Customization doesn’t bring efficiencies

September 17, 2012

Note: This posting is based on my weekly “Thank God It’s Monday” which is offered to help companies thrive!

This week’s focus: configurable products and services

Being a “customizer” doesn’t create efficiencies. More often than not, customization brings tremendous inefficiencies in sales, order administration, engineering, manufacturing operations, service, etc.

  • Your team is forever chasing experts to answer and resolve normal, routine configurability questions that arise.
  • You require significant human intervention to accommodate complexity and variety simply because information isn’t available–the business isn’t set up properly.
  • Your team is challenged to pull together quotes for products and services that can actually be delivered.
  • Your team is challenged by the fact that nothing is standard; everything is a special.

Companies must evolve their business processes to cost-effectively meet the challenges product and service complexity bring. If customizers don’t take action to improve efficiencies, they will continue to suffer margin and operational challenges that only mount.

Failure to address these challenges will keep you and your company from thriving.

Thought for the week:

“Don’t confuse enthusiasm with commitment.” - Paul J. Silvia

What do you think? I welcome your blog comments!

___

Dave Gardner, Gardner & Associates Consulting

http://www.gardnerandassoc.com

© 2012 Gardner & Associates Consulting  All Rights Reserved

Note:  To receive an email version of “Thank God It’s Monday” to start your week, please subscribe here.  I would very much appreciate your suggesting to others that they subscribe.

Privacy Statement:  Our subscriber lists are never rented, sold, or loaned to any other parties for any reason.

Share


Dave Gardner’s “Thank God It’s Monday” 19MAR12

March 19, 2012

“Thank God It’s Monday” is to help companies thrive!

This week’s focus: configurable products and services

Why is it so many companies that offer configurable products and services are so ill-equipped to deal with the customer-facing side of the business? Here are 3 key reasons:
  • When the business started, the focus was on the product, not on how products would be configured, priced and quoted–the processes never caught up
  • The inefficiencies and operational challenges are seen as a “cost of doing business”
  • Your ERP system is optimized for a different business paradigm: mass production

The result is margin leaks–margin leaks amounting to 3% or more of revenues. How much is that costing your company year after year in real dollars?

What if you could add 3% or more to your bottom line? How would that change the valuation of your business? How would more effective processes favorably impact customer relationships and your customer’s experiences?

The cost of correcting these problems is trivial compared to the annualized cost of the problem. Solving this problem will help you and your company thrive.

[Note: Here are self-assessment tools to help you determine where your company stands.]

Thought for the week:

“If everyone is thinking alike, then somebody isn’t thinking.” – George S. Patton

What do you think? I welcome your blog comments!

___

Dave Gardner, Gardner & Associates Consulting

http://www.gardnerandassoc.com

© 2012 Gardner & Associates Consulting  All Rights Reserved

Note:  To receive an email version of “Thank God It’s Monday” to start your week, please subscribe here.  I would very much appreciate your suggesting to others that they subscribe.

Privacy Statement:  Our subscriber lists are never rented, sold, or loaned to any other parties for any reason.


Dave Gardner’s “Thank God It’s Monday” 20FEB12

February 20, 2012

“Thank God It’s Monday” is to help companies thrive!

This week’s focus: configurable products and services

Increasingly, customers expect to be able to influence the products and services they buy.

For low-end consumer goods, e.g., food products, items you would tend to find at large retail chains, etc., mass produced products meet the essential consumer need. However, there are niche product areas where the ability to tailor the end product is valued and appreciated.

For higher-end products and services, the provider must offer some degree of choice. The days of a “one-size-fits-all” solution satisfying market need are behind us. And, of course, the challenge for the providers becomes containing costs as variety increases.

Is there an enthusiasm gap between what you offer and what your customers expect and want? If there is an enthusiasm gap, it is incumbent that your organization to close the gap if you expect your organization to thrive.

Thought for the week:

“So innovation has to be appropriate for your business. It must fulfill a need, and it must give you an edge over your competition.”
- Sir Richard Branson, Business Stripped Bare

What do you think? I welcome your blog comments!

___

Dave Gardner, Gardner & Associates Consulting

http://www.gardnerandassoc.com

© 2012 Gardner & Associates Consulting  All Rights Reserved

Note:  To receive an email version of “Thank God It’s Monday” to start your week, please subscribe here.  I would very much appreciate your suggesting to others that they subscribe.

