- Adam Anderson
Will Bachman 00:02
Hello, and welcome to Unleashed the show that explores how to thrive as an independent professional. I’m your host will Bachman. And I’m excited to be here today with Adam Anderson Umbrex member He’s a graduate of Stanford Business School, McKinsey alum, independent consultant. And Adam, welcome to the show.
Adam Anderson 00:24
Well, thank you so much for having me.
Will Bachman 00:26
So, Adam, really looking forward to this, you do a lot of work with companies on helping deliver quick bottom line impact. And I know you put together some case examples to walk us through from a few different industries. Let’s get started. What’s what’s the first case study that you’ve put together for us?
Adam Anderson 00:47
Well, the first one is a lotek, chemical manufacturer 20 production facilities, five countries. It’s a very stable company in a very stable industry. In other words, changes both in revenues and in the bottom line are miniscule from one year to another. The company is owned and run by one gentleman whose grandfather established the company almost 100 years ago. Now this gentleman, approached me with a request to help him cut costs in order to grow the bottom line. And his idea was to cut white collar expenses through attrition. I spent the first four months of the project in the headquarters of the company, and then followed up with another year long distance remote work. The team was all the executives in the company, all three of them, the chief executive, senior executives, in the company, and myself as the as the leader, they devoted about 50% of the time to the project, I devoted 100% of the time. So first, we analyzed each white collar employee, person by person, minute by minute, what do they do, what kinds of activities how much time they devote to each activity. Now, the conclusion I reached was that there is very little waste and very little opportunity to generate big savings by letting people go. And I told the client, that it’s easy to cut people, but in his case, it would be next to impossible to cut people without actually reducing the bottom line rather than increasing it. Concurrently, I conduct analysis of all the expenses, all the other expenses across time departments, facilities categories, and that showed me where the savings were possible. And when they were where they were likely. So I convinced the client to expand the scope to all the expenses, not just labor, not just white collar labor. And the next step of the exercise, we involved all the white collar employees in the different countries in generating ideas, how to cut costs. That lasted for a few weeks, they generated about 500 ideas. Then our team analyzed the ideas selected 50 most promising ones, the cost benefit analysis on each of them, calculated NPV, calculate ROI. And we throughout 5025 Out of the 50, we kept the best 25 with the highest forecasted value. We created implementation plans, we assigned the team and the leader to each implementation. Then I moved out to the headquarters returned to my home office and oversaw the rest of the activity, the implementation of the of these ideas remotely. And we have monthly zooms with the with the executives a year later, with the implementation of most of the 25 ideas. The recurring savings recurring not one time exceeded the pre project bottom line of the company by 200%. So we tripled the bottom line in a pretty big company, which, as I said, was in a pretty stable state. So this was a this was a big, big improvement. And what actually made me very happy is that we did it without laying off a single person. And as I said the idea initially was to was to accomplish the savings by by cutting labor. We did not replace some people who retired or who left for offers elsewhere. But there was no involuntary separation. So that is case number one. Now, some of the lessons I would draw from that case led lessons with general applicability is that even in a big, old established company in a stable industry, we can experience we can effect radical improvements in the bottom line 200% is a pretty big, pretty big improvement. In my lesson number two is that it is actually possible to make major cost cuts, even in a manufacturing company without layoffs. The third lesson, and one that I remember hearing in some of your podcasts, some of your previous podcasts is that client employees, no matter how low they are, in the hierarchy, are frequently a source of practical knowledge. And all we need to do is to encourage them to speak, to grant them immunity so that they are not afraid for saying things that may not be popular with the bosses. And then listen to them. And the last lesson that I draw from this is that sometimes we, the consultants should go against what the client asks us to do, and suggest something else. In this case, the client wanted to terminate some people and I convinced him that that was neither necessary nor prudent.
Will Bachman 06:46
What were some of the examples of some of those ideas they came up with that got implemented?
