EP48: The Theory of Constraints - Abandon or Persuade
The theory of constraints dominates the world of business, and yet it tends to be ignored by almost everybody in business for a pretty simple reason: it's politically unpalatable. The theory of constraints says your business is a system, and every system has one and only one constraint.
And that's the only thing you should be working on right now: understanding that constraint, characterizing it, coming up with an investment thesis, making the investment, or observing the results of the investment. The investment is something like better cycle time, increased throughput, more units that are doing the work, or better quality. Those who employ this practice will dominate markets.
What we tell you here at Market Dominance Guys is that there’s an environmental constraint on businesses, which is gaining the trust of your prospects. How do you do this? In other words, what’s your investment? Have conversations with them! Do you have to wait till they're ready to buy? No, have the conversations now, and the relationships you create will begin paving the road to trust, which leads to eventual sales.
The main challenge as you narrow your focus down to this one constraint is keeping all the human beings in your own business happy and willing to allocate enough resources from the business to solve this one constraint issue, one bottleneck at a time. Join Chris, Corey, and Jake Housdon as they discuss this challenge, as well as how to successfully employ the conversation-first investment.
About Our Guest:
Jake Housdon is CEO and co-founder of SDR League, the world’s first esports league for salespeople.
The complete transcript of this episode is below:
Corey Frank: (00:35)
So welcome to another episode of the Market Dominance Guys with Corey Frank and the sage of sales, Chris Beall, with us today. We are very pleased to have Jake Houston. And Jake, for full disclosure, is Canadian. So we will have subtitles as appropriate. Susan we'll add those where needed; when he uses words like a boot or a lift or whatever else you guys do. So Jake is the co-founder of the SDR league; which we'd like to talk a little bit about today; certainly, which is the world's first E-sports league for salespeople. Something that before I had a bad shoulder 20 years ago, I'm sure I would have participated, right Chris? Chris has kind of gimpy knees, but we were kind of the older guys. Maybe we can come in for an inning or two of relief, but we'll see. We'll leave it to you guys, like you and Ryan and the younger guys, to set the records. All of Chris and our records are in the books.
Corey Frank: (01:31)
You and Brian and the new guys will have a little asterisk next to yours. You have weapons like ConnectAndSell and Outreach and everything else to talk to more folks. We had rotary dials, so our fingers are all knuckled up. So before Jake did the SDR league, it was a CRO of an EdTech company and currently your director of SDR development at dialogue. So we're pleased to have you today, Jake, and Chris and I do not have guests on very often. So when we do, certainly expectations are very great, but we know that your reputation precedes you very well, Jake, and I think we would just jump right into it.
Corey Frank: (02:07)
As we were talking before we hit the record button, Chris was talking with you, Jake, about the theory of constraints and the series of constraints that's germane to us as salespeople today seems to be the sales reps, rattling the marketing cages and rattling the SDR cages and said, "Hey, where's my leads? Where's my demo's." And then God forbid, we actually fill the top of the funnel and then what happens after that, right? Chris, how would you frame that up for you and Jake here, since we were talking about it just a few minutes ago about this very same issue.
Chris Beall: (02:45)
The theory of constraints dominates the world of business and yet tends to be ignored by almost everybody in business. And it's ignored, I think, for a pretty simple reason, which is it's politically unpalatable. When you think about a theory of constraints of your business, a system, every system has one constraint, one and only one constraint. And that's the only thing you should be working on right now. You should be investing in either understanding that constraint, characterizing it, coming up with an investment thesis, making the investment or observing the results of the investment. The investment has always been something like better cycle time, increased throughput, more units that are doing the work, better quality. And the reason we don't like it; none of us like it, there's not a human being on earth who likes it except for Eliyahu Goldratt; the guy who came with it; is that it says there's only one thing right now to invest in.
