Over 10,000 fans showed up for the grand opening of Planet Hollywood’s New York restaurant. Stars like Demi Moore, Bruce Willis, Arnold Schwarzenegger, and Whoopi Goldberg had invested in the company, and they showed up regularly to promote the handful of initial restaurants in Chicago, Los Angeles, Washington, D.C., and London.
Hospitals face difficult patient decisions. For example, inner-city emergency rooms are used as a typical doctor’s office where people show up with colds, the flu, or earaches. The patients go there because they don’t have a regular doctor.
So, if you are an aluminum company, you should know the whole industry value chain and the part you play in it. When you view yourself along this chain, you see that your revenue is actually a cost to your customers, the fabricators. If your revenues increase at the fabricator’s expense, then their costs go up. In turn, they either:
From a critical path perspective, you must understand the value you add for your customers. But if your company’s business relies on selling goods and services to other firms and companies, there’s another consideration you must take into account.
As the Swiffer example in the previous Lesson shows, we need to understand the customer experience from their perspective. What steps do they go through to buy and use your company’s product or service? While they are doing so, what are they both doing and feeling?
Occasionally, the problem that the customer is trying to solve is linked to another problem that the customer needs to solve. Recognizing and solving that unstated problem can be a tremendously powerful way of connecting with customers along the critical path.
Some companies fool themselves into believing they know what their customers want by looking at their sales data. After all, it stands to reason that if people buy something, it is a strong signal that they want it.
Understanding the customer’s problem is no easy task. Just as with the critical path as a whole, this understanding begins with the customer, not your product or service.
Customers look at your company the same way that your company looks at you as an employee: are your company (and you) adding value, and is that value worth the price?
We can go a step further than we did in the previous lesson. It’s not only important for executives to know the company’s customers. It’s actually the job of everyone in the company to know the customers—and not just the current ones, but potential customers as well.
The critical path does not start with the company’s product or service. It starts with the customer. The movie Field of Dreams popularized the fantasy that “if you build it, they will come.” But it rarely turns out that way. If you start out at the wrong end of the critical path, you are handicapping your chances of success.
If you or your company do not focus on the critical path, sooner or later, someone will do it for you—with the result that you could be out of a job. So, start thinking like you own the company. Better yet, think like a hedge fund activist who is eyeing your company as a potential takeover target.
Reducing costs and generating revenues are not abstractions or things a company does just to do them. Both actions must be documented carefully, in hard dollars and cents, to determine and verify the effects on the critical path.
The most important side of the critical path in most organizations is the revenue side. You can’t grow a company through cost reductions. You can only do it by increasing revenues. This requires an intense focus on the customer. In this sense, every worker must be working for the customer.
LeBron James is arguably the most famous and popular basketball player in America, perhaps the world. When he first left the Cleveland Cavaliers and headed to the Miami Heat, season tickets for Miami sold out quickly for the next two years.
Support Services include everyone in the organization who is not on the critical path or managing it. These include Accounting, Human Resources, Legal, etc. Their job is to provide tools and services that enable critical path workers to be more productive in the organization’s competitive and regulatory environment.
If you are not directly on the critical path, then you’d better be supporting someone who is on it. After all, as the old saying goes, “If you are not making or selling it, then you’re an expense.” If you want your salary paid, the critical path employees have to generate the money to pay you.
Companies actually have two critical paths: today’s and tomorrow’s. Today’s path deals with meeting current customers’ current needs. Its product is available to customers now, and customers are buying it. This process creates the cash flow and profits that keep the enterprise afloat. It pays the bills and the salaries of the workforce.
The most important thing you can do for yourself and your company is to get on the critical path.
Think about what your organization actually makes or does for your customers. Do you provide them with: Cars? Accounting Services? Electricity? Vegetables? Software? Transportation? Healthcare? Mortgages? Music? The Promise of salvation?
While the concept of the critical path may be simple, there are a number of steps along the way. The critical path consists of all the steps it takes to get your product or service to your organization’s customers. No matter the industry, the path is strikingly similar from organization to organization.