Privacy Statement:  Our subscriber lists are never rented, sold, or loaned to any other parties for any reason.


Dave Gardner’s “Thank God It’s Monday” 09JAN12

January 9, 2012

“Thank God It’s Monday” is to help companies thrive!

This week’s focus: configurable products and services

Is it all about your company–the product or service provider–or all about your customer?

If it’s all about your company, watch out! Someone will come along who is better focused on the customer and take market share from you.

How can you tell if it’s all about you?

There’s friction in the marketplace between what your company offers and what your customers really want and expect from your company.

Friction will keep your company from thriving.

Thought for the week:

“Brands exist as a means of communicating what to expect from a product or service–or to highlight the family likeness between different products and services. An established brand on a new product is a guarantee that what you’re getting will be, in its own way, like something you’ve enjoyed before. “ - Sir Richard Branson, Business Stripped Bare

What do you think? I welcome your blog comments!

___

Dave Gardner, Gardner & Associates Consulting

http://www.gardnerandassoc.com

© 2012 Gardner & Associates Consulting  All Rights Reserved

Note:  To receive an email version of “Thank God It’s Monday” to start your week, please subscribe here.  I would very much appreciate your suggesting to others that they subscribe.

Privacy Statement:  Our subscriber lists are never rented, sold, or loaned to any other parties for any reason.


Product Configurator, Configure, Price, Quote Top Challenges

August 5, 2011

Based on my experience, a few of the top pains include:

* Not approaching this challenge holistically across the enterprise–the configure-price-quote (CPQ) process is disconnected from back-office processes

* Focusing on CPQ as a back-office process rather than a tool and process to engage customers

* Not establishing a product management function that owns the evolution of products and product lines

* Not creating and engaging cross-functional product teams who own the success and profitability of a product line

* Thinking the product configurator technology is going to solve all the problems

* Selecting inappropriate product configurator technology

* Continuing to “engineer-to-order” rather than pre-engineering around product modularity and offering previously rationalized choices within a coherent system for CPQ

* Not having a sustainable, scalable process for adding new features and options

* Trying to be all things to all people leading to an unprofitable or low margin business that is not sustainable while you hope that things will get better–hope is not a strategy

* Not having and engaging in a strategy to drive down the cost of variety

I write about this in my book: “Mass Customization: An Enterprise-Wide Business Strategy” available at Amazon.com. You can read more about it at www.happyabout.com/mass-customization.php

What do you think?

Dave Gardner, Gardner & Associates Consulting http://www.gardnerandassoc.com

© 2011 Dave Gardner

Dave Gardner’s “Thank God It’s Monday” 13JUN11

June 13, 2011

“Thank God It’s Monday” is to help companies thrive!

This week’s focus: configurable products and services

Out with the old; in with the new. Acer had to write down $150 million in European inventory just this past week as the inventory had passed its prime.

The mass production paradigm comes with a substantial potential cost penalty: what doesn’t sell must be deeply discounted or written off. Want proof? Look at all the “end of season” sales–40% off, 50% off, 70% off and more.

Why does this happen under mass production? It is nearly impossible to align supply with actual demand. Is there a solution?

Build to order postpones committing inventory until a named customer appears. While it doesn’t totally eliminate risk, it can reduce the risk of finished goods inventory obsolescence dramatically. This paradigm can help a company thrive.

[Read my entire Fast Company Expert Blog post: The High Risk of High Tech Inventory.]

Thought for the week:

“At first dreams seem impossible, then improbable, then inevitable.”  - Christopher Reeve

___

What do you think? I welcome your blog comments!

___

Dave Gardner, Gardner & Associates Consulting http://www.gardnerandassoc.com

© 2011 Gardner & Associates Consulting  All Rights Reserved

Note:  To receive an email version of “Thank God It’s Monday” to start your week, please subscribe here.  I would very much appreciate your suggesting to others that they subscribe.

Privacy Statement:  Our subscriber lists are never rented, sold, or loaned to any other parties for any reason.


Dave Gardner on customization and personalization

May 10, 2011

Dave Gardner was interviewed by Dr. Amy Vanderbilt on her TrendPOV show titled Market of One–Using Individualization For Advantage to discuss customization and personalization, how to use it effectively to dominate your market, and how not to lose your profits by customizing the wrong way.

Here’s the link to the interview.

What do you think?