Chris Beall: (03:34)
Therefore, here's the parentheses; it's probably not what you're doing. It's probably what somebody else is doing. And so that makes everybody feel that, right? Imagine a budget meeting if we said we're going to address one constraint next year. Just one, right? That would be an improvement for most businesses, by the way, if they get up from zero to one, that'd be pretty good. So we're just going to do one. So Jake, we suspect by all the measurements where we're doing the inventory in the form of prospects builds up in front of the sales development function and the discovery function is starved. So we think you've got the constraint and we want to go in and characterize it and you go, "Yippee!"
Chris Beall: (04:18)
So great. You're going to focus on my stuff. And that means, Oh, by the way, the salespeople who are doing discovery, you're going to ignore you completely. The folks who are providing the data, we're going to ignore you completely. All we're going to do is focus on Jake. So now Jake's important and he gets all the budget money, and everybody else gets to sit around and wait until 2021 or two or whatever it happens to be. Right? So nobody likes it. But those who practice it dominate markets. And in fact, when you look at market dominance, guys, the whole of what we're saying is there's an environmental constraint on businesses, which is the people who need to trust you, trust you yet. The answer is not enough of them. So go get them to trust you. How? Have conversations with them. Do you have to wait until they're ready to buy?
Chris Beall: (05:05)
No. Have the conversations now. Cheat, right? Condition the market, pave the road, cheat. That's how it works. And you said, right, as we were coming on aren't that analytical? I'll tell you. That's not the problem, even though it's true. The problem is doing it right is politically unpalatable because it feels de-powering to everybody else. And then as soon as you do it right, you get this problem. You create a flood of output from your constraint, usually, assuming there's enough input, and whatever the next function is downstream becomes the constraint and they don't like it. They wanted it to be easier. They didn't want to be under the spotlight. That happens a lot. Have you ever seen it?
Jake Housdon: (05:53)
Yeah. When you depict it that way, Chris, it seems like the main challenge then is sort of keeping all of the human beings happy as you go about narrowly focusing on the single constraint, right? Because Ryan and seemed to debate this one a lot; whether it's process before people or people before process. But at the end of the day, these organizations are just groups of human beings. And it'd be nice if we could just sort of sweep aside all of their sort of feelings and everything else and just kind of drill down on that.
Jake Housdon: (06:20)
But I think what you're saying is that the challenge is that the political factors at play with everyone's sort of different wants and desires within the business is what makes it difficult for leaders to take that focused approach, to identifying and characterizing that bottleneck and then addressing it and then following it and allocating enough resources from the business behind solving that one bottleneck at a time. It seems like it's probably a kind of human problem more so than anything based on what you're saying, which makes a lot of sense to me.
Chris Beall: (06:55)
You've nailed it! Isn't that something? Corey, you nailed it. I'm setting you up to be CEO of my next company cause I'm always the constraint and, yeah, you've nailed it. My fiance goes on stage and talks about the years of research that she's done on digital transformation. And she works for Microsoft. She was a global digital transformation leader; their sales leader; and her conclusion was it's culture. Ultimately, the technology can't get the job done without the culture. And I think you've just put your finger on what the cultural issue is, which is that it's like an Uber constraint and everybody's got to feel good enough.
Chris Beall: (07:34)
That's fascinating. So how do you do that? Corey is the master. How have you been Corey? How have you kept everybody happy?
Corey Frank: (07:41)
Everybody knows within the sound of my voice, that how I fix it is hang on, let me get Chris Beall on the line and let me tell if I can get the answer. But then if you're busy, I'll call Ryan or I'll call Steve Richard. So that's how I've been able to do it. I think, Jake, what you were leading to when some of the correspondence we had prior to this to answer Chris's question is that the revenue problems seem to start upstream in a business and with this conversation flow and this mystique that, "Pipeline cures all, right Chris?" How many books have we talked about that? It just gets more pipeline. But then what happens if the pipeline is a little sickly, right? What do you do in that regard?
