Archive for the ‘Product Management’ Category

How great design can set you apart from competitors

If I could rank all of Steve Jobs’s business lessons, the importance of design in supporting business success would top my list.

Don’t take my word for it, though. Many global market leaders, and not just in fashion, electronics or luxury brands, drive growth by continuously enhancing product design. However, companies without a design heritage or capability can also use this strategy to improve revenue and brand image.

In a simplified process, designers working in collaboration with product managers and engineers take creative ideas and marry them with a customer’s requirements and the company’s goals. The integration of this effort hopefully leads to the creation of an aesthetically pleasing, functional and profitable product. Design is the sum total of the properties of a product or service made up of the form (i.e., the aesthetics around look, feel, sounds etc.) and the function (i.e., the practical benefits delivered). Good design can help a company create or dominate a category (think iPhone); poor design can kill a brand (remember the Edsel).

Design isn’t just the purview of high-end, iconic consumer brands such as Apple, Louis Vuitton, Nike, and Bang & Olufsen. Some B2B manufacturers such as IBM (laptops), Herman Miller (office chairs) and Olivetti (calculators) have used product design leaders to dominate their categories.

Then there’s successful and well-designed brands including IKEA, Samsung and Canada’s Umbria, which have proven neither price nor a Paris, New York or Milan address are required for using design competencies as a key differentiator.

Nor do you need a large investment or a creative studio to compete on design. Take, for example, the experience of one of my clients — a manufacturer of high performance automation systems. The company, challenged to build market share without resorting to price discounting, tweaked its product designs and saw an immediate boost to revenue and brand image. Research showed buyers perceived little difference between products (not unexpected since the systems looked remarkably similar) despite the fact that system performance and warranties varied significantly. Not surprisingly, pricing was their key purchase driver. To stand out, the company had to leverage other attributes.

Management agreed to run an experiment: redesign its product demo to make it visually appealing and high end, then gauge its success through prospect and client feedback. This involved some simple design changes — repainting certain components, enclosing messy cable assemblies and enhancing the documentation and packaging. The response from the sales team and prospects was overwhelming. Sales closing rates and perceived product value jumped. Based on these results, the CEO decided to redesign the entire lineup.

Leveraging design is not for the impatient, undisciplined or risk adverse. World-class firms build internal competencies and ensure they become part of their cultural DNA.

Three best practices to achieve this are:

Learn Acquire a deep and multifaceted understanding of your customers’ needs (including sub-conscious drivers of their behaviour), as well as an understanding of emerging trends, such as mobile computing. Be mindful of Sony founder Akio Morita’s observation that consumers often fail to see the appeal of a breakthrough product on first hearing about it (the Walkman in this case). Keep the creative juices flowing by being plugged in to what is happening in complementary industries and related fields such as technology, nature, entertainment and fashion.

Build Assemble the right ingredients — talent, tools and processes — then give them the freedom to follow a vision consistent with the company’s goals. Collaboration is essential; designers should spend much of their time working directly with the product development and operational groups as well as external partners. Employing the right knowledge management systems and metrics will help ensure design excellence is institutionalized, cultivated and effectively managed long term.

Persevere Making these changes stick requires strong leadership, the pull of motivational values and goals and perseverance, not to mention a re-balancing of priorities. Internal alignment won’t always be easy especially when you are asking engineers and production managers to collaborate with designers. Finally, you need to be realistic. Not every new design, no matter how elegant, will be a hit with customers.

Mitchell Osak is managing director, strategic advisory services at Grant Thornton LLP. He can be reached at Mitchell.Osak@ca.gt.com Follow him at Twitter.com/MitchellOsak

Retooling product development

The success of companies like RIM, Sony, P&G, Apple and GE depend heavily on their ability to develop and launch compelling products on time and on budget. Alas, few organizations are consistently successful.  Plenty of market and academic research shows that upwards of 90% of all new products fail to hit corporate objectives within 3 years, resulting in missed market opportunities, wasted capital, and damaged executive careers.  These breakdowns have many culprits, as we have written previously.  According to a recently published article in the Harvard Business Review, the primary cause of new product failure lies in flaws within the conventional product development approach. Addressing these shortcomings can improve a firm’s ability to successfully design and launch new, innovative products, thereby improving time to market, enhancing product appeal and reducing business risk.

