apple” holds true in corporate cultures that to a degree entrepreneurial managers and young CEOs rarely credit – until a late correction is made and a collective sigh of relief can be heard company-wide.

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Fire fast, not last.

by on May.04, 2010, under Depending upon others, Surrounding yourself with talent, The fight for quality

                 Here is one that takes a real leap for a younger manger or CEO to believe.  After hiring someone with all of the attendant enthusiasm followed by the training and learning curve, if an employee shows signs of weakness in the job or problems dealing with contemporaries, it is the natural tendency for most of us to go first into coaching mode, and reset the observation clock to see if our excellent coaching does the job.  A month or so later, when no apparent change has been noticed, we may move from coaching to a polite warning and maybe even the dreaded note-to-file.  Another month, and the probability of a decision to separate becomes obvious and the move initiated.  Lawyers will tell you that this progressive chain of moves is good for the company, protecting against lawsuits by a disgruntled former employee.

                But surprisingly, in post-exit interviews after emotions have dissipated, most former employees (who were handled respectfully during the separation process) and most all managers will agree that the move should have been made sooner.  The former employee will often state that he or she was at least somewhat unhappy in the job, knowing that the fit was not as good as it should be. The manager will most often admit that he did not move aggressively, following his best judgment in coaching the employee toward separation much earlier.

[Email readers continue here...] Firing fast in most every case is best for everyone, as opposed to long, drawn out sessions and stressful employee periods of waiting for a verdict in between sessions.  It does sound counterintuitive. But I would believe the post-exit interviews.  Why not conduct your own survey of fellow executives and managers and see what they think.  If they agree, you should recalibrate your expectations and act sooner, all with the important caveat that employees must always be treated with respect, and there are many times when documentation to file is a required protection for the company against possible lawsuits, especially by protected classes of employees.

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Know and avoid “time bankruptcy.”

by on Apr.21, 2010, under Growth!, Positioning, The fight for quality

Time bankruptcy results from the deliberate over-commitment of core resources. 

          I created the term “time bankruptcy” almost thirty years ago when the computer software business was young, and I was a software developer building a young company based upon quality first.  Asked to speak at a number of software industry events, I found my voice and immediate audience understanding as I described variants of the following problem to my audience. The insight became clearer as I was hired again and again to pick up the pieces of failed programming efforts by other software companies in this then young industry.

          A developer would take on a new customer, customize programs as needed, and install perhaps an 80% completed system upon the customer’s brand new minicomputer system.  The customer would pay for all or at least 90% of the system, perhaps holding back a retainer awaiting completion.  Burning through the payment and needing more to cover fixed overhead, the developer would do the same for the next 80% customer, moving on to the third.  About that time, the first would call asking for completion of programming or training, firmly but politely.  The fourth installation was interrupted as the first customer suggested that he would stop giving glowing recommendations for the vendor, insisting upon a completion date, while the second customer interrupted with its first call for completion.  By the fifth or sixth (who keeps count for these stories?), the first threatens suit, the second becomes demanding and the third makes that expected call for a completion date.  So the vendor stops work on the newest installation to complete earlier installations.  Revenues dry up while overhead continues to burn though the developer’s pockets.  It’s a classic case of time bankruptcy.  The developer deliberately overcommitted his prime or core resources (in this case his personal time) leading to a loss of income and reputation that it could not recover.

[Email readers continue here...] The same story could be constructed for any company selecting a limited number of test customers for a new product. Select too many, and pay too little attention to each.  Commit all of your core resources to solving the resulting problem, and new work stops.  Time bankruptcy. Not a pretty sight, and completely avoidable.

          Be aware of this trap.  No-one but yourself can be blamed for allowing core resources to be overcommitted, even if by subordinates.  That’s because you now know the term and the impact of such an error in judgment, and understand that the simple but important remedy is to slow the commitment of those most critical resources to the front lines.