Corey Frank: (08:23)
What cures sickly pipeline, would you say? This is what Chris and I were talking about, jake, before you jumped on, is talking with another gentleman whose colleague, a former board member of Chris's and talking about some of the clients that he deals with and that as soon as the SDR, the BDR function fills that pipeline as Chris was iterating on the constraint. Now the sales reps go from, "Well, I just want any conversation" to "Well, I want a particular type of conversation." They try to be in search of the perfect pitch as opposed to getting frequent before you get good as we talked about with Oren Klaff and a lot of the things that we do on flip the script.
Corey Frank: (09:04)
So have you seen that, Jake, is where you do such a great job and you get all the budget as Chris had iterated, and now you find downstream that the sales reps are saying, "Jake, the thing is I know you put 20 on my calendar this week, but I talk with 12 of them and six of them, if they could just be a little bit more X or a little bit more Y, then you nailed it, buddy. So keep those flowing, will you, but don't send me the other ones."
Jake Housdon: (09:32)
I think that's a massive problem. And I think that it's been succinctly stated by Chris. I think that it's really people think that the cold calls are the Google search, but that's kind of absurd. And it's actually the discovery is the Google search. And ironically, the discovery is where all the best discoveries are made, right? I think what it comes back to is just the prominence that the eight-year-olds have given within the sales org. And I think that's something that is just because they're closer to stroking the cheque that people elevate the AAE role to an extent where they kind of put down the SDR role a little bit, frankly. And I think that you end up uncomfortable to have conversations that are less perfect, let's say, right? And so I think that again, human beings just naturally shy away from that discomfort.
Jake Housdon: (10:20)
And when the authority level is sort of in the hands of the AAE, then that's where you get a lot of that bad behavior and stuff like that. I think we're seeing that change where people realize the whole pipeline cure it's all we've heard that forever. Outbound, just getting harder, I think, maybe? Maybe it's easier with amazing tools like ConnectAndSell now to your point about the asterisk earlier, but to Chris's point about the emperor being naked with emails and sales engagement platforms and things like that. Now you've got a lot of SDR teams where they feel like they're doing their job by just kind of clicking a bunch of buttons on a, on a platform or something. Right. So I just think that outbound is getting really hard. And as a result, the most effective thing now is the most uncomfortable thing, which is making the cold calls, having the conversations. And so it just leads to people, even not wanting to have discovery meetings that are less than perfect. I think we're seeing shift though, where people are like, wow, I, I see how incredibly important my outbound machine is.
Corey Frank: (11:17)
Let's take that for a second. So for Chris and Jake, let's say I did listen to my sales managers and my sales reps, and I wanted to alter tweak, change, quote, unquote, improve my SDRs to get them much more perfect discovery calls. What's the, in what's wrong with having my SDRs engage in a little, maybe instead of one band, maybe my effort is to get eight bat questions, right? I'm going to get two B's and two A's and two ends and two tees. And I'm going to put this massive freeform notes section, and then I'm going to put the ball on the tee. So my sales may get fewer conversations, but man, are they going to be qualified? What's what's real harm in that. Well, I think you're going to crank down the trust that you have in your Tam and the amount of relationships you have with people. Right? Because another thing that I absorbed is just that relationships, third binary, and I know that's something you talk about Chris, like either have one or you don't. Right. So I think that this notion of, I don't know, spamming your Tam or things like that is flawed thinking and that instead it's the whole nail-shaped pipeline instead of the wedge and all of that stuff that we should aspire to. Because at the end of the day, like we said, in the beginning, human beings are involved in business and speaking with them is how you go from that zero to that one. And if you try to sort of crank up the perfection and you, you end up cranking down the relationships and trust that you have, which are really the currency of business in the first place, right? So that's how I think about it.
Chris Beall: (13:30)
Yeah. Corey, I think about it in the very similar way would, when you think about it in detail, and this is one of the hard things about not as in manufacturing, it doesn't do much good to sit around at the coffee shop and talk about how your factories running, right. You've got to actually get in there and watch it run. And you've got to measure yourself and you've got to listen to it. And you, you got to be surprised. You got to be open to, Oh my God. I didn't realize that at that point. And on that conveyor where it turned on that little corner that you can't figure that out at Starbucks, she looked at the details and the deep conversation, cold conversation. There's a flip on the side of the prospect. Hopefully not on the side of the rep. The rep has to have their emotions and their beliefs in line beforehand.
