Looking Glass Land - Part 1

The following is Part 1 of a three part article by Perry Been, Public Sector Services Director.

In Lewis Carroll’s (Charles Lutwidge Dodgson) sequel to Alice’s Adventures in Wonderland (1865), Through the looking Glass, and What Alice Found There (1871), we find young Alice pondering what the world is like on the other side of a mirror's reflection. Climbing up on the fireplace mantel, she pokes at the wall-hung mirror behind the fireplace and discovers, to her surprise, that she is able to step through it to an alternative world, the Looking-Glass Land.

After spending 18 ½ years in the public service arena, with the last 9 ½ of those years serving as the Deputy Director of the State Energy Conservation Office (SECO), I now find myself in Looking-Glass Land working in the private sector for DMI Entegral Solutions. I enjoy telling folks that I am doing the same thing I did for the State: I’m dealing with the same end-users, but now I can tell them what I really think. While said tongue-in-cheek, there is a lot of truth in that statement and I would like to share just a few things that I have learned and observed during the past 14 months of my life in Looking-Glass land.

Lesson 1- Bigger doesn’t necessarily mean better.
On the State side of the looking glass I used to believe that in order for the end user to be adequately protected in their renovation projects, they needed to deal with large companies with mega-millions in cash reserves and a staff of thousands. My perception was that it takes a giant with a giant balance sheet to stand behind a "guarantee" of energy savings and to avoid bankruptcy. Even before I stepped through the looking glass, I began to see the error in that thinking.

Over time, the reality that I observed about energy projects with guarantees is the rarity of guarantees ever being enforced. I saw a few in my days in SECO, but mostly for very small percentages of the guaranteed savings. I never observed a guarantee providing a tangible, financial return on investment. That is not to say that guarantees do not have value, only that I've watched some pay more for the guarantee than the value delivered. Furthermore, saving money through energy efficiency has had a proven track record for over a decade. In my experience, the successes I have seen have not been because of a large staff or a lot of money, but a result of sound engineering practices, attention to detail, and a commitment to excellence.

Another thing I started learning while at SECO (and now understand more fully) is the cost of dealing with a large company. There are two categories: 1) financial, and 2) emotional.

1) Despite the notion that bigger companies run more efficiently, I have observed just the opposite. Large, publicly traded companies have shareholders that demand growth and dividends. Usually, one comes at the expense of the other: if you want to grow, you reinvest and have fewer dividends; if you want to hand out dividends, you sacrifice reinvestment and growth. To have both growth and dividends, the profit margins must be very, very healthy. In this industry specifically, the "value premium" that has existed and has been priced into the market norms has allowed this type of profitable growth. To be clear, I am not against either profit or growth. What I have learned, however, is that smaller, private companies do not have the same profit demands on them, and can provide a substantial cost benefit to their clients with no drop off in quality.

2) Dealing with a multi-layered mega company can take its toll on a person. While I have enjoyed my relationships with many of the individuals within those types of companies, I can't say that the organizations have provided the same warm fuzzies. The primary issue is the time and effort it takes to get a decision, a change, a concession, or a signature. Most large companies do not endow their salespeople or engineers with the authority to act in the field. They have well defined processes and procedures, with multiple levels of authority that tend to engage in lengthy debates before any definitive answers can be relayed back to a client on even the most insignificant of topics. The most frustrating aspect of this in my experience has been when the "decision maker" high enough on the food chain finally comes in with the authority to solve the problem, and we realized that we wasted months leading up to that. With smaller companies, there is typically easy access to decision makers, and the delays associated with multi-layered management are non-existent.

To conclude lesson #1, I'll borrow an old phrase from an unknown author, "It really isn’t the size of the dog in the fight, but rather the size of the fight in the dog that matters." As long as the company is big enough, I say pick the smallest company that is big enough to do your job.

The Speed of Trust

There is an old business axiom that goes something like this: “Quality. Speed. Cost. Pick 2.”  The conventional wisdom has been that if you want something fast and good quality, you will pay a premium.  If you want something cheap and fast, you will sacrifice quality.  And if you want something high quality at a good price, you will have to wait.  Most of the time, this is probably true.

Stephen M. R. Covey authored a book that touches on this topic, and attempts to reveal a loophole in this universally accepted logic.  The book, “The Speed of Trust”, is really a reflection of the way things used to be.  There was a day that business got done on a handshake, and you could take a man’s word to the bank.  Somewhere along the way, that reality has succumbed to the new reality of dotting every “I” and crossing every “t” in a complicated world of red tape and multiple tiers of authority.     

Of course, Mr. Covey gives us no magic formula for returning to the good old days at a macro level, but he does offer insight into creating one-off business relationships that break the current mold.  The key, he writes, is creating and maintaining unusually high trust.  

Covey states that, at a minimum, trust is built on two things: 1) Clear and transparent communication, and 2) Accountability for results.  The first should be a commitment from the first handshake in the first meeting.  The second: a demonstrated and proven philosophy of your business.  Obviously, there are many more aspects of building trust embedded in the 322 pages of the book.

For all who aspire to transform your business relationships, your companies, or your industry, “The Speed of Trust” is worth the read.  If nothing else, it is a reminder of what once was, and gives us a little hope that those who embrace the principles inside are on the right track.

Lessons from the Auto Industry

It may not be intuitive how something as nebulous as “transparency” can be the cornerstone of a company.   

Consider the transformation of the auto industry.  Once, dealerships employed skilled, highly compensated sales professionals adept at negotiating the best margins on each car.  Buyers had little information to help them understand the true value of their purchase, other than what their neighbor paid or an outdated “Blue Book”.  Though many dealerships haven’t strayed from this model, others have taken a different course over the past 10 years.  Some have chosen to utilize the accessibility of information to buyers, and the trend of buyers becoming educated before they walk in the door as an advantage.  They have basically said, “OK, no more games… we’ll open up our books, show you the invoice, and win your business through a building of trust.”  Replacing high priced sales professionals are younger associates that respond to emails and internet inquiries.  With that comes lower overhead, and lower requirements on margin to make the same after tax profit.

The more significant thing that happens is a transformation of the industry.  Those that refuse to adopt a transparent model look like they are trying to hide something.  Trust is diminished quickly, and buyers flock to where they can see clearly the value of the merchandise.  Soon, the industry as a whole is held accountable.  Margins are squeezed.  Companies that were inefficient start to struggle.  The well run companies pick up market share, because they can make money with the transparent, low overhead model.

This transformation is about to happen in the energy efficiency industry.  Gone are the days when the promise of energy savings was enough to mask the true value of a conservation measure.  If an efficient light bulb costs $1, a buyer won’t pay $2 just because it will save energy.  They used to, but they are smarter and more sophisticated now.  Companies that continue to sell rolled up solutions and refuse to clearly demonstrate the economic value of each component will be faced with a new type of competition.  Like the auto industry, some will step out and say, “Ok, no more games…we’ll open our books, show you the costs, and win your business on trust.”  And that will transform the entire industry for the better.  It’s about time.