Daily Archives: October 23, 2009

If You’re Always Firefighting, Don’t Be Surprised If Your Business Goes Up In Smoke

A recent article on the top 10 myths and realities of S&OP made some great points about what S&OP is and isn’t and why you need it. I particularly liked myths #2 and #3 which pointed out that if your leaders focus on real time issues (firefighting), they are not thinking strategically over the long term. As the article points out, firefighting is simply an expensive, non value-added attempt to recover for inadequate aggregate planning, lack of foresight and poor execution.

There is simply no amount of adjustment at the detail level will correct an error at the aggregate level. Companies who try to plan at the detail level over the long term, such as the 24-month planning horizon common to most good S&OP processes, simply waste time and resources since such plans will need to be updated almost daily. More importantly, they lose the forest for the trees and might not notice the clearcutter coming their way. If you’ve always got your head down correcting for minor deviations in consumer demand, you are going to miss the major deviation coming up with the next major shift in consumer preferences (such as the introduction of a new product that uses new technology or offers a brand new feature). And when this happens, you might just find that your already struggling business goes up in smoke.

So if you haven’t already done so, implement proper S&OP practices. You might just find that you have fewer fires to put out.

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Beyond the Beaker, A Book Review

Paul Patterson’s Beyond the Beaker, a book on How to Achieve Successful Market Adoption for Emerging Technologies, is a book that belongs on every innovator’s bookshelf. Whereas there are a lots of books on how to innovate, and even a fair number on how to take your product to market, there are very few that overview all of the relevant issues that need to be addressed and managed, fewer still that address both the innovator and corporate perspectives, even fewer still that illuminate the roadmap with real case studies, and next to none that uses successes and failures to help you understand the criticality of getting even the seemingly mundane choices right.

As Paul Patterson notes in the preface, the true, Real Life, events, which frequently go undocumented, are more often the critical events of success. For example, its 4 am and your phone rings. The person on the line is upset, screaming vulgarities because someone in the collaboration violated international trade laws. It’s your job to repair the situation.

For example, sometimes the most important aspect of the product is the seemingly mundane service guarantee. Here in North America, we expect our products to work and manufacturers to replace them if they don’t. We also reward companies who have faith in their products and provide satisfaction guarantees in addition to basic “works as advertised” guarantees. These companies do so knowing that, since we want to do the right thing, we won’t abuse the guarantee. However, do the right thing is culturally defined. Whereas some cultures will pride themselves on only using a guarantee if they are truly unsatisfied or the product doesn’t work, others will pride themselves on finding innovative ways to use the guarantee because their culture prizes cunning in business more than personal restraint. As Paul Patterson notes with this quote from Gan Chee Eng, Vice President of Amway China Company Limited, the Amway Guarantee almost put them out of business in China on the first day:

“I tried to explain to corporate that their guarantee will not work in China, but they insisted. People would have a wagon in the parking lot with a small barrel in it, come into the shop and purchase a 1 litter container of L.O.C.TM, walk out to their wagon, dump the container into the small barrel, walk back inside, and say, ‘I’m not satisfied, you replace’. Honouring the guarantee almost put us out of business on the first day. We closed for two weeks and re-opened with a new guarantee, which limited customer satisfaction to providing one replacement, which meant we effectively sold two for the price of one.”
  – Gan Chee Eng

Sometimes the most important aspect of the product is the education around the importance of the product. For example, the success of Hindustan Lever Limited (HLL), the largest soap and detergent manufacturer in India, and its Lifebuoy soap (reformulation) came down to educating the populace on the importance of using soap. A market analysis by HLL found that many consumers were not using soap when washing because they believed that soap did not provide any additional value. So HLL developed an educational program that “visual clean is NOT safe clean” which included a germ-glow demonstration targeted at school children ages 5 to 13 and their parents. This program which did not advocate HLL or Lifebuoy but simply soap usage, ultimately led to a sales increase of 30%. The branding around the educational content was enough.

And sometimes the most important aspect of the product is the insight into potential usage. For example, consider the classic Post-It Note. In 1968, Spence Silver at 3M developed a super-weak glue that could stick to objects, and be easily peeled off, while searching for a new super-strong glue formula. For five years, he hyped the product internally, showing samples in spray-can and tack-less bulletin boards, but it never took off. Then he noticed Art Fry using pieces of the tack-less bulletin board tiles to mark pages in his hymnals and he came up with the idea for a better bookmark. Then he realized that the product wasn’t really a better bookmark at all, but a better note. And while there were technical challenges in perfecting the formula so the glue stayed on the note and not the object the note was stuck to when the note was removed and in developing appropriate coating equipment for paper (which was an imprecise substrate), the biggest hurdle was coming up with the right application for the technology. The second biggest was the right marketing campaign as the product, which was the company’s Outstanding New Product in 1981, did not take off with the first launch attempt in 1977, but the second in 1980.

The second thing I really like about the book is that it’s not your usual pop-culture business book that uses 200 pages to expound upon a simple (although usually very important) idea that could be summarized in 20 pages but is instead a jam-packed tome of information which would make a good textbook. As a result, this is a book that will end up on your bookshelf when you are done reading it and not the goodwill donation pile because you will want to read some parts of it more than once and keep it for reference.

Not only does it tackle strategic marketing, business development, financial concerns, legal considerations, organizational management, and corporate perspectives as well as the identification and evaluation of emerging technologies and technology development, but it addresses each from multiple viewpoints. For example, with respect to strategic marketing, it addresses SWOT (Strengths, Weaknesses, Opportunities, & Threats), macro and micro approaches, Porter’s Five Forces (Rivalry, Threat of Substitutes, Buyer Power, Supplier Power, and Barriers to Entry), Boston Consulting Group Market Evolution (Fragmented, Specialization, Volume, Stalemante), market and sector attractiveness, competitive advantage, value proposition, application and value chain analysis, other market drivers, and risk management. It addresses business development from a multitude of perspectives that include strategy, cultural, pitch, promotion, and communication. And it covers the five phase evaluation of emerging technologies (feasibility, value research, quick test market, action plan creation, and implementation) because the easiest thing about innovation is, well, innovation itself. The real challenges often lie in getting the innovation to market.

Finally, I really like the inclusion of a chapter on the corporate perspective. If you identify an emerging technology that you want to bring to market, you have to understand how your potential financiers think if you are going to be successful. Financiers typically invest in a portfolio of opportunities to mitigate their risks and increase the odds that they will see a return on their investment. As defined by Copper et. al in Portfolio Management for New Products:

Portfolio management for new products is a dynamic decision process wherein the list of active new products and R&D projects is constantly revised. In this process, new projects are evaluated, selected and prioritized. Existing projects may be accelerated, killed, or deprioritized and resources allocated and reallocated to the active projects. The portfolio decision process is characterized by uncertain and changing information, dynamic opportunities, multiple goals and strategic considerations, interdependence among projects, and multiple decision makers and locations.

This indicates that decisions about whether or not to invest in your product will not be made in a vacuum and will be made with respect to the rest of the portfolio. That means that you will need to insure that you continually address each of the critical success factors of portfolio management (strategic alignment, competitive advantage, market attractiveness, leverage of core competencies, technical feasibility, and financial rewards) if you wish to get funding and maintain it.

All in all, a great book and a great reference.

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