Chapter 9

Three weeks later, the second session of the rings and valves meeting was convened. In the meantime, copies of all the notes from the first session had been circulated to the participants. Cliff presided as they reviewed the notes page by page. When they reached the basis of competition, no one had more than minor word changes. Additional material on Murphy and its position in the business was added to the notes based on work done by participants between the two sessions.

Then, after lunch, they turned their attention to strategy. Cliff said, "Now the fun begins. I always find this part amusing. For some reason, it's seldom very hard to select an appropriate strategy. The problem arises when it comes time to look at the ramifications of it. For some reason we often encounter problems right here. Keep in mind, strategy is like a spear. It can be thrown in any direction: 360 degrees on a circle. Pick one!

"The strategy is our direction. It tells us where we're going, and, by elimination, where we're not going. Before we finish this session, I want agreement from you, or at least understanding — some of you may not agree — on where we're not going. If we decide to eliminate products from our line, they're gone — they're history. Everyone understand?

"Okay. Specifically, we agreed last time that a major element of our strategy is Product Rationalization. We talked about cutting our product line by up to 95 percent in terms of number of items. Let's see what we've come up with since the last session."

Bill Stevens and his operations people, Jeff Stover and his accounting people, and Steve Muller and his marketing and sales people had all done analyses. The groups went at it hot and heavy. Stevens and the manufacturing people gave the impression they wanted to make a single piston ring and a single valve, thus maximizing economies of scale. Muller and his people had reluctantly given up about 60 percent of the items. Cliff knew Steve had faced down a near-mutiny to get his guys to agree to those cuts, while to the accounting people, every item, no matter how small a seller, generated some revenue.

At the afternoon break, he took Sandy aside. She came up to him and formed her lips into a kiss while her back was to the rest of the group. "My God, honey!" she whispered, "Is it always this tough? This is brutal! There are guys here who are saying, in effect, that the company is out of business if we give up one stinking ring ... even if we've only sold one set in the last year and a half!"

"Sweetheart, this is easy! Honest. Every guy in the room really accepts the fact we have to cut the line — even the accountants, for chrissakes. What you're seeing is an incredibly healthy process at work. I guess we have done a pretty good job ... particularly you! No one is hanging back or acting like this is a sterile exercise. They know it's not. These guys are fighting for their customers ... for what they believe in.

"There's not a single person in the room who's not involved, most particularly your ex-roommate, fighting for some of her former small customers. It may seem like a war, but let me tell you, when we get finished, we can be confident we didn't throw anything away by accident.

"What you're seeing is a very basic difference between the process we're using and a more straightforward consulting assignment. The guys at Cumings are smart as hell. They really are. The problem is they can meet a guy who doesn't know all the fancy B-school buzzwords, but who really has a good point to make. Since he doesn't present it the way they would have in business school, the consultants dismiss it. That's how big mistakes are made.

"We're not going to make those mistakes. Not only are the guys all talking, people are listening. It may sound weird, but I'm relaxed. I don't think we're going to drop an important product by accident. Now it doesn't mean we'll necessarily come up with all the right answers. But it does mean we'll have made the decision after hearing all the relevant information. On this basis, we can't be too far wrong."

He smiled warmly at her. "And as a reward for doing such a fine job — and as a punishment for not letting me watch you skin Jane alive — you get to play lion-tamer for the rest of the day! Aren't you lucky?"

"Clifford Fitzpatrick, Jane was right! You are a sadist!" she said with a grin. "At least the lion-tamer has a whip, a chair, and a gun! All you let me have is this dumb felt-tip marker! There's one thing, though. You have to promise to pick up all the pieces of me before you go home tonight. Promise? Maybe you can glue most of them back together."

Sandy called the session back to order, and continued the process. As Cliff had known it would, things did get worse. The first cuts were relatively easy: there really wasn't any reason for continuing the product. But as the afternoon wore on it got progressively tougher. The products being discussed did generate some sales. So the fight turned on whether they paid for their house room. Cliff finally called a halt to the meeting at six-thirty.

When the last participant left, Sandy fell into his arms. "Don't forget your promise. There are pieces of me in every corner of this room, Cliff. I know what you got paid at Cumings and you earned every penny! That was grueling!"