In our experience, a new product’s evolution follows a common trajectory: project managers are tasked to deliver mission-critical yet ambiguously defined new products on time and on budget. In turn, managers cajole their teams to write detailed plans, to remain frugal around program spending, and to minimize schedule variations and downtime. Changing market and client feedback as well as shifting internal priorities complicate matters.  Managers never [sic] seem to have enough resources to get the job done.  All the while, their superiors continue to insist they adhere to predictable schedules, budgets and deliverables. This rigid approach, which may work well in turning around under-performing manufacturing lines, can actually be hurting the product development effort.

The article’s authors, Stefan Thomke and Donald Reinertsen, identified a number of fallacies around the standard product development process that produces delay, compromises quality and raise costs.

Sticking to “great” plans

Many companies put inordinate faith in their new product plans.  However, we have never seen a project plan remain unchanged throughout the design and commercialization process.  Slavish adherence to a first generation plan – no matter how well crafted – will often lead to poor outcomes since product requirements often change, new customer insights are discovered and operational processes take time to solidify.  This is not to say that upfront planning is wrong; managers just need to ensure their kick off project plans and goals are flexible enough to adjust to changing financial assumptions, new customer and channel feedback and actual operational lessons.

The higher resource utilization, the better

Conventional wisdom says that the busier the product development group, the more efficient they become.  The reality is often the opposite.  After a certain point, more work inevitably leads to more setbacks and lower quality work.  These diseconomies of scale trace to the intrinsic variability and opaqueness of development work. Delays can result from multiple projects queuing, the difficulty of managing stressed knowledge workers, and the challenge of working with semi-completed actions and milestones.

Another unexpected problem with running a fully utilized product development group is the tendency for executives to start too many projects reflecting shifts in corporate priorities or personal agendas.  Furthermore, product managers and developers abhor idle time and look to further their careers with new initiatives.  They tend to launch more projects than they can realistically complete given existing resources and reasonable timelines. All of these organizational issues dilute resourcing on all projects and triggers delays for the real high priority projects.

Get it right the first time

As in life, it is challenging to get things right from the get go when there is a high degree of uncertainty. In virtually every company we have worked with, there is always an inordinate amount of pressure on the team to get the execution right the first time.  The problem with this imperative is that it often leads to sub-optimal results (especially when linear project management approaches like Six Sigma are crudely employed). Specifically, the team will often default to the least risky – not the ideal – solution; true project costs tend to be pushed out beyond the initial project horizon and; employees have little incentive to pursue innovative alternatives.  This last point can be particularly dangerous because employees will cling to bad ideas longer than they should.

Organizations can take a variety of steps to overcome these failings, including:

  1. Treat the project plan as a work-in-progress that should evolve to reflect new information and conditions;
  2. Commence projects only when there is a full organizational commitment and sufficient resourcing to ensure success;
  3. Utilize parallel, not linear, project planning schemes to avoid delays and illuminate problems earlier in the implementation process;
  4. Employ quick feedback mechanisms instead of first pass success to rapidly inculcate new customer and operational learnings;
  5. Tolerate some resource slacking to preempt project delays and foster creative solutioning.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Cut complexity, boost profits

Companies in industries as diverse as consumer and industrial products, banking, IT and telecom looking to sustain growth and reduce risk will naturally evolve towards a high degree of business complexity. The level of complexity will be directly correlated with the range of products and services offered, the intricacies of the operations, and the organizational structures deployed. Not surprisingly, complexity (both visible and hidden) come with an expensive price tag including unnecessary input, production, and selling costs as well as operational lethargy. Companies that can eliminate needless complexity and prevent its return will build margins, increase agility and improve resource allocation.

