Isegoria

Years ago, lean consultant Bill Waddell learned that when management is committed to the idea that they are different, and that the principles that apply in other manufacturing sectors don’t apply to their unique situation, it is best to pack up and move on:

“Do you have experience with a dairy products manufacturer that is 50% employee owned selling to both retailers and restaurant supply distributors with factories in both Alabama and Nebraska?” is code for “We ain’t gonna change.”

Some of the worst offenders are in pharmaceutical manufacturing, where they blame regulations, labeling requirements, and their “unique” no stock-out philosophy for their problems:

This particular issue stuck in my craw after I read that the Johnson & Johnson’s plant making children’s products has been closed down after four recalls in seven months. The FDA met with Johnson & Johnson’s senior management in February and they still can’t figure out how to make children’s Tylenol and other products without “foreign materials and black or dark specks” in them. This is no primitive outsourced operation — the solution of choice for many of the big pharmas to address their unique challenges. This plant is in a suburb of Philadelphia.

The FDA inspectors found “thick dust and grime covering certain equipment, a hole in the ceiling and duct tape-covered pipes.” I guess the challenges of dealing with all those labels are moot. The FDA is urging J&J’s customers to use private labeled alternatives — generics — anything but Johnson & Johnson. How’s the ‘No Stock-Out Philosophy” working for you now, J&J? Seems as though the government has concluded that a stock-out of Johnson & Johnson products is about the best thing that can happen to their customers.

The rationalization that you are different — your problems are so difficult and unique that no one else can understand them — is a formula for disaster. It makes management sound like so many teenagers — or alcoholics — whining ‘no one understands me’. In fact, just about everyone understands you quite well. The only one who doesn’t get it is you.

John Robb continues to sing the praises of backyard farms, citing some business numbers from a recent LA Times article:

On average, the companies charge between $900 and $2,000 to have a section of land dug up — or to build a raised bed — that’s big enough to grow enough edible plants to feed a family of four.

The companies also offer personalized planting and harvesting services. For an additional weekly fee of $20 or more, a staff member will put in the plants, pluck the weeds, amend the soil, quash the bugs and fill a basket with ripened produce.
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The two-person staff at Your Backyard Farmer is so overwhelmed with maintaining their 67 mini-fields, they’re turning people away. Co-founder Donna Smith started a waiting list earlier this month for those willing to spend at least $1,675 a year to turn 400 square feet into rows of butternut squash, bok choy or kale.

The economics are questionable:

Along with fresh produce, those rewards can include the bragging rights that come with having the latest eco-conscious status symbol: a farmer to call your own.

“The reality is, in most cases, you can go to Safeway or Whole Foods and buy organic produce for less,” said Jeremy Oldfield, 27, co-founder of Freelance Farmers. “So we focus on the intangibles of this: the joy of picking a tomato in the afternoon that’s still warm from the sun, or having a dinner party and being able to point out to your guests that most of the meal came out of your backyard.”

If you enjoy gardening, or your labor is suddenly undervalued by the market — as in a recession — then raising your own produce makes more sense:

Home Depot saw its vegetable seed sales jump 30% last year and continued to have double-digit growth in January. George Ball, chief executive of W. Atlee Burpee & Co., North America’s largest home garden company, said that for the last few years the company has been selling more vegetable seeds and plants than flowers — for the first time in its 130-year history.

Again, the economics are questionable, even from the hired-farmer’s point of view:

Today the company has offices in Claremont, Pasadena and Los Angeles’ Westside, and has expanded its staff to eight. Revenue is small but growing: Farmscape pulled in about $54,000 for the first four months of this year — $22,000 more than last year.

Most of the money is being plowed back into Farmscape, Dubois said, to expand the network of 60 mini-farms they’ve built in Southern California.

A staff of eight is splitting revenue — not profit, but revenue — of $54,000? (Presumably the bulk of their annual revenue comes during the spring planting season.)

That doesn’t seem… sustainable.