Dave Gardner, Gardner & Associates Consulting http://www.gardnerandassoc.com


How to excite a la carte customers

July 13, 2010

Customers expect companies to offer more than a “one-size-fits-all” product or service. The à la carte customerTM wants to be in control of what they buy. A prospective customer wants to know what is available, at what price and, if we’re talking about a manufactured product, how long it will take to produce.

Traditionally, companies with configurable products and services build and maintain elaborate, electronic menus—often referred to as “configurators”—that describe the array of options available. Many companies offer so many choices that prospective customers are overwhelmed leaving them to wonder, “Where do I start? How do I begin to understand what product or service is appropriate for me?” For example, Dell’s website, dell.com, offers a vast array of choices yet does not go far enough in helping a prospective customer converge on the best solution based on their individualized needs.

Most companies discuss their products and services using industry-centric language which may align poorly with the language and expertise of the prospective customer. If a prospective customer doesn’t understand a company’s lingo, there’s going to be problems. Here’s an example.

Imagine you have just arrived in Malaysia and you are taken to a local, traditional buffet. You know nothing about the food you see. Some things look like insects, some things look raw—you are going to have many questions. There will be language differences that make it difficult to communicate with your local host. There will be a lot of “yeses” and head nodding but you wonder, “Did she really understand that I can’t tolerate anything spicy? When she tells me it’s not spicy, can I trust she understands my definition of ‘spicy?’” It is no different speaking to a prospective customer who does not possess expertise about your products and services.

If a company does a poor job of helping prospective customers make appropriate choices through its selling tools, it forces the prospective customer to speak with someone to help them figure out what to buy or, worse, turns the prospective customer toward competitors who more effectively help an individual decide what they need to buy.

Sometimes, a prospective customer will connect with a knowledgeable sales agent and, at other times, the customer will speak to a sales agent who knows little more about the company’s offerings than the prospective customer. The prospective customer has no means to determine the skill and expertise of the sales agent taking their call. If the product or service doesn’t meet the customer’s expectations, the customer may never buy from that company again. The unhappy customer is likely to share their negative experience with others.

Most configurators fail to offer what prospective customers really need. What are the best practices that companies of configurable products and services must employ in next-generation configurators?

  • The configurator needs to be assistive to the prospective customer and the sales agent. Prospective customers require more than a “product selector” or “service selector” as traditional configurator solutions are presently constituted. Prospective customers need much more than an elaborate menu presented with little guidance about how to order or configure a product or service tailored to their individualized needs. Consider the trusted advisor role a waiter satisfies in a high-end restaurant—the waiter provides guidance and expertise to help the customer order a wonderful meal from a myriad of possibilities.
  • Configurable product and service providers must offer guided selling solutions that teach a prospective customer how to buy based on the essential mission or application required of the product or service. To do this requires matching customer-required attributes with attributes inherent in certain products and features.
  • Prospective customers need to know they are selecting the appropriate product or service based on attributes they have previously been prompted to provide. It is far better to fit the solution to the customer’s actual needs than let them buy something based purely on price that will disappoint them later.
  • Configurable product and service providers need to provide different entry paths to help a prospective customer converge on a solution—the tools must help the novice or infrequent purchaser as well as the expert.
  • Prospective customers need to have the opportunity to learn about products and services they never dreamt existed, creating excitement and engagement.

Has any company created what I call the “next-generation configurator?” Not that I am aware of. Most companies that have implemented configurators have done what I call Version 1.0 but need to be thinking about Version 2.0.  Version 2.0 offers companies an opportunity to distance themselves from the competition.

These best practices for offering and presenting configurable products and services via next-generation configurators will turn customers into committed, raving fans. That’s exciting!

Dave Gardner, Gardner & Associates Consulting http://www.gardnerandassoc.com

© 2010 Dave Gardner


How do you price your pizza?

May 5, 2010

It’s 4 pm and I’ve got a 5:30 pm meeting at the house with my wife.  The light lunch I’d had a few hours earlier is wearing thin.

I’m thinking I’ll stop by Premier Pizza in Santa Clara on my way home and grab 4 different slices of pizza to go.  My wife is a vegetarian; my mother-in-law and I are both carnivores.  So, being able to mix and match different slices is appreciated.

Premier Pizza is a tremendous value at $3.75 per slice.  Here’s what happened in the store.

Me:  I’d like to get 4 slices of pizza to go.