Cutting complexity is a significant enterprise-wide opportunity for organizations. Complexity reduction projects can produce more than $10-million in annual savings by eliminating labour redundancies, consolidating raw material inputs and optimizing supply chain networks. Moreover, indirect benefits such as higher productivity, fewer errors, and better employee engagement were forecasted to generate up to twice the amount of direct savings. The Boston Consulting Group estimates firms with the right strategies and cost transparency can realize a 25% to 100% increase in profit margins.

Excessive complexity is often found in organizations with the following traits:

A strong ‘customer is king’ mission

Many companies go overboard satisfying customers with little regard to the long-term organizational impact. Managers regularly offer new products, features and marketing programs to customers as specials or targeted against small niche segments. Inevitably, product proliferation occurs, and with it comes complexity challenges around inventory management, production scheduling, and sales efforts.

Matrix-intensive organizations

For many firms, a matrix structure is the default organizational model.  As these companies grow, so does the complexity especially when the structures and processes are poorly designed and implemented (e.g., overlapping roles & responsibilities, inadequate information flows, unclear decision rights). Complexity is manifested through process redundancy, increased conflict over mandate & priorities, and slower decision making.

Complicated supply chains

Most large firms maintain a large (often global) network of suppliers plugged into a convoluted supply chain. Managing this network is inherently difficult in the best of times. However, one small change in the external environment like adding a new supplier or connecting to a new IT system can dramatically increase operational complexity within the firm.

It should be pointed out that not all complexity is created equal. Clearly, some actions and choices are needed to reduce business risk, maintain core competitiveness and retain important clients.  However, problems arise when the revenue or value derived from these activities is far below the actual, enterprise-wide cost of delivering them. The management challenge is to separate the good complexity from the bad complexity and to deal with the bad. 

To do this, managers need visibility into the problem, some strategies for tackling complexity across the organization and the fortitude to prevent its return.

1.      Understand the problem

You can only fix what you can see. Conduct a product, department or company-wide review to comprehend the scope of the complexity problem. You could start by analyzing how each SKU within the product portfolio or extensive activity in a major value chain contributes to revenue, margin or enterprise-wide cost.

2.     Identify the culprits

Complexity follows the “80/20” rule – typically, 80% of complexity will trace to 20% of products or activities. The analytical challenge is to identify these 20% margin-killers, while safeguarding “good” complexity like strategic stock keeping units (SKUs) or prudent risk management activities.  Once the culprits are identified, managers should break them down into their component parts for analysis. For example, SKUs can be broken down into ingredient and packaging inputs. A value chain can be mapped into discrete processes, touches and approvals etc.

3.     Start Pruning

Once managers have the data, it’s time to reduce the logjam. Below are three common strategies for cutting complexity:

Consolidate and streamline

With products, look for opportunities to eliminate poorly performing SKUs and to consolidate the number of raw material and packaging inputs that go into the remaining portfolio. To reduce operational complexity, consider ways to minimize or remove unnecessary touches in areas like internal reviews, team & communication practices, and sub-optimal processes.

Bundle to increase standardization

Some companies have the ability to standardize complexity. For example, automotive and PC makers have been successful at combining dozens of product features, styles etc. into standard consumer bundles that could more readily be manufactured, inventoried and sold in volume.

Price for complexity

Some businesses must learn to live with certain complexity due to key client or regulatory demands.  In these situations, managers should look to recoup some of the cost of complexity by raising prices – and communicating these reasons to customers so as to manage churn.

Never going back

Pruning can often be the easy part. The bigger challenge might be ensuring the complexity doesn’t not return. Managers need to take steps like instituting disciplined product line management systems to make sure complexity does not creep back.