He kissed her softly on the mouth and said, "And you were brilliant, as usual. But did you see what I meant when we talked at the break? Those people are engaged! It isn't an academic exercise; it's their livelihood. They're fighting for it, and I think everyone will benefit.

"Sweetheart, I would offer to cook dinner tonight," Cliff said with a small smile, "but after what you've been through, I'm not sure you're in condition to handle my poison. How about going out? Better yet, why not eat here at the hotel? I have it on good authority they do have something on the menu besides cold cuts. What do you say?"

She smiled at him, and went limp in his arms. She was relying on his reflexes to catch her and he did. When she lifted her face, he kissed her softly. "Honey," she said, "if you intend to make love to me tonight, you're going to be doing all the work! Let's eat!"

They went down to the main dining room where they were recognized by the maître d'hôtel as regular patrons of the hotel. Cliff asked for a quiet banquette table, and they were quickly seated with Cliff sitting next to Sandy rather than across from her. Again, she let her body go limp and sagged against him.

She lifted her face, and he gave her a quick kiss. "Now I know when the honeymoon is over. It's when your husband lets you fall on the floor in a restaurant!"

A waiter came over and they ordered cocktails. Cliff was surprised when Sandy ordered an extra-dry Beefeater martini on the rocks.

He ordered one, too, and looked at her. "Sandra Donnell, what are you doing? You never order a martini. I thought you were the beer and wine girl."

"Clifford Fitzpatrick, I am going to the dogs ... or the cats ... or something! Besides, they haven't killed you ... yet!" She daintily stuck out her tongue at him.

The drinks came, and after Sandy had a tiny sip she made a little face. "Cliff, it tastes like ... like ... I don't know what it tastes like, but it's strong!"

"You're right, it is. But why did you order it? Seriously, sweetheart, you look like you're exhausted. Are you?"

Just then a small band began playing and she visibly perked up. She got up from the table, held out her arms, and said, "Off your ass. We're dancing."

"I thought you were so tired, you couldn't even stand up," he protested. "How can you possibly dance?"

"It's different," she claimed.

He got to his feet and followed her out to the dance floor. As she turned and came into his arms, he noticed she was wearing sneakers. Without heels the top of her head barely reached his cheek. In spite of the sneakers, he still had the impression of holding a feather. She raised her face, and he kissed her softly on the lips.

"Cliff, you can't believe how good this makes me feel. I love you so much. When I'm in your arms like this, it's almost like you've been giving me a massage. I'm really not tired anymore."

When the music stopped they returned to their table, and Cliff returned the conversation to the session they had just been through. "What did you think of the results? It's your company, but you were totally dispassionate this afternoon. I'm very serious when I say I couldn't have done what you did. That's your money they were talking about."

"Cliff, I think we're on the right track. But what are the risks? It can't be quite this easy."

"Very good question. Tomorrow, we'll take a look at a risk analysis. We use risk as a measure of uncertainty, rather than in some more abstract form. Frankly, I see the greatest uncertainty relating to our timing. We'll be taking a big risk. Right now, our reputation for quality is not good. What we propose to do is sharply cut the number of products, upgrade our production facilities — we haven't talked about that yet, nor about inspections — and produce a much higher-quality product.

"The problem is that for a short space of time we're very exposed. We will have cut out the rinky-dink products that only we sell, but will not yet have reestablished a quality reputation with our major customers. Until we reestablish a quality reputation, we are highly vulnerable.

"Sandy, we could be in tough shape if something happens while that window is open. We'll be walking away from some revenue in hopes of getting a lot more later. But there has got to be a 'later'. Worst case, we're in big trouble. I can't minimize it. What do you think? It's your company,"

"No, Cliff. It's our company. I want to do what's right, and I'm convinced we're on the right track. Let's go for it! Honey, believe me. I do understand the risks. I'm thinking about the guys and gals in the plant who are counting on us. I want to do what's best for the company because it's what's best for them. Does that make any sense?"

He leaned over and kissed her softly on the lips. "Have I told you how much I love you in the last five minutes or so? Sandy, you are absolutely the best thing that's happened to me in my entire life. Okay, let's go for it!"