Cashier:  I can only sell you 3 slices.  If you want a fourth, I’ll have to charge you for a whole pizza.

Me: Huh?

Cashier:  They are really big slices.  I can only sell you 3 slices.  If you want a 4th, I have to charge you for a whole pizza.

Me: You’re kidding, right?

Cashier: No

Me: How much is a whole pizza?

Cashier:  About $20.

Me:  So, I can buy 3 slices for less than $12 but a forth slice is an additional $8?

Cashier:  Right.  Each slice is really big.

Me:  I’ll take 3 slices.  You realize I’m going to have to write a blog piece about this.

Cashier:  Okay.

But, the slices are really big.  Sure.  And, tasty, too.

Dave Gardner, Gardner & Associates Consulting

http://www.gardnerandassoc.com

© 2010 Gardner & Associates Consulting All Rights Reserved


Best practices for selling and producing customized, configurable products

April 25, 2010

The best practices for selling and producing customized, configurable products are:

  • producing a customized product on demand,
  • for a specific, named customer,
  • based on the order attributes specified by the customer (or their representative) within an online tool offered for that express purpose,
  • after receipt of an actual order, and,
  • a customized product is produced with the same efficiency as one would expect from a non-customized (or mass-produced) product.

Most manufacturers of customized products produce them under sub-optimal business processes. We often find that the sales, dealer and customer side of the business are not well aligned with the back office creating tremendous inefficiencies, errors, rework and order delays. We work with clients on the front end of the process and, when indicated, on the back office processes as well.

The inefficiencies come with a considerable cost.  Industry experts estimate a customizer’s inefficiencies nominally cost 1.5-3.5% of gross revenues year after year and sometimes much more.

Many customizers experience low single-digit profits that they are constantly challenged to attain or even maintain as the cost of variety increases which further erodes profits.  There is nothing worse than working your tail off to make almost no profit quarter after quarter, year after year.

To realize enterprise-wide efficiencies, I have long advocated that manufacturers offering configurable products look at this business challenge holistically. I apply a holistic approach with my clients.

If you are a customizer, isn’t it time you implemented a solution that improves efficiency and profits and delights your customers as well?

Dave Gardner, Gardner & Associates Consulting

http://www.gardnerandassoc.com

© 2010 Gardner & Associates Consulting


Dave Gardner’s “Thank God It’s Monday” 01MAR10

March 2, 2010

This week’s focus: customer choice

Back in 1961, Hertz ran a very powerful and memorable ad campaign built around a compelling theme: “Let Hertz put you in the driver’s seat.”

Not only did this ad campaign create the image of a customer ending up in one of Hertz’s rental cars, it suggested that Hertz puts the customer in control of each transaction and the relationship. What could be better than a customer driving the relationship? This simple ad set the stage for Hertz being the world’s largest car rental company.

How is your company putting customers in the driver’s seat enabling your company to thrive?

Thought for the week:

“It’s not your customer’s job to remember you. It is your obligation and responsibility to make sure they don’t have the chance to forget you.” Patricia Fripp

Dave Gardner, Gardner & Associates Consulting http://www.gardnerandassoc.com


Dave Gardner’s “Thank God It’s Monday” 22FEB10

March 1, 2010

This week’s focus: customer choice

Mike Dreyer, CIO of VISA Inc., has been quoted as saying he doesn’t want technology to be a limiting factor in implementing any good idea. A wonderfully refreshing thought!

Too often, people reject ideas that would better serve customers with weak rationales: “that won’t work here,” “that’s not how we do it here,” “it’s too hard to do that,” “we’ve never done that before,” and my personal favorite, “the system can’t handle it.”

Is your company artificially constraining customer choice?  Or, are you, like Mike Dreyer, taking the lead to make sure that good ideas find their way to the top so you can delight your customers and help your company thrive?

Thought for the week:

“What leaders see on the surface can be discouraging–people, even very able people, caught in the routines of life, thinking short-term, plowing narrow self-beneficial furrows through life.  What leaders have to remember is that somewhere under that somnolent surface is the creature that builds civilizations, the dreamer of dreams, the risk taker. And, remembering that, the leader must reach down to the springs that never dry up, the ever-fresh springs of the human spirit. John Gardner, On Leadership, page 199

Dave Gardner, Gardner & Associates Consulting http://www.gardnerandassoc.com


Follow

Get every new post delivered to your Inbox.

Join 1,886 other followers