Customer Manufacturing Group
In This Issue



 

 

 
 
Where Or On What Should A CEO Spend Their Time?  
We've noticed several recent articles in CEO-focused media, discussing the best use of a CEO's time. We've had commentary on this important topic over the last 10 years. We went into our archives and found two great papers and a video. They remain timely and appropriate today, and we updated them anyway to make them even better.

The first of these papers look at how a CEO should allocate their scarcest resource, their time. The video supports this first paper.

Since, as you will note from reading it, this first paper has a strong bias towards customer-facing activities, then the second paper digs into how to allocate your customer-facing time.s. 
 
 
 

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Customer Manufacturing Update
February 2016

Dear Mitchell,

 

Here is your February Customer Manufacturing Update.

We've noticed several recent articles in CEO-focused media, discussing the best use of a CEO's time. We've had commentary on this important topic over the last 10 years. We went into our archives and found two great papers and a video. They remain timely and appropriate today, and we updated them anyway to make them even better.

The first of these papers look at how a CEO should allocate their scarcest resource, their time. The video supports this first paper.

Since, as you will note from reading it, this first paper has a strong bias towards customer-facing activities, then the second paper digs into how to allocate your customer-facing time.
Your Help Is Appreciated 

Many of you have a copy of one or more of our three books: It's Not Rocket Science; The Secret To Selling More; and Value Acceleration.

 

We would really appreciate you posting a review of any of these books on Amazon.com for us. To make it easy each title above is linked to the appropriate page on Amazon.com

 

Thank you in advance for your help. 

 

Apple's Innovation Challenges     

After Steve Job's death, we posted a few times in our blog about where Apple heads next with innovation. Many people have asked the same questions. Their recent lackluster performance continues to raise concerns, and the iPhone 7 due this summer is supposed to "fix" this concern.

We stated and continue to believe that the innovation issue for Apple is going to be the need to change its innovation archetype, and that is risky.

Since the beginning, Apple has used the Visionary Leader innovation archetype.  Due to Steve's untimely death, we felt they were likely to no longer be able to follow that approach. Indications are that they are not even trying and have moved to the most common archetype, Systematic Innovation.

This is not really a surprise since shifting from Visionary Leader to Marketplace of Ideas is a huge shift and Collaborative Innovation is also way outside their culture. The Systematic archetype seems the most logical.

We see indications of that also in the number of innovations Apple is now working on. When Jobs returned to Apple after his Next adventure, he famously reduced the projects from hundreds to a handful. Indications are that Apple is now working on dozens (at least). Pundits suggest that Apple needs to do so because they cannot move the needle anymore with a simple $1B innovation. They need many of those. Or a $50B innovation as Jobs was more inclined to look towards.

Anyway, as we have said previously, Apple has its challenges ahead and only time will tell if it can make the transition. The bar is very high, but then so is their cash on hand.
Are Your Customers Buying On Price? 
"There is nothing in the world that some man cannot make a little worse and sell a little cheaper, and he who considers price only is that man's lawful prey."

We remember first seeing this quote by John Ruskin in a Baskin Robbins Ice Cream store decades ago. It stuck with us. We were reminded of this quote by several recent events.

Over the years as we have spoken to and worked with executives in many companies, one of the common questions we are asked is how not to compete on price. Our answer forever has been that to not compete on price you have to understand what customers can buy from you they can't get from anyone else, or at least don't believe they can.

This takes an effort to learn, but keeps you from needing to compete on price. And if your answer to the question is truly "nothing," then the actual answer is the same as they can get from others but at a lower price. And if you can't be profitable at that lower price, then either your company, or one or more competitors will cease to exist. Why would anyone want to pay more for the same thing?

All that being said, a common push back we hear from executives is that purchasing has all the power in companies and they only want to talk about price. Firstly, that is rarely true and if it is, in our experience those companies are in for trouble and you might want to serve their competitors instead.

Our best example of that is Ford vs General Motors. For many years it was common to be a supplier to only one of the so-called Big Three automakers as they wanted a supplier that could help them get an advantage. Thus, suppliers wanted to serve General Motors as they were the far larger company.

In the early 1990s General Motors appointed Jose Ignacio Lopez de Arriortua head of their procurement function. One of his first actions was to demand substantial (up to 25%) price reductions from GM's suppliers. Many of the best ones moved to Ford. Over time, Ford surpassed GM as the premier auto supplier in the U.S.

Why do purchasing people focus so much on price? Simple: the management maxim which says "what gets measured, gets managed." Too many purchasing people, still today, are measured on how much money they save the company year over year by price reductions. Nobody looks to see, at what cost.

Two recent examples come to the fore, one private sector and one public sector.

Chipotle suffered a 30% drop in sales during December of last year as a direct result of food contamination. That slide continues. They are closed all restaurants for several hours in early February to have an all hands meeting to discuss "food safety." PR tactic we believe. It is fairly clear, in our opinion, that the root cause problem here was the food supplier.

How much money did Chipotle actually save buying from the low bidder? Well none, or negative. How much of a bonus did the buyer get for his/her good work in finding the lower cost supplier and saving Chipotle so much money? (Unknown). And has anyone in procurement lost their job over this? (Again unknown).

However, it's pretty clear that you will continue to get more of the behavior you reward. True with kids, dogs, and employees. How are you rewarding your purchasing people? How much power do they have in vendor selection?

Our second example is Flint, MI. They have declared a state of emergency and the National Guard is helping pass out bottled water since their municipal water supply is contaminated with lead. How did that happen? Simple, two years ago the State changed water suppliers to save money. How much money have they actually saved? None or negative. Who's been fired over this? Not sure anyone has. Though several people have recently resigned. Who's going to pay for this? The taxpayers of Flint for sure and probably of Michigan as well.

How much is it costing your firm to reward purchasing for the wrong things? How are you dealing with customers who try to commoditize your products or services?

What can customers buy from your company they can't buy, or don't believe they can buy from anybody else. The only way to stay out of the commodity trap is to have a useful answer to that question. And remember it is not about what you do, it is about what the customer is buying.

Tailoring To Meet Customer Needs   
 
This picture, supposedly from Wegmans, is an excellent demonstration of tailoring a product to meet the customers' needs with a simple service. Well done.



Free Reading Guide

If you have a copy of our book Value Acceleration, you can download a free reading guide to help you and your team get the most from the book. (And btw, the book is also available in a Kindle edition.)

We appreciate your feedback to help improve these

Updates. If there are others you feel would benefit from this issue, use the Forward email link just below on the left.

 

Sincerely,

 

MGSig

Mitchell Goozé

 

Customer Manufacturing Group, Inc.

www.customermfg.com 

Customer Manufacturing Group, 1900 Wyatt Drive, #11, Santa Clara, CA 95054
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