Although a strong customer focus, powerful supply chain or large product portfolio can differentiate a company, it can also burden it with undue complexity – much of it hidden and insidious.  Firms can unlock significant savings and accelerate the speed of their business by systematically tackling the complexity challenge.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Turning industrial waste into gold

The idea that waste from a manufacturing process can be reused or sold is fairly well established.  In agriculture, cast-off corn husks are being converted into animal feed, while discarded cow parts are turned into everything from leather to jet engine lubricant. Harvard Business School professor Deishin Lee has pushed the notion of waste management even further with her concept of “by-product synergy.” As outlined in the school’s Working Knowledge newsletter, BPS is about taking the waste stream from one industrial process and using it to make a new product. According to Lee’s research, a BPS strategy can: 1) boost profits by reducing waste disposal fees;   2) create new revenue streams by using the waste to develop new products;  2)  decrease the environmental impact of a process and;  3) improve operational efficiencies through increased manufacturing utilization. 

Virtually every manufacturer defaults to a disposal or sale strategy when dealing with waste.  BPS looks at waste more strategically by asking a simple question:   What is the maximum value that can be extracted from the by-products given existing inputs, processes and capabilities?   At its full potential, BPS leads to the development of new products, derived from the by-product waste, and delivered through the same production process.

To tie her conceptual thinking into a practical tool, Lee developed a scenario-based model that is driven off the relative value of the original waste-generating product, the cost of waste disposal, and the cost of raw materials:

Scenario 1 – Waste has low value and utility  

Since the by-product is of low value, a company should not commit too much time or capital to repurposing the waste.  To maximize profits, firms would seek to dispose of the waste through traditional means and look for easy and inexpensive opportunities to turn some of the waste into a new product.

Scenario 2 – Waste has significant value and utility

As the value of the waste increases, managers would explore how to “productize” it within the existing operational model.  In some cases, there may be a profit incentive to actually increase the production of the original product in order to generate more “waste.” Though profits of the legacy product might fall due to market saturation or reduced operational efficiencies, the incremental revenue and profits from the secondary product could more than compensate for the loss.

Lee uncovered this insight in her study of Cook Composites and Polymers Co., a manufacturer of gel coats for premium yachts. One of the by-products created in the manufacturing process was styrene, a chemical used to clean molds between batches.  Interestingly, the firm discovered  styrene can also be used to make coating for concrete. Through productizing the styrene waste stream, the company gained more options to optimize the joint production process, creating a win-win situation for both products.

The operational benefits of manufacturing multiple products in one line will not always be apparent. Competing product priorities could generate capacity and workflow challenges since BPS implies a proportional volume relationship between products.

Scenario 3 – Waste is more valuable than original product

The company may discover that the by-product is more profitable than the legacy product. In this case, a consumer goods producer might deal with the problem by sourcing virgin material to create more of the secondary product. Not only does the company reduce costs for the original product by cutting down on waste, but it also gains competitive advantage over other firms for the secondary product – who are limited to sourcing virgin material.

Environmental questions

While BPS can deliver new revenues and greater operational efficiencies, its environmental benefits are not always clear cut.  According to Lee, “As you create more value and demand for your by-product, and you increase the quantity of everything, then emissions might increase, depending on process characteristics. That could be the unfortunate part of being successful.”  Furthermore, it is hard to quantify the net effect of a joint manufacturing process on the environment, as BPS may change the nature of the environmental impact.  In essence, Lee asks “Is it better to have carbon emissions or toxic waste in a landfill?”

Manufacturers with hundreds of inputs and complex production processes could face a dizzying array of BPS options.  To choose wisely, managers should apply a market lens to focus on what current customers want and what the company is well-positioned to produce. Properly planned and managed, BPS can be the alchemy that turns industrial waste into gold.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Beyond the hype: business-centric social networking

Businesses have not ignored the potential transformational effects of social networking technologies like Twitter and Facebook on their own processes, knowledge management and communication systems.  Today, many large IT providers like SAP, Oracle, Microsoft, IBM and Salesforce.com are attempting to capitalize on this interest by developing new enterprise-level social networking products.   These “social platforms” promise breakthrough advances in employee collaboration, knowledge transfer and communications.  As a result, the global market for social platforms is expected to jump from $630 million in 2011 to $1.86 billion by 2014 (source:  IDC).