He stuck out his hand, and she gripped it with hers.

"We're going for it! Can I have another martini, now? You have to promise to carry me home, okay? If you do, you can have complete access to my body, such as it is, as a reward."

"Sandra Donnell, when are you going to quit knocking that exquisite body of yours? Do you really want me to list all your bodily assets?"

She rapidly nodded her head with a big grin on her face, so he did.

The next morning Cliff presided. They were at the point in their rationalization discussion where real pain was being inflicted. Tempers were still frayed from the day before so there was little safety margin left. At one point, Jane Miller jumped up and said, "I don't give a damn what the volume on 4606 is! Willoughby Motors has got to have it! It's the only ring that fits their engine. We have an obligation!"

Cliff stepped into the discussion. "Jane, I have a question: How much is Willoughby paying for those rings? And where did the price come from?"

Jane looked in her book and answered the question. It was about the same price Magna was paying and Cliff pointed this out. "But Cliff, it's almost the same ring Magna's buying. The steel is the same, the weight's about the same, so the price should be the same."

"Why should it be, Jane? How about the cost to us of setting up for a short run? Jane, have you ever asked Willoughby about taking a price increase? I'll make a deal with you: Get them on the phone right now and explain what we're doing. Tell them it's not a choice between cheap rings and expensive rings. It is expensive rings or no rings from us. Do you want to give it a shot?"

The group continued the battle on other items while Jane made her call. Fifteen minutes later she returned to the room. Instead of retaking her seat she went up to the front where Cliff was standing. Jane had a comedienne's natural sense of timing. "Mr. Fitzpatrick, would you please give me a swift kick, right here. Please?"

She was wearing a pair of tight jeans, and was bent over pointing to her rear. The group in the room howled with laughter. Aside from anything else, Cliff realized she had discharged the tension that had reached dangerous levels. He wound up to give her a big spank, but didn't touch her, stopping his hand a fraction of an inch from her pants.

"I'm sorry, Jane. I can't. Steve is bigger than I am and he might object. What did the people at Willoughby say?"

"That's the point, Cliff. They just said, 'How much?'. I tripled the price but told them our quality assurance would be far better. You know what they said? They said the cost of our rings is so small, they can't even find it in the cost of one of their engines. Then they asked if we might be interested in their valve business, too. Is that what you expected?"

"Let's say I'm not as surprised as you are. Folks," he said, addressing the entire group, "there's a lesson here for all of us. Instead of thinking go-no go, we should put price into the equation. Let's face it: We may be losing money on a product now, but could still make good money if we got a steep price increase.

"I'll be honest. Jane should have kicked me. I just remembered an experience I had a few years ago with a manufacturer of very high-quality stereo speakers. They had one speaker model, the top of their line, a technological marvel that sold for about $1,500 a pair. They sold in very limited quantities to real audiophiles. The problem was the company was losing its shirt even at that price, so they decided to drop it.

"On word of discontinuation, orders came pouring in, along with letters of complaint from many of its best dealers. So they kept it in the line ... for a while. They tried to discontinue it a year later and got the same reaction. That was when I came in. I suggested a price increase and was told it was impossible. The speaker was already one of the highest-priced units on the market. I pointed out that they received files full of complaint letters each time they went to discontinue it and no one had ever mentioned price. Besides, they wanted to kill the product anyway, so what difference did it make if the orders just dried up?

"As far as I know, they're still making the speaker. The last I heard the price was up to $6,000 a pair. They don't sell quite as many as they did, although unit sales didn't fall by very much. However, now they're minting money on the deal.

"This is basically what Jane did with her rings. Now, are there any products we canned earlier we might want to try a major price move on? Actually, it's a good tactic. We're not pulling the plug on a customer who needs a particular ring. It's still available if he wants to pay the price. What about it?"

The rest of the product discussion went smoothly. The tension had been relieved and the alternative of a price increase satisfied the remaining concerns.

The discussion moved to product quality and the production line. Bill Stevens and his people had worked out new line arrangements to streamline work flow but had encountered another problem. "Cliff, I don't like to be the bearer of more bad news, but I have no choice. We're going to have to spend big money on our machines.