Adam Anderson 06:54
The some of them had to do well, quite a few of them had to do with purchases, because the biggest, the biggest single item in that company’s income statement, on the expense side was purchases of raw materials. So by the by, well, first of all, we we actually hired a person who had experience specifically in purchasing, there was no no such person in the company purchasing activity was distributed among people in the various plants and various departments, the people who did purchasing as part of their other duties. So they were not they were not experts in it. So that was, that was one element of it hiring a person who did nothing but purchasing. Another thing was the analysis of the actual purchases, that’s what we did within the within the team, even before the new purchasing director came aboard. Looking at the expenses, looking at the various purchases, identifying areas where we could, where we could save money, either by changing the product purchased, or by changing the supplier, or by neg renegotiating the terms with the supplier. This was this was the source of, of most of the most of the savings. Now we’re saving, which may be interesting in the context of what we’ve, what we’ve been going through over the last year and a half, talking about COVID. This, this project took place just before COVID. And one of the things I noticed is they that companies spent a lot of money on travel, travel both to meet customers, but also travel internally, since they had these facilities distributed over over several countries. They traveled in order to compare notes to oversee to discuss. And one of my suggestions was to shift that communication or at least some of that communication to, to zoom and emails. And actually, at that time, Zoom was not nearly as popular as it is today. Today, everybody’s using zoom in those days, it was a relatively small number of people, because it was pre COVID. So an interesting, an interesting consequence. I mean, we did cut travel expenses by more than half as a result of this even before COVID hit but when when it did hit the company was quite well prepared to to handle it. Because it was already to a large extent, conducting its business online.
Will Bachman 09:53
Fascinating. Cool. Well, let’s walk through another example.
Adam Anderson 09:59
Another example Apple is quite different. First of all, it’s a it’s a smaller company. It’s a different country, specifically England. And it’s a different industry, specifically healthcare. So some time ago, I was asked by a doctor who wanted to buy a medical clinic to assist her in the process. So I helped her get the financing. And also, I looked at dozens of clinics that were for sale in England and Wales, and Scotland, identified the best looking ones, the most promising ones, they, and then we actually effected the purchase. And I was, I was in charge of running the facility for the first several months, just to put it on its feet. How the old owner ran the clinic for over 20 years, the clinic was in a small, very picturesque town in southern England. It was it had very stable and attractive revenues and income. But it presented some challenges. Well, the first challenge was that the old owner was well liked and trusted in the community. And he planned to the part upon sale because the sale was actually generally caused by his decision to retire. Have the employees decided to leave upon sale also. So it looked like we’re going to inherit just the facility, but not the operation. And another problem was that the new owner was a foreigner, who had been England just for several months, and spent no time in this town was virtually unknown to the community to the patients. So I perceive the real risk of patient outflow, especially since there were three competing clinics in the same time. So the objective of the exercise was to prevent this outflow of patients and the resulting drop in the bottom line. So we took some actions. First of all, we convinced the old owner to work part time for the first three months. That’s a, that’s a pretty obvious action. We were lucky enough, he said, Yes. Then we worked on the departing employees, and we managed to convince some of them to stay. We quickly computerized all patient non medical data, because believe it or not, it was kept in in the paper form. And then we use this to do a mailing signed by the seller to all the patients, informing them of the sale, introducing the new owner and assuring that the quality of service will not decline. Then I decided to not renew the annual contract with NHS, the National Health System, which is the principal buyer of health services in the UK, and it’s financed with taxpayers money so the health system there in the UK is very different from the health system in the US. But quite similar to the health system in most European countries, extra probably all European countries. Now the contract with NHS guarantees guaranteed revenues, but at a very low level of profitability. So it was a risky thing to do. But I felt it was it was necessary to to get the to get the earnings up. Then I analyzed financially, all the procedures, in other words, all the all the services offered by the clinic and found a pretty wide variation, profitability, including quite a number of unprofitable procedures. So we decided to raise the prices of all unprofitable procedures so that they became profitable. And then we decided to make further price changes. To simplify it, we lowered margins on 80% of the procedures which accounted for 20% of the quantity and increase prices on procedures which accounted for 80% of quantity. The quantity I mean now there’s the number of procedures performed. So that gave the appearance the new priceless gave the impression that all the prices have been reduced because the vast majority of them have been reduced. But because the big profit generators do prices have increased, the actual total profits actually increased by over 50%.