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No second chance to create first quality.

by on Apr.13, 2010, under The fight for quality

                Let me illustrate this insight with a personal story.  As my enterprise computer software company which produced innovative lodging systems for hotels and resorts grew quickly, we found ourselves straining to keep up with the hiring and training of good customer support representatives, a critical part of the equation then and still so today in the 24 hour environment of hotel front desk operations.  If a front desk clerk called support at 11.00 PM in the evening, it usually meant that there were guests lined up waiting to check in, anxious to pass beyond this necessary but inconvenient bottleneck between a tiring plane ride and a comfortable bed.  The result would be very frustrated clerks facing angry guests if the wait were to be long.  It was simply not acceptable to be backed up in customer service, forcing either a ten minute wait or a call back from support.

[Email readers continue here...]  It took several months to hire and train enough new support reps to keep up with the rapid growth of our company.  But the problem was solved, and response times returned to “immediate” for at least this class of customer call.  There was no wait, and the quality of response was rated as “excellent” by callers later surveyed.  But “There’s the rub” (the snag) wrote Shakespeare in Hamlet. It took two long years for the company to fully recover its lost reputation after the actual problem was fixed to the satisfaction of all.  Aided by salespeople from competitors and long memories from unhappy customers, the myth of continued quality problems in customer support bounced around the industry for those years, until finally good press, great experiences and a marketing campaign together overwhelmed bad memories to put this issue to bed.  

                If the problems had been in product stability and customer service together at the same moment, there might not have been enough time and resources to recover.  There are plenty of young companies that died trying to recover from such a combination.

                Your reputation hinges upon delivering a quality product at the moment of release, and maintaining product quality throughout its life.  The smaller the company, the more is at stake.  There are fewer resources and much less of a reserve of good will among the customer base to absorb a problem release or in the example above, inability to fill the void in customer service created by rapid growth.

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Haste makes waste; but to lag is to sag.

by on Apr.07, 2010, under Growth!, The fight for quality

                 Here we examine the relationship between time, quality and competitiveness. If you are getting the impression from these many insights that complex relationships cause simple problems, you are right.

                We have heard the “haste makes waste” ditty since childhood.  There is little need to reinforce the obvious.  On a larger scale, there are epoch stories of giant companies eating massive losses in a recall of product, often based upon limited testing before release. 

                A marginal example was the Intel release of the Pentium Pro and new Pentium II processor to rave reviews – until a math professor found an obscure error in the chip’s code that made a rare floating point calculation error.  Posting that finding on the Internet, quickly Intel found itself defending against fears by others using the processor for math work that the processor could not be relied upon.  Intel rushed to fix the bug and offered to replace the processor to anyone requesting such a replacement.  At a cost of millions and a reputational hit, Intel recovered.  The lesson here is a bit obscure, since it is not clear whether the kind of testing then common in processor design would have surfaced the error.  It is quite clear that such an error would be found immediately today based upon changes in testing procedures made by all processor manufacturers after that event.

[Email readers continue here...]  The waste from haste in this example was in not pre-thinking of enough testing scenarios for a new product.  There is always a trade-off between cost for testing, time to market and risk of problems. 

                 Perhaps better examples to point to are easy to find in the toy industry, where recalls because of small parts that could be swallowed by infants or lead-based paint or flammable components make the news on a regular basis.

                And the other side of this coin, “To lag is to sag”, addresses the two issues of loss to the competition because of delays in release of a new product, and burning of fixed overhead while products are redesigned.  

                It becomes obvious then that there must be a balance somewhere between rushed release and too much rigor in pre-release planning and testing.  Perhaps that balance can be measured in estimating what a company could endure in lost overhead and hits to reputation before becoming crippled and unable to recover.  With that measure based upon pure estimates, the balance point changes between companies, with the largest, most profitable companies able to suffer the most risk as to resources, and the smallest suffering by far the most when measuring reputation.

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