Chris Beall: (14:14)
They're the machine. You can't have the machine changing its characteristics while it's processing the part. It's the part that's changing its characteristics and shapes because it's being processed by the machine, right? So the reps, the machine processing the part and the part isn't ready yet for the, so the next process say the next process is a kneel and you're going to put another, make it really hot and hard, right? So it's got to be shaped right? First. Otherwise you're kind of screwed. You put it in the oven and now it's too hard that to work in sales, we don't have enough trust built in order to go to the confession part until somebody shows that they're ready to confess by saying, they'll come to us. So when we ambush somebody, they are not by definition, ready to confess. There are exceptions and folks will hold those up.
Chris Beall: (15:02)
Oh, I had a great conversation with so-and-so first conversation. They told me everything about the business, blah, blah, blah. That's how you can tell you don't have a decision maker, right? You have a socializer. It tells you everything about their business because they're lonely and they want to talk. You know, but if you're talking to somebody serious, the evidence, the number one qualifying evidence that you're going to get it's that they agree to come to the meeting. And the number two qualifying evidence is that they come to the meeting. And the best thing for you is for them not to show up at the meeting the first time. So you can talk to them, furthering the relationship within the context of them being obliged to you because they didn't come to the meeting. So the best sequences, brief conversation, we talked about how to do it.
Chris Beall: (15:49)
Enough curiosity, to agree to the meeting, too busy, to go to the meeting. That means they're important. Call them back, reschedule the meeting. Hey, I don't know something must have come up for you. So when would be a better time to talk. And that is by the way, the biggest emotional problem that reps have is doing that. I'm offended. You didn't show up at my meeting. Well, I'm trying to find busy people. Of course they don't show up at meetings. That's how busy they are. They’re doing things more important than that. Today. For instance, I'm supposed to pick up a trailer today over at U-Haul and I'm going to drive my Chevy bolts up onto the trailer, put a bunch of paintings and stuff like that and hook it up to my excursion and drive it through Oregon back to Washington. But Hey, Oregon's on fire. I'm a busy guy. You think I'm going to pick up the trailer
Chris Beall: (16:33)
And I'm the customer.
Chris Beall: (16:34)
And you know, if they want to run a really good business that Uhaul and I love them. And they're going to, they're going to say Mr. Bill, but we're so sorry that you were unable to execute your mission and we're here to help you. Let's move this. When would you like it? Oh, next Friday. No charge. Right? And they have the moral advantage on me because I'm thinking I didn't pick up the trailer, right? So that's the advantage you want. Your ultimate way to build a pipeline is to have conversations with, with people you really want to meet with objectively in an ambush conversation, in a cold call, the prospect is not ready to confess. We don't have enough relationships. So we want that nail-shaped pipeline, that funnel and they'll shape the funnel. So when we're trying to generate a quality product at scale, the quality product is for folks to buy our product.
Chris Beall: (17:25)
We need to start with an input. And the input is the best list that we can put together in a short amount of time. And we shouldn't ignore timing. That's why going after going after timing, it's like the dumbest thing in the world. You want to talk to your whole market before anybody talks to any of your market. Therefore you need to talk to everybody and timing must stop yet concern. Secondly, we need to avoid the fantasy of believing that folks will confess to us before we have a relationship that is strong enough for them to actually tell us their business truth. The evidence for that relationship is that they will come to a meeting. So the ideal sequences, we talked to everybody that we believe intrinsically as qualified to buy our product, regardless of timing, and to make use of it. By the way I make money off it, we talked to them.