Will Bachman 15:04
What strikes me there is that you had a price list. I think I’ve never been to a position where they had a price list and you had any idea what anything was gonna cost ahead of time. It’s like, you have no idea, doctor visit, they look it up, do inspection, whatever, do some test building. In the US, you only find out after you get the bill from the insurance company.
Adam Anderson 15:29
Well, that may be one of the reasons why the US spends almost 20% of its GDP. on healthcare. In Europe, it’s about 10%.
Will Bachman 15:42
So they actually had a price list you walk in, it’s like a menu, like a barber shop where, hey, you guys get a just a quick check. It’s this much if we’re gonna do a, you know, this kind of proceed? I mean, you actually had a price list that was available?
Adam Anderson 15:58
Well, you know, I, both professionally and personally have been to many clinics and hospitals, both physically and an online. And the prices of procedures of the publishing of prices of procedures is the rule rather than the exception. In the European countries in which I had the either pleasure or necessity of, of exploring that. So yes, it is. It is it is open book.
Will Bachman 16:32
Wow. No kidding. And, I mean, in the US right now, I think Congress passed a law that’s requiring hospitals to make their prices available. And even if it would be even with it being required a lot of hospitals apparently blowing it off and, and just like not doing it. But how does it work in in England? If, if you’re not taking NHS money, are people just private pay? They just say I don’t want to wait in line for the NHS? I’ll just go pay that amount pocket?
Adam Anderson 17:04
Yes. I mean, it’s just like, when you when you go and buy bread in the States. You get the bread from the from the bakery, and you put cash or you pay with a credit card? No, you pay the supplier of the bread, right? Of course, you can imagine doing it through an intermediary like HMO, where you pay the HMO a monthly, a monthly fee and in exchange for that you have access to bread with which the HMO contracts with the various bakeries. Okay. Yeah, I mean, that’s the I think I just described the most popular way of doing it in the States with one exception. It is not you who was paying the HMO, which is your employer who’s paying the HMO. True.
Will Bachman 17:54
Right, except, there probably be a lot of complications to it.
Adam Anderson 17:59
But well, but But I mean, if we are not doing it with bread, right, if if somebody suggested doing it with bread in the United States, people would probably start talking using words like communist but in healthcare, it is done. So there are these intermediaries here. And, and nobody, nobody thinks anything of it. In fact, in fact, they consider it the free market. Now, in Europe, most of the healthcare services are state provided. So unfortunately, the state is the intermediary. Yeah, who collects taxes and then and then pays for the procedures that creates, it has its own baggage of problems. But, but much of the I mean, the rest of the healthcare is private, and yes, there are intermediaries like a HMO, but there is also just direct traffic where the where the buyer pays directly the supplier with no intermediary present, and thus, with costs not inflated. But of course, you know, when you when you change prices, or when we change prices, there was a risk that patients would look at it and say, Oh darn, you know, this particular price is, is higher, so I’m going to go to a different clinic to buy this particular service. So in order to make it more difficult for patients to compare prices with the competition, we studied their price lists, and we either grouped or ungrouped our items in the menu in such a way as to render price shopping, if not impossible than difficult. Okay. So we clouded the, we cloud the meta, and we also we also offered various discounts which made Which made it more difficult to do one on one or apple to apple components. Now, the next change this and the other clinics worked Monday through Friday, eight to five regular business hours,
Will Bachman 20:18
which I’ve always thought is so dumb, because that’s when everybody’s working. Right?