David Foster recently mentioned Peter Drucker’s Adventures of a Bystander, in which he tells his own life story indirectly, via profiles of people has known:

In the chapter titled “Ernest Freedberg’s World,” Drucker writes about two old-line merchants. The first of these, called “Uncle Henry” by those who knew him, was the founder and owner of a large and succesful department store. When Drucker met him, he was already in his eighties. Uncle Henry was a businessman who did things by intuition more than by formal analysis, and his own son Irving, a Harvard B-School graduate, was appalled at “the unsystematic and unscientific way the store was being run.”

Drucker remembers his conversations with Uncle Henry. “He would tell stories constantly, always to do with a late consignment of ladies’ hats, or a shipment of mismatched umbrellas, or the notions counter. His stories would drive me up the wall. But gradually I learned to listen, at least with one ear. For surprisingly enough he always leaped to a generalization from the farrago of anecdotes and stocking sizes and color promotions in lieu of markdowns for mismatched umbrellas.”

Reflecting many years later, Drucker observes: “There are lots of people with grasshopper minds who can only go from one specific to another — from stockings to buttons, for instance, or from one experiment to another — and never get to the generalization and the concept. They are to be found among scientists as often as among merchants. But I have learned that the mind of the good merchant, as also of the good artist or good scientist, works the way Uncle Henry’s mind worked. It starts out with the most specific, the most concrete, and then reaches for the generalization.”

Drucker also knew another leading merchant, Charles Kellstadt (who had once run Sears). Kellstadt and Drucker served together on a Department of Defense advisory board (on procurement policy), and Kellstadt told “the same kind of stories Uncle Henry had told.” Drucker says that his fellow board members “suffered greatly from his interminable and apparently pointless anecdotes.”

On one occasion, a “whiz kid” (this was during the McNamara era) was presenting a proposal for a radically new approach to defense pricing policy. Kellstadt “began to tell a story of the bargain basement in the store in Chillicothe, Ohio, where he had held his first managerial job, and of some problem there with the cup sizes of women’s bras. He would stop every few sentences and ask the bewildered Assistant Secretary a quesion about bras, then go on. Finally, the Assistant Secretary said, “You don’t understand Mr. Kellstadt; I’m talking about concepts.”

“So am I,” said Charlie, quite indignant, and went on. Ten minutes later all of us on the board realized that he had demolished the entire proposal by showing us that it was far too complex, made far too many assumptions, and contains far too many ifs, buts, and whens.”

After the meeting, another board member (dean of a major engineering school) said admiringly, “Charlie, that was a virtuoso performance. but why did you have to drag in the cup sizes of the bras in your bargain basement forty years ago?”

Drucker reports that Charlie was surprised by the question: “How else can I see a problem in my mind’s eye?”

Drucker draws this conclusion, citing Plato’s Phaedrus and the Krito:

They teach us that experience without the test of logic is not “rhetoric” but chitchat, and that logic without the test of experience is not “logic” but absurdity. Now we need to learn again what Charlie Kellstadt meant when he said, “How else can I see a problem in my mind’s eye?”

Consulting isn’t about advice, as the story BCG offered Keith Yost $16,000 not to tell demonstrates:

Despite having no work or research experience outside of MIT, I was regularly advertised to clients as an expert with seemingly years of topical experience relevant to the case. We were so good at rephrasing our credentials that even I was surprised to find in each of my cases, even my very first case, that I was the most senior consultant on the team.

I quickly found out why so little had been invested in developing my Excel-craft. Analytical skills were overrated, for the simple reason that clients usually didn’t know why they had hired us. They sent us vague requests for proposal, we returned vague case proposals, and by the time we were hired, no one was the wiser as to why exactly we were there.