Chris Beall: (18:14)
We said as many meetings as we can, and we hope they don't show up. And the reason we hope they don't show up, then we can talk to them again. And that's evidence that they're busy people by the way. So we can talk to them again and say, Hey, you must've been too busy to attend this meeting. Can we reschedule? Eventually you will end up having the discovery meeting with them. And that discovery meetings quality has to do with how clean is the confession not did it lead to a deal? So one of the problems we have is we comp our account executives on the deals, but part of their job is just to discover. What's true. We look at the world in a quarterly timeframe, but in our customer base in our Tam 11, 12, set them are not possibly in a consideration cycle this quarter.
Chris Beall: (18:58)
So who's going to do that discovery work. I suppose we could reorganize and have sales development do discovery. And that could be done by the way, Jake. I bet we could do this experiment. If your organization was willing to do it is to train sales development on how to do product-free discovery and then pass off great stuff. So you have two kinds of conversations, one to set the meeting and then you would be holding meetings and then you'd be passing off, essentially done deals. And everybody would love you. Of course, you'd be doing the whole job too, but that's okay. Everybody would love you. And the account executives could just sit around and go, Oh, look, I got a check
Jake Housdon: (19:35)
Hundred percent. And that I think is what ends up happening with all of these forces at play? Is that that becomes the move, right? Because like you said, people want perfect timing. The compensation is based on closed deals, depending on how long the sales cycle is. And all of those things, the eight ease sort of appetite for how far out that timing might be in all of those things, then just impedes the trust-building in order for their confessions to happen and, and everything that you're saying. So I think that naturally what ends up happening is that sort of quest for perfection for the perfect meeting takes so much power that it like forces what you just said to happen, where, okay, well the correct model then to make our business function properly, if that's going to be your expectations is to bring something that's already had great discovery done and, or there's been a few truthful confession spilled already, and then sort of bringing that to the account executive and that model can work too, right? It's, it's a very different culture in terms of your organization and the trouble with it is what you said. It's that we're asking you a heck of a lot out of the SDR, right. And the pay that they make, usually doesn't reflect that in most organizations either there's the open, the close, right.
Corey Frank: (20:48)
So good. Are you at 50 50 in terms of the importance that, that each role has? Right. So that's some of the issues I play for sure. Well, it's difficult. I would imagine Jake too, in person, I've spoken about this in several episodes, that to develop that level of curiosity, which can carry the conversation to any real deep level of insight. Anyway, it's one thing as we always talk about to get from fear to trust and then trust to curiosity, and that chasm is large to get from fear to trust. Right? Chris, Chris and I have certainly we've talked about it. Certainly if Chris Voss, et cetera, it's about seven seconds, seven to 15 seconds or so, but that next chasm, that next hoop that I have to jump through to get from trust to curiosity, oftentimes that's where the empathy and the tone come in.
Corey Frank: (21:34)
And certainly the screenplay, if it's a great message, but a lot of it is really contingent on that, that BDR, that SDR to drive a sense of conversationality through their own curiosity. So it becomes a conversation and not an interview, not a hostage situation. So in that scenario, Chris, that you and Jake just outlined, that's a tough trait to train on. That's a tough trait to hire for, but yet is really contingent on if I wanted to change my whole organization to much more quality discovery at the top of the funnel versus just cold calls. Correct.
Chris Beall: (22:14)
So you got me thinking here and Corey, I, I think that we could do this in your business. Why don't you hire a good therapist and teach them enough about business, that they can hold a product-free discovery call, just think about it. You could do it and I could do it right. I could, I I'm confident that I can hold with, Oh, say two hours of education in a particular field, but I don't know anything about that. I could learn enough to hold a product-free discovery call. That was a lot of fun for the other person that was very educational for them because I'd have my three insights that are special that have to do with my company. I just joined two hours ago. Right. And I'm not motivated by anything other than learning the truth, because one of the problems you, you hit on it.