Potential value

According to the gurus, business-centric social networking will not be dissimilar to what millions of people do everyday with their friends on Facebook, Twitter and LinkedIn.  That is, find new ways of sharing different kinds of information;  break down departmental silos; foster new communities and; enable the emergence of new forms of customer service and team collaboration.  The business impact will be transformational if companies can get the technology, use case and business processes right.  Although social platform adoption is in its infancy, a number of global companies are already blazing a trail:

Dell

Dell is looking to social networking to enhance collaboration and streamline operations.  They have rolled out Chatter, a new Salesforce.com product, across the organization touching all 113,000 of its employees. Chatter allows Dell employees to share profiles, comment on projects and “follow” colleagues as well as important business processes such as invoicing and sales pitches. The Company found that Chatter was effective in improving the connection between its sales team and manufacturing, which helped the firm better meet its customer delivery promises as well as manage overall expectations.

Cisco

Cisco is leveraging social networking to “flatten the organization” in order to improve productivity and accelerate projects. In this model, Cisco is using their proprietary social networks to rapidly form and deploy product & project management teams. Based on internal successes, Cisco has turned this unique social networking tool into a new product called Quad.  This enterprise-level social network solution integrates with business and Internet content management systems and includes Facebook-style status updates and instant messaging.

Current challenges

Widespread corporate adoption of social networking faces a number of significant behavioral and management challenges.  For example, the uneven market experience of existing collaboration and knowledge management systems suggest that achieving ubiquitous, responsible and consistent employee usage will be a challenge.  Furthermore, having social networking on all the time can divert employee attention, reducing overall productivity. Finally, as has been demonstrated with Twitter and Facebook, there is a tendency for some people to over communicate and generate excessive information, creating data paralysis and process slowdowns.

Today, creating effective social networking applications for the enterprise space is still a work in progress. Conceptually, there should be a lot of value added to the organization but the benefits will be different for each process, worker and department. Before business-centric social networking really takes off, there needs to be some proof that these technologies and approaches deliver real process and customer value with minimal risk.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Reduce product selection to increase sales

Many company’s under perform for a reason that appears counter-intuitive:  too much product selection.  Whether shopping in an online or physical environment, many well-intentioned consumers become befuddled from a plethora of products and configurations and end up purchasing less than was originally intended.  These missed buying opportunities can sink product plans, spoil capital investment decisions and hinder customer satisfaction scores.   Moreover, excessive product selection can spawn system complexity resulting in sub-optimal service and support, reduced scale economies and increased error rates.  Recent thought leadership by consulting firm, Booz & Co., explored this marketing challenge.

Consumers seem to want more choice but shop at their own peril.  In 1949 the typical US grocery store stocked 3,700 products.  Today, the average supermarket has 45,000 products with the typical Walmart stocking around  100,000 products.  For service businesses, the number of different product combinations can be mind-boggling.  Starbucks, not content to offer only 87,000 drink combinations, recently launched the However-You-Want-It Frappuccino, with “thousands of ways to customize your blended beverage.” Not to be out-done, Cold Stone Creamery provides customers with 11.5 million ways to customize their ice cream through a menu of mix-ins. 

Some psychological studies analyzed the negative impact of too much choice. One study looked at participation in defined pension plans.   When the plans offered only 2 funds, 75% of the relevant employees participated. When the plans offered 59 funds, the percentage of participants fell to 61%.  Similar finding around “choice overload” have been observed in other situations as varied as buying chocolate, applying for jobs, and making healthcare decisions. 

Why does a person’s behavior change when faced with an excessive number of options?  Cognitively, individuals find it very difficult to compare and contrast the features of more than about 7 different variables. There are neurological limits on a human’s ability to process information.  During choice overload, the task of having to choose will often generate frustration and suffering, not pleasure. Not surprisingly, buyers may skip the purchase altogether, reach for the most familiar item, or make a purchase decision that ultimately leaves them far less satisfied than what they had expected to be. 

In market research, consumers often say they want more selection.  Company’s willingly oblige by offering more products that target ever narrower needs and niches.  What marketers should do is give consumers what they really need: new ways of shopping and an optimized product mix that reduces the cognitive demands of choosing.

