Customization doesn’t bring efficiencies

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!

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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” 19MAR12

“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” 16AUG10

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

This week’s focus: configurable products and services

A small business owner contacted me about needing a configurator system to handle his anticipated volume of business.  He wants to spend “as little as possible” to resolve his mission-critical challenge.

His business is about configuring, pricing and quoting configurable pump systems. His prospective dealers have told him that they might fail without an effective configurator tool.

The business owner has focused on the product design and product features, not the support system required to seamlessly drive the business from quote to cash.  In this instance, the support system is as important as the product itself.

Why are companies with configurable products reticent to invest in critical infrastructure so their businesses will scale?

A go-to-market strategy and budget must address critical infrastructure as well as the product or service. Businesses that thrive anticipate and address all challenges in their go-to-market strategies pro-actively.

Thought for the week:

“I’ve never made a secret of what gets me out of bed in the morning. It’s the challenge.  It’s the brand.” - Sir Richard Branson in Business Stripped Bare

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

© 2010 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” 19JUL10

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

This week’s focus: configurable products and services

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?”

Companies that thrive will offer selling tools that are better aligned with customer needs than their own needs.

Read the entire blog post: “How to excite a la carte customers.”

Thought for the week:

“If everything seems under control, you’re not going fast enough.” – Mario Andretti

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

© 2010 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.

How to excite a la carte customers

Customers expect companies to offer more than a “one-size-fits-all” product or service. The à la carte customer^TM 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

Dave Gardner’s “Thank God It’s Monday” 07JUN10

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

This week’s focus: configurable products and services

An information technology department contacted me seeking assistance selecting a new configurator software package.

My response:  before we can talk about the technology, I first need to understand your business and your business requirements as well as the needs of your customers and channel partners.

• What is the immediate problem that needs to be solved and how can I help the client create a compelling vision for the future that is implementable?
• Are they looking to create a “me too” solution or a game-changing solution that solidifies their position as a market leader?
• Do they want to make an incremental improvement or do they have time to make a huge impression on their marketplace?

Getting an appropriate configurator system will ensure a company thrives. Conversely, selecting the wrong system will take a company to a deep dark place they will soon wish they had never entered.

Thought for the week:

“Courage is being scared to death – but saddling up anyway.” John Wayne

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

© 2010 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.

Self-Assessments: Configurable Products and Services

I have developed self-assessment tools for product manufacturers and service providers to look at their business execution for their customized offerings.

These tools can be used by individuals or in group meetings to understand the current state of the business.  They may identify gaps and could result in rather spirited debate if discussed at an executive staff meeting.

To access the PDF version of these self-assessments, please click the appropriate link below:

Configurable Product Self-Assessment

Configurable Service Self-Assessment

I would love to hear your reactions to these tools.  Please contact me via email at info (at) gardnerandassoc.com

Dave Gardner, Gardner & Associates Consulting

http://www.gardnerandassoc.com

© 2010 Gardner & Associates Consulting

Boeing and Manufacturer of Southwest’s Florida One

This is a wonderful video depicting the manufacturing of a Boeing 737 for Southwest Airlines:

I hope you enjoyed that as much as I did!

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

Best practices for selling and producing customized, configurable products

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

Paradox of Choice is ludicrous

It’s one thing when a person writes a book and gets it all wrong but it is yet another thing when entrepreneurs believe the nonsense Barry Schwartz is promulgating merely because he is a psychologist and a college professor.

I just posted the following comment on a different blog:

From your post, you offer this observation:

“People only want a limited amount of choice. And that’s not to say consumer behavior won’t change in the future, but consumers are fairly intolerant of the paradox of choice, which basically states that choice brings us happiness but too much choice makes decision-making miserable.”

This is nothing other than pure, unadulterated B.S. The professor who wrote about the “Paradox of Choice” writes about being overwhelmed after walking into a retail outlet to “just buy a pair of jeans” and was “overwhelmed” about all the choices he could chose from.  He said it was so disturbing that he had to write a book to understand his reaction. Customizers need to throw a flag on the concept of “paradox of choice.”  This book is complete nonsense.  Just because a professor writes a book doesn’t make it so.  Customize on–give your customers what they want.

Barry–get a grip!  Less is not more–it is simply less.

Also, here are some best practices to consider to help your customers converge on a solution that best meets their needs.  If you are considering constraining choice from your customers, stop!  It may be that you need a configurator to guide customers through the variety available to them.  My firm helps companies with that.

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

© 2010 Gardner & Associates Consulting  All Rights Reserved

Best practices for the a la carte customer

If your company offers configurable products or services, what are the best practices for connecting with your customers?  Your company would:

• Modularize your offerings in such a way that customer requirements can be derived from standardized modules (or components or capabilities) allowing for acquisition “a la carte.” This, of course, requires that there has been a “rationalization” effort to identify those essential options or value components that customers will require.

• Maintain a listing—usually within a configurator—of standardized modules as well as any rules for combining the modules into fully-configured customer orders.

• Provide a means to seamlessly share the same understanding about customer options across the enterprise (with customers, distributors, sales, order administration, and customer service).

• Extend the capability to create personalized orders and explore quotation alternatives with the customers, distributors and channel partners (extended enterprise) via tools offered and supported for that purpose. This allows customers to conduct a “what if” analysis looking at different capability and pricing options.  [Note: Three things a customer really cares about are (1) what are my options, (2) how much is this set of options going to cost, and, (3) for manufacturers of products, how long will it take to produce it? Truly effective systems need to address all of these issues.]

• View the likelihood that any two orders would be identical as a coincidence and set up the business accordingly, e.g., complete modularity—no bundles.

• For product manufacturers, produce orders only after receipt of an order—no stocking of any finished products.

How does the business behave differently?

• For product and service providers:
  • Orders are driven directly to Order Administration or Customer Service
  • Development, Product Management and/or Marketing is involved only when a new module is needed.
  • Product management makes determinations about “saleable” option combinations.
  • No people-dependency for expert knowledge about allowable option combinations.
• For product manufacturers:
  • Engineering is not involved in the creation of a bill of material to support individual order configurations.
  • Engineering defines “allowable” product configurations based on technical feasibility, not marketing or sales policy. This is important. You do not want to change the logic behind allowable or permissible configurations every time the marketing or sales philosophy changes. To do otherwise creates constant rework and churn.
  • Engineering designs the product with product modularity in mind.

The attributes above demonstrate why offering configurable products and services must be approached as an enterprise-wide business strategy, not merely a departmental hurdle.  Efficiencies must flow across the entire enterprise. The mission is providing unique products and services tailored to the customer’s needs with the same or greater efficiency than is presently realizable.

The modularization of the offerings must not occur in a silo separate from the rest of the organization or the impact will be sacrificing speed and efficiencies to meet each customer’s requirements.  And, the inefficiencies, of course, undermine profits.

Customers at the high-end of the marketplace want products that are highly-personalized, unique and offer superior value. For example, there is a product configurator for the Bentley GTC Speed, a very high-end automobile is an excellent example of how a company has approached giving customers a lot of choice in how they want their $250,000 automobile configured.

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

© 2010 Gardner & Associates Consulting  All Rights Reserved