Daily Archives: March 19, 2009

People versus Technology

Consider this excerpt from a recent article on The Big Picture in Industry Week:

We reviewed several conveyor delivery systems and settled on cutting-edge technology. It eliminated so many positions that the payback was very quick. Parts were routed through the department and into a sorting area to be automatically picked … we were really proud of this engineering marvel. … Then, reality started to set in. We weren’t ready for cutting-edge technology. It required engineers to program and mechanics to maintain all the little switches and gates. … The downtime had gotten so bad that we positioned full-time mechanics on the line. … We were missing cycles on the main assembly line and having to manually run interiors over to catch up with product. There was considerable capital investment and lots of sweat equity.

So the company brought in TBM and Shingijitsu lean consultants and started to study the Toyota Production System. They started with a week long kaizen event focussed on one component that resulted in a U-shaped cell delivering JIT to the assembly line that worked nicely on 90% of products. Additional kaizen events totally changed the department layout to a smaller footprint that verified the methodology. Then the plant ripped out the high-tech conveyor systems and performance improved while the production footprint decreased almost 45%. As a result, the plant was able to in-source a regional distribution center that generated additional savings and created synergies across the supply chain.

Moral of the Story: technology is good, the right technology is better, but nothing beats a great team with the right training and the empowerment to do what needs to be done.

If You Fall For “Free” Then You’ll Get Suckered!

Money’s tight, the recession is still in full swing, everyone’s telling you to get a good deal, you’re starting to fall for “freeconomics”, and that’s a BAD thing. Anderson’s Claim that $0.00 is the Future of Business is false. Just because something, like the cost of software, is trending towards 0, that doesn’t mean it will ever reach 0. Zero is a limiting value. If you understand mathematics, that means that it will only reach 0 when an infinite number of instances are in play. Furthermore, a product that is consistently dropping in price month after month on a well defined curve could be trending to any point between the current price and zero on that curve … there’s often no way to say for sure, since you can only say with probability that the model is right, not with certainty.

As a recent Knowledge @ Wharton article points out, products and services offered for free aren’t really free; they’re just paid for in another way … and in business, the way they’re paid for is often more expensive than just buying them outright, especially when we’re talking about software.

Free services? Chances are those required a multi-year commitment at a monthly price point that is high after 12 months, really high after 24 months, and exorbitantly high after 36 months. Chances are you were offered the deal because the vendor sensed the disruptive entry of a new competitor or price point that was going to significantly erode their margin, and in return for this “concession” they could lock in a 300,000 deal for 50,000 worth of services (for example) knowing that if you waited six more months, you could have acquired the same deal from a competitor for half that. Free? Try twice as much! Same goes for “free” training or “free” modules.

Marketers know that “FREE” spikes demand in a nonlinear fashion and that the number of people who will irrationally want something that is “FREE” is many times that will want it even if it only cost a penny. And since enterprise negotiations are always done with a person, they use that fact to their advantage to try and draw your attention away from an overpriced product or service to a “free” offering that is nowhere near as valuable as it sounds.

And even if it is free with no visible strings attached today, you can bet those strings will magically appear tomorrow. Consider those social networks you like so much. Spoke is selling your profile data. Facebook recently decided that they “owned” your information. Sure they reversed that decision, but they’re still retaining the right to use that information … and just because you delete something from the site, that doesn’t mean it gets deleted from the backups. What happens to that data? And you can bet the investors who just poured 35 Million into Twitter are going to want to see that money back. Those context-sensitive ads you were complaining about on MySpace and Facebook last year might seem benign in comparison!

There’s no free in business (to business). There never was. There never will be. So don’t get suckered, no matter how tempting it is in this economy. The best deal you can get is getting a product or service for what it’s worth, and not a penny more. Then you’ll have value, and you won’t be on the hook for an unreasonable expense down the road.

(And don’t try to tell me Open Source is free. It’s not. There are restrictions around use that could be very costly if you violate them — just ask an attorney specializing in the matter. And it’s unsupported, so there’s the support cost of installing it, patching it, and supporting your users on it which can’t be passed off even partially to the vendor. And if it has a bug you can’t work around, you have to write your own patch. Developer’s aren’t cheap. That’s not to say that it’s not the best deal, but that you don’t know until you do a TCO/TVM model over the intended lifespan of the product.)