There are a number of ways to do improve the choosing experience:

  1. Cull the number of options. A combination of quantitative modeling, product rationalization and qualitative techniques such as ethnography can be used to design the right product mix.
  2. Foster confidence with expert or personalized recommendations.  In categories where variety matters like music, apparel and food, some companies such as Nordstrom and Amazon use recommendation engines  and product experts to help guide customers through the purchase cycle.
  3. Categorize the offering so that consumers better understand their options.  One useful approach is to group products according to certain characteristics or usage patterns.  This enables consumers to quickly eliminate unwanted options and get to a decision faster.
  4. Condition consumers by gradually introducing them to more-complex choices. Consumers will embrace more complex configurations after they have been warmed up on simpler offerings. Beginning with fewer options also helps consumers better understand their own preferences, which in turn, enhances their choosing experience.

Clever companies know that happy consumers purchase more and are more loyal when the product selection process is simple. When it comes to designing the product portfolio and process, less is usually more.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Choice Modeling: Polishing the Crystal Ball

When it comes to designing products that customers will buy in droves, the stakes have never been higher.  Despite billions of dollars of investment and countless hours of R&D, 90% of all new product launches will fail within 3 years of hitting the market. Furthermore, many products live as ‘walking wounded’, suffering from low market share, profitability and market differentiation.  The challenge is deceptively simple:  what is the ideal product that balances customer appeal, product profitability and supply chain fit?  The answer can be devilishly complicated, given the myriad of product combinations that could be delivered through different supply chains and sold in a range of markets.  

Fortunately, there are powerful, new analytical tools and methodologies that can help.   One of these techniques, Choice Modeling (CM), can improve new product success rates,  reduce business risk, increase customer knowledge and help define the optimal combination of features, services and prices for existing products. (Another powerful tool is CRM-driven data analytics)

Choice Modeling

As an approach, CM is part science and part art.  CM uses high-performance computer simulations and econometrics to understand and predict customer choice under various product configurations, market and environmental conditions.  In the past, marketers could only rely on simple statistical tools like regression analysis to understand a small set of cause and effect relationships between variables.  Thanks to CM, a firm can now dramatically accelerate the scope, depth and speed of their product analytical capabilities.

CM is being used to design products, services and supply chains in a wide variety of industries including consumer & industrial goods, financial services, hospitality, telecom and retail.

Using Choice Modeling

There are 3 basic steps to utilizing CM:

  1. The first step identifies the number of possible product, service or experiential features  (choices) that could influence a customer’s preference for your offering.  For a new car, the choices would include color, engine size, sales experience and options.  Information on choices can be gleaned from many sources including current product information, customer interviews, surveys and industry data.
  2. The second step is where the art comes in.  Marketers would design a series of simulations that ask customers to choose between a small number of choice options within a series of choice sets.  Using the car example, a simulation could be designed that asks customers to make choices between 2 different luxury packages (choice options) within a series of different feature collections (choice sets).
  3. The final step is where the science takes over.  Powerful econometric models are applied to a representative sample of respondents to identify empirical relationships between their selections of choice options and choice sets.  Unlike traditional tools, CM allows marketers to rapidly model and understand the relationships between hundreds of choices in hundreds of scenarios. Back to the car analogy, analysts would be able to test the impact of various option packages with different features on market share, segment profitability and customer satisfaction, before finalizing the product design and without guessing.

Poised for Growth

With the penetration of Web 2.0 technologies and higher bandwidth, it is now feasible to quickly gather key data and run simulations across multiple geographies, regulatory environments and customer segments.  Importantly, designers can now model unique and customized solutions to individual respondents or micro-segments using new advances in Bayesian statistics.

A Final Caveat

Like other analytical tools, CM is susceptible to “garbage in, garbage out” effects.  Problematic data, shaky assumptions and poorly designed simulations will inevitably lead to misleading results.  Furthermore, the most powerful CM models will not overcome incorrect findings arising from organizational effects like management bias or cultural influences.