Adam Anderson 20:22
Thank you. That’s precisely the point I wanted to make. And that is precisely the point I made there. That’s when the patients are at work or at school. So this is damn inconvenient. Because I mean, you have to take time off from work, not everybody can do it. And some people don’t simply don’t want to do it. And the same thing with the with the kids in school. So what we did, we shifted the hours so that the patients could visit us in the evening, and also on Saturdays, but at higher prices, because obviously, our both doctors and nurses didn’t want to didn’t want to work evenings, so we had to entice them to do so. And also because we wanted to, we wanted to make more money in the process. So the price sensitive patients, for example, seniors, they continue to come during the regular hours, they were not at work. But many patients took advantage of the evenings and the weekends. And because because those services were were priced at a premium, a substantial increase in the profits ensued. And also news that there is now one clinic in town where you can get medical services, after hours, and on weekends, quickly spread. And many patients defected from other clinics, they shifted to us. Well, they shifted to us just once in order to try it. But then when they saw that the service was actually good, they stay. So we had higher revenues, and thus an additional increase in the prophets, we actually needed to hire more staff to handle the traffic. So this idea with the hours, which you consider obvious, and which I consider obvious, but at least in that particular town, and I also know from from previous experience in other towns in in the UK, what was the standard conductors work during during business hours, which reminds me a little bit of a visit in Moscow, in communist times when getting getting lunch was very difficult, because when I worked two restaurants, I could see the signs saying closed for lunch hour. I mean, the employees of the restaurant wanted to have lunch during lunchtime, so they close the restaurants. So, alright, next initiative, the backlog. The backlog is something that you are probably familiar with, especially if you are buying your services through an intermediary, your medical service, your health services, the backlog at this clinic was comparable to the backlog at the other clinics, it was about three weeks. So that was the average time between making the appointment and the actual visit. I when I was looking at the historical data, I saw that the backlog did not change with time, which meant that actually the supply of services was equal to demand. So that’s not the reason the backlog was there. It was just a one time creation. And then it continued. Now, I believe that when a patient calls a clinic, he or she would like to get service right away. I mean, we do not normally plan our illnesses three weeks in advance. So what we did is we temporarily extended the hours, hired additional temporary staff. And within two months, we reduced the backlog to a couple of days. And after that we could shorten the hours, we get rid of the spec of the extra stuff. And we were running again steady state, but the backlog was two days rather than 21 days. And that was the average. And that meant that the patients were not in a hurry but wanted a specific day or of the week or wanted a specific time of the day, for example, evening or morning. But they got that and they waited for a week for the visit. Whereas those who are in a hurry, could visit the next day or even the same day. And that was a radical change to the way that people in that town and in the vicinity bought medical services. So that created a big competitive advantage.
Will Bachman 25:03
Yeah, that’s fantastic. Certainly some of the, I mean, in the US, you have some of these minute clinics now where you can just walk in without an appointment. And that really is a game changer. If you just have some, you know, not life threatening, but ailment, you cut your finger, you need a stitch or two or just need some kind of you think you might, you know, have the flu or something. It’s, it’s a game changer. So that sounds like a pretty smart thing to change your hours and make it possible to do last minute appointments.
Adam Anderson 25:38
Let’s, I mean, when I started, when I started working, I remember working for a high tech company just outside of Boston, and, and we were running tremendous backlogs. But we are producing a very high tech product, we are the only supply on the market with that particular product. So customers were willing to wait. But but that doesn’t mean that they liked it. Right. And if there was a competitor who had a shorter backlog, we would have lost some business. Yeah. So. So I’m familiar with this. And I believe that that lines are not inherently necessary, that they may temporarily happen, but but there is there is no justification for having a line, which doesn’t change in time, like in this clinic for three weeks. Okay, if the next, the next initiative. The next initiative had to do with customer experience. And I remember a very nice podcast of yours, devoted to the topic some time ago. A customer experience is a is one of my pet peeves, one of my favorite topics, because I believe that there is I mean, I have not met a company, which didn’t have a problem with customer experience. You mentioned your problem with the Wall Street Journal when you wanted to terminate your subscription. I had similar problems with with big names in business when I want to terminate subscriptions, or, or or I went