I got the feeling that our clients were simply trying to mimic successful businesses, and that as consultants, our earnings came from having the luck of being included in an elaborate cargo-cult ritual. In any case it fell to us to decide for ourselves what question we had been hired to answer, and as a matter of convenience, we elected to answer questions that we had already answered in the course of previous cases — no sense in doing new work when old work will do. The toolkit I brought with me from MIT was absolute overkill in this environment. Most of my day was spent thinking up and writing PowerPoint slides. Sometimes, I didn’t even need to write them — we had a service in India that could put together pretty good copy if you provided them with a sketch and some instructions.
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What I could not get my head around was having to force-fit analysis to a conclusion. In one case, the question I was tasked with solving had a clear and unambiguous answer: By my estimate, the client’s plan of action had a net present discounted value of negative one billion dollars. Even after accounting for some degree of error in my reckoning, I could still be sure that theirs was a losing proposition. But the client did not want analysis that contradicted their own, and my manager told me plainly that it was not our place to question what the client wanted.
[...]
Early on, before I began case work, one manager I befriended gave me some advice. To survive, he told me, I needed to remember The Ratio. 50 percent of the job is nodding your head at whatever is being said. 20 percent is honest work and intelligent thinking. The remaining 30 percent is having the courage to speak up, but the wisdom to shut up when you are saying something that your manager does not want to hear.

I spoke up once. And when it became clear that I would be committing career suicide to press on, I shut up.
[...]
Nominally, my job was to provide advice and aid in my client’s decision-making process. In practice, my job consisted of sitting quietly and resisting the urge to dissent. Each day was like a punishment from Greek mythology; with every meeting my liver would grow anew to be eaten again by eagles.

Jerry Murrell explains how he created Five Guys Burgers and Fries — perhaps the closest thing the Atlantic coast has to In-In-Out:

My parents died my last year in college. I married, had three kids, divorced, then remarried. I moved to northern Virginia and was selling stocks and bonds. My two eldest sons, Matt and Jim, said they did not want to go to college. I supported them 100 percent.

Instead, we used their college tuition to open a burger joint. Ocean City had 50 places selling boardwalk fries, but only one place always has a 150-foot line — Thrashers. They serve nothing but fries, but they cook them right — high-quality potato, peanut oil. That impressed me. I thought a good hamburger-and-fry place could make it, so we started with a takeout shop in Arlington, Virginia.

Our lawyer said, “You need a name.” I had four sons — Matt, Jim, Chad are from my first marriage, and Ben from my second to Janie, who has run our books from Day One. So I said, “How about Five Guys?” Then we had Tyler, our youngest son, so I’m out! Matt and Jim travel the country visiting stores, Chad oversees training, Ben selects the franchisees, and Tyler runs the bakery.

Three days before we opened, I was still working as a trader in stocks and bonds and was in a hotel for a meeting in Pittsburgh. I found a book in the nightstand, next to the Bible, about JW Marriott — he had an A&W stand that he converted and built into the Hot Shoppes chain. He said, Anyone can make money in the food business as long as you have a good product, reasonable price, and a clean place. That made sense to me.

We figure our best salesman is our customer. Treat that person right, he’ll walk out the door and sell for you. From the beginning, I wanted people to know that we put all our money into the food. That’s why the décor is so simple — red and white tiles. We don’t spend our money on décor. Or on guys in chicken suits. But we’ll go overboard on food.

Most of our potatoes come from Idaho — about 8 percent of the Idaho baking potato crop. We try to get our potatoes grown north of the 42nd parallel, which is a pain in the neck. Potatoes are like oak trees — the slower they grow, the more solid they are. We like northern potatoes, because they grow in the daytime when it is warm, but then they stop at night when it cools down. It would be a lot easier and cheaper if we got a California or Florida potato.

Most fast-food restaurants serve dehydrated frozen fries — that’s because if there’s water in the potato, it splashes when it hits the oil. We actually soak our fries in water. When we prefry them, the water boils, forcing steam out of the fry, and a seal is formed so that when they get fried a second time, they don’t absorb any oil — and they’re not greasy.

The magic to our hamburgers is quality control. We toast our buns on a grill — a bun toaster is faster, cheaper, and toasts more evenly, but it doesn’t give you that caramelized taste. Our beef is 80 percent lean, never frozen, and our plants are so clean, you could eat off the floor. The burgers are made to order — you can choose from 17 toppings. That’s why we can’t do drive-throughs — it takes too long. We had a sign: “If you’re in a hurry, there are a lot of really good hamburger places within a short distance from here.” People thought I was nuts. But the customers appreciated it.

What Five Guys lacks is the high level of customer service delivered by In-N-Out’s high-quality employees. Chick-fil-A has that — but no burgers.