 For more information on services and work, please visit the Quanta Consulting Inc. web site.

Successful Green Transformation: The 6 Ps

Environmental sustainability has become a key priority for most companies given its significant impact on profitability, brand image and business risk.  As a result of public and investor scrutiny, executives now need to convert good intentions into real progress.  The tough part, however, is how to do this cost effectively while overcoming internal inertia, maintaining consumer value and aligning suppliers. To help drive a green transformation in your organization, it pays to start with a planning and implementation framework.  Our proven sustainability roadmap focuses on business strategies that target the 6 Ps, as outlined below:

Planning

  • Integrate sustainability building blocks into your corporate strategy, capability-building and budget allocations.
  • Commence analytics, prioritization and goal-setting to catalyze action.  A good start is to conduct Product Lifecycle analysis to understand the environmental impact of each product and operating activity. 
  • Stipulate that new green initiatives must possess a strong business case, including having tangible consumer benefits. 
  • Learn from other’s green strategies.

People

  • Identify and empower a green czar, a single point of responsibility (individual and office) to coordinate green activities up, down and across the organization.    
  • Key individuals should be experienced with sustainability issues as well as possessing solid operational or marketing experience.
  • Embed green goals & metrics into individual incentives, measurement and reporting systems.

Practices

  • Re-jig internal & external policies and processes to accommodate new green criteria and initiatives. 
  • Prioritize green activities into ‘quick wins’ and longer term tactics.  Examples of ‘quick wins’ could include insisting on double-side photo copying and recycling old PCs.  Examples of longer term initiatives could include making sustainability part of the procurement criteria or switching to more energy-efficient lighting systems company-wide.

Products & Services

  • Acquire a deep understanding of which green benefits consumers’ really value and how they impact your pricing, value proposition and market positioning. 
  • Where possible, build in sustainability through bottom-up product development and customer service design.
  • Explore breakthrough green product innovation that establishes new rules, not just follows the old ones.

Promotion

  • Ensure consumers understand why your green products and benefits are different and superior to the competition.
  • Ensure the new messaging is consistent across all on & offline channels.
  • Make certain your key environmental stakeholders like NGOs or retailers see your strategy as credible and are regularly engaged.  

Partners

  • Align your entire supply chain around your sustainability vision, goals and strategies.
  • Where possible, leverage your partner’s complementary green strategies and structures within your plans  

Without a doubt, driving a successful green transformation is  not an easy task for most large, global firms. Environmental legislation is in a state of flux, supply chains are often inflexible, many employees will be resistant to change and consumer needs continue to evolve. However, there are some change management truism’s that will improve the odds of success:  create a compelling business case that generates a sense of urgency for sustainability; utilize a holistic implementation approach that encompasses the entire value chain, maintain a bottom line focus and, above all, be patient. 

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Toyota’s Quality Troubles: Blame it on Complexity

Toyota’s recent quality problems and clumsy attempts at managing them stand as one of the most notable corporate stories of the past year.  The Company has faced a barrage of criticism over everything from product design to the failure of company executives to publicly acknowledge the issue head on.  The most damaging indictment may be to the famed Toyota reputation for quality.  Not surprisingly, this story has many lessons for other companies in terms of operational strategy, process design and culture.   

Recently K@W, a newsletter published by The Wharton School of Business, conducted an interview with Professor Takahiro Fujimoto, a leading authority on the automotive industry and the famous Toyota Production System.

Some of his conclusions on the Toyota saga include:

  • Excessive operational and product complexity were the root cause of Toyota’s quality troubles.
  • Historically, Toyota was very good at managing the complexity required to deliver industry-leading quality.  However, the company has reached a point where rapid growth, challenging product requirements and multifaceted operations have combined to raise the complexity level to a point where traditional strategies and norms are no longer as effective.
  • Some of the sources of Toyota’s complexity includes: large numbers of product configurations, intricate production systems and convoluted processes & structures.
  • Company executives were previously aware of the problems but were unable to prevent them.
  • Delays in responding to the crisis were exacerbated by management hubris, flaws in customer feedback mechanisms and a lack of clear ownership over the “complexity” problem.
  • Toyota’s problems are such that they could happen to any large company 

A challenge of any large organization regardless of sector, high operational and product complexity leads to lower productivity, increased duplication, resource misalignments, customer & partner confusion and unwarranted error rates.  