for a for a free trial, and then did not decide to buy a subscription. And they just badgered me and saying Why don’t you want to check? Why don’t you want to buy? Why don’t you want to buy? I mean, what’s wrong? And why did you go with the with the free trial period? I will not mention the name. It’s a well known name, big American company. They but anyhow, this is this is a problem, which afflicts not just clinics in the UK, it afflicts clinics in every country, including the US, of course, not every clinic, not every doctor, I’m talking about the human side of the service, not the medical side of the service, but the human aspects of it. human aspects which are very important to too many patients, patients don’t want to be treated like like cases of sickness. Like Well, Doctor houses, I guess a good example. He was solving problems rather than helping humans. In in Hollywood, it made for a good for a good series, but in real life, we all want to be treated with with some kindness and some empathy, especially if we have a serious medical problem. We focused on that. And, and that was, that was not easy, because in the UK, the doctors had a strong financial motivation to cut the time of the visit, you come to the time of the visit, that means you can see more patients. Well NHS pays you for the number of patients that you service. Even if you are doing it in the free market. With given prices the more patients who service the higher, the higher your revenues and your bottom line. But we decided to go the opposite way we decided to extend the time of each visit. So that the doctor would have a chance to see a human being to have a talk if that person wanted to if the patient wanted to just talk about even non medical staff just have a little bit of gossip. We did that to put the patient at ease. And and it worked quite nicely. Patients really appreciated that and we saw it and I’ll explain in a moment why how we saw it. So that was that was another another element. Another initiative. The typical problem with patients is not are not with patients this time not with doctors is no shows, patients forget about appointments, or the plans change, something comes up. And not all of them had the good manners to call in advance and inform the clinic. So the clinic is left with 15 minutes or 60 minutes empty, no revenues, no income, all the costs. We tackle this problem in, in several ways, automatic text messages to the patients today before with a one key response from them to cancel the visit discounted services to stand bys. So we have patients who, who wanted to save money. And they would simply be standing by waiting for a phone call saying look, we have an opening, you can come in, if you can come in 15 minutes, we can take you. And we also had a small penalty fee, we introduced a small penalty fee, that was a little bit risky. But we did it for patients who did not inform us in advance of a canceled visit. So we charged them a percentage of that of that visit. And if he was not there to generate income, it was there to motivate the patients to call in. And it worked. Even the small amount a couple of quid was enough to have the patients remember the big profits that we that we generate pretty quickly after we took over, we invested all of that in upgrading the facility, turning it into the best equipped and the most computerized clinic in town and earnings reputation for top shelf. And then another thing, and here I am going to relate to another podcast of yours which I liked very much. We involved all the patients in the waiting room in service. So rather than have them look at the wall, we gave them surveys to fill out either on paper or on a tablet, whatever the preference was. And we asked them, we asked them what they liked, what they disliked What metric to them, what they would like to see change. And we found not surprisingly, that the focus was on non medical aspects of the service. That was opening hours waiting time, especially in urgent cases, prices and good communication from the dentist to the patient. And you can probably recognize because each of these items I covered earlier in initiative. So we took these initiatives because a we knew that these were good initiatives. But our knowledge was confirmed by what the patient said. And we started out with the ones that were the topics that were most popular among the patients. So listening to the customer is important. And it sounds very simple, and many companies as pounces, but not many companies do it sufficiently well.
Will Bachman 33:15
Yeah, well, and the fact that you use the term customer is interesting, because a lot of times it’s more they just think of it as patients but not really thinking that there Oh, these are also customers that have a choice. The sounds like really transformative efforts that you made at that at that clinic. Well, Adam, for folks that wanted to find you and you know, follow up, maybe reach out to where would you point them online?
Adam Anderson 33:47
Well, there is a there is a website of Palo Alto business solutions. There is also my my profile on on LinkedIn, I’m happy to to communicate with anybody who contacts me. I know there is more than one Adam Anderson but there is only one in Warsaw in Poland. On LinkedIn, and the my, my email address is a as in other Mandersohn at pa as in Palo Alto, dash, Bs as in business solutions.com.
Will Bachman 34:23
Okay, fantastic. Well, we will include that info in the show notes. Adam, thank you so much for joining today.
Adam Anderson 34:31
My pleasure. Thank you again for having me.