Chris Beall: (23:01)
One of the problems in discovery is the motivation is not to learn the truth. The motivation is to get to a deal. And as soon as, as an AEC smells that there might not be a deal. They either abandoned or begin to persuade. And to really bad things to do in sales are abandoned. You start to lose interest and then you sound like you've lost interest and nothing's worse than talking to somebody who's lost interest in you. So the other party is like, what's going on or you start to persuade to start to sell and it's discovery. It's not selling. Right. So I actually think these people are out there and they're out there in the boatloads of highly hireable need to learn business acumen. They need to learn to feel and think business while remaining open to possibilities. And that might be the missing role. Jake, we may have just had, we may have discovered a breakthrough
Jake Housdon: (23:56)
May have a breakthrough that completely eliminates the lack of trust in discoveries, right.
Corey Frank: (24:04)
Person in the think business. Yeah. I mean, what do you think about that? Curiosity trade, all the folks that you've had working with you over the years as CRO and VP of sales director of a biz dev, is there a proportionate connectivity here between curiosity and success or curiosity and their ability to maybe move into a sales role and the success they have there? Do you see any correlation?
Jake Housdon: (24:32)
Yeah, well, I certainly do. And I think that one of the things that's extremely difficult for people is that as they sort of get further in their career and learn things and become more experienced, it takes them further away from a nice Zen Buddhist word called shoshin, which is the beginner's mindset. Right? And I think that becomes one of the most difficult things is to really do good discovery. You truly need to be curious and sort of naive in some way as well, because as you get more experienced, you're fighting with yourself on the fact that things that come up, you're going to think you've heard this before and you know where this is going, and you're going to steer it a certain direction, which causes you to miss out on a whole lot of clues that, that ought to be discovered and potentially not create the right environment for people to spill their beans in that confession in an ineffective way,
Corey Frank: (25:24)
Like water as Bruce Lee would say, I love that Shoshin
Jake Housdon: (25:28)
Shoshin. Yeah. Shoshin beginner's mindset. And this is a whole other topic, but I think a problem in sales is beginners are, are often sort of looked down upon and, and stuff like that a little bit. And I think that sometimes they have some of the more valuable insights for your business. And so maybe in that way, it does make sense for SDRs to be doing discovery, right. Because they are usually more so beginners. Yeah. It's pretty interesting.
Corey Frank: (25:52)
I think it was from a Lao-Tzu or Confucius or a fortune cookie that I had, but a mentor of mine would always say kind of the evolution of a great salesperson is a three-step process. It's number one, it's ironic that we're talking about this that says I know nothing. And then number two is I know everything. And then number three is I know nothing. And I think some of us stop at maybe the second piece, maybe some of us stop on the first phase. But I think certainly the practitioners of the craft, the true searchers that we know, and we admire right. Continue with all three.
Jake Housdon: (26:33)
Yeah. A hundred percent that reminds me of something else it's on a slightly different gear, but it's these extreme dualities, right? That you have to grapple with. The other one is the whole notion of detaching from the outcome. You know, that, that we like to talk about it. And Josh Brown, he talks about commission breadth and, and how people can smell your commission breath and all these things. And it's the same thing where you have to close the gap between yourself as a human being and yourself as a human being with a sales quota, strapped to your back, that you're gunning for it. Right? And the best people in the world that I've seen, they close that gap, very elegantly. And, but what it is is this dance of thrashing between the two, as you learn, because at first you have to learn certain sales tactics and how to have a cold conversation and these things, cause they're not natural necessarily ways to speak to people, right.
Jake Housdon: (27:16)
It's kind of different than the way we might have a normal conversation. So you need to be strategic like that, but you also just need to remain yourself. Right. And that's the real tricky part. And then I think that's maybe why you land into third place again, of not knowing once again, because you had to, you didn't know, then you had to learn stuff and then that stuff messed you up a bunch along the way, because it messed up your ability to do certain things. But then at a certain point, you've done that stuff so many times that it just becomes like part of your soul. And I think that's the promised land to get to. But the thing I was talking about with detaching from the outcome is you simultaneously have to care everything about trying to help that person, but you also need to care nothing at all about whether you actually can't. That's a very weird thing for people because we're emotional creatures.
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