Tackling complexity in a large, multinational enterprise like Toyota is not easy given arduous consumer demands, a lack of quality data, competing stakeholders and implementation difficulties.  A variety of top-down and bottom-up approaches can be used to understand what needs to be cut, reengineered or enhanced without increasing revenue risk. This link outlines a product-focused methodology we have used to reduce complexity in a global B2B company. In this project, we dramatically reduced the number of product SKUs by over 60% leading to major cost reductions and indirect payoffs such as enhanced resource allocation and improved decision-making.

Many firms such as Unilever, P&G and Diageo have successfully undertaken complexity reduction initiatives that have saved millions of dollars.  The Toyota case will serve as a clarion call for other large firms (and not just automakers) who seek to grow profitably while ensuring high levels of customer satisfaction and scalability.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

In Web Retailing, Pay Attention to Where Your Consumers Reside

Conventional wisdom suggests that the power of the Internet enables online retailers to dispense with traditional purchase dynamics when pursuing borderless commerce.   However, two recent studies published by The Wharton School of Business challenge this view suggesting that old economy factors continue to play a vital role in driving online retailing.  The papers looked at the effect of location and physical factors (e.g., consumer proximity, product availability etc.) on Web retailers seeking to reach potential buyers who reside in an area where their purchasing needs and decisions make them a minority.

The first paper, “Traditional and IS-enabled Customer Acquisition for an Internet Retailer: Why New Buyer Acquisition Varies by Geography and by Method”  compares the effectiveness of traditional marketing tools for reaching customers (e.g.,  advertising, referrals) with Internet-specific tactics such as key word search and social media.  The researchers used zip code-level sales data from a large Internet retailer to study how the proximity of customers to one another, retail coverage and convenience affected the performance of each customer acquisition program.

Surprisingly, the results indicated that offline word-of-mouth effects had an especially significant impact on Internet customers, while online word-of-mouth is, on average, less effective.  The key difference was that it was more powerful to communicate trust (critical for word of mouth effects, brand building) through offline means than through an online environment.  Put another way, shoppers living in different cities with different physical store environments etc are less likely to build trust online and therefore leverage influences like referrals.  Since Web retailing offers considerable marketing flexibility, this suggests that marketers ought to consider different acquisition strategies that are customized for local market conditions (i.e. by zip code versus region), customer needs & physical proximity.   The paper goes on to add “…traditional marketing efforts are still important to firms in the new economy and provide some evidence that geo-targeting will be vital to the success of Internet retailers, especially those with limited resources.”

The second paper “Preference Minorities and the Internet: Why Online Demand Is Greater in Areas where Target Consumers Are in the Minority,” also studied Internet retailing but in the context of the physical world.  The researchers investigated the optimal strategy to acquire customers whose shopping needs might be different (i.e. preference minorities) than the majority of the people in a given geographic area. For example, young parents living in a zip code populated mostly by elderly people would find fewer offerings in local stores because the retailers need to devote the bulk of their shelf space and inventory to meeting the demands of the majority of their customers (i.e. the elderly).

The results show that the best way to target preference minority customers in specific geographic areas is through online-based strategy.   This makes intuitive sense as traditional local retailers will more likely cater to the preference majority customer needs and demand through shelf space, inventory, service etc. The study also found that online sales of “niche” brands respond more strongly to the presence of preference minorities than local online sales of “popular” brands do. This is because in geographies where it’s already relatively difficult to find a good offline assortment of popular brands, it will be even more difficult to find a good assortment of niche brands.

In general, where your target market is the preference majority in a given area, a judicious mix of on and offline retail strategies is the best approach.  However, where your target market is the preference minority, web-only retailing is likely the right strategy. 

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