Monthly Archives: January 2012

SAMBC? WTH? Can’t They Just Say Only Customer Service Matters?

Or at least a better acronym? This one is a Seriously Impractical Customer Orientation. In fact, SICO is a better acronym — Success Is Customer Oriented! Anyway, we are referring to Service As Measured By the Customer (SAMBC), the metric that is replacing “perfect order” at P&G, as described in this recent SCB article on how The Perfect Order Isn’t So Perfect.

According to P&G, the perfect order metric doesn’t get the job done because it causes your service to become very internally focussed. And as we indicated in yesterday’s post, you can’t just focus inward. First of all, as we indicated yesterday, you will fail your customer if your supplier fails you. Secondly, you will fail your customer if you don’t insure that they get what they need, when they need it — and this is often more than just delivering a product on a specified date. As noted by Deidre White, Associate Director of Customer Service, an undue focus on the perfect order results in the loss of opportunity to create value for our customers and ourselves.

As Dale S. Rogers, Professor of Logistics and Supply Chain Management at Rutgers notes, while the perfect order might offer the advantage of simplicity, it’s ill-equipped to deal with the complexities of most global supply chains today. Furthermore, the trend toward outsourcing has created a network of independent partners, each of whom plays a critical role in getting a shipment to its destination. By limiting its performance assessment to what goes on within its own plant or distribution center, a company like P&G fails to get the big picture. What looks like a smooth-running operation could easily be considered a failure by the end customer.

The lack of joint scoring on the traditional perfect order metric is what causes it to fail. For example, consider the example of a 100-case shipment that is five cases short because of space constraints. A supplier who puts the missing cases on the next shipment considers the order filled. The customer thinks otherwise. And it’s the customer’s opinion that counts. An unhappy customer can result in lost sales down the road.

So how do you implement SAMBC? That’s a good question. According to the article, there’s no one-size-fits-all solution in a SAMBC process as each customer has its unique set of metrics and priorities. The article notes that the suplier must adjust its own to meet them. And that the SAMBC metric is the percentage of measured customers at which we are at or better than expected service targets, where the targets are established by and with each customer. That’s a scorecard. And SAMBC can be implemented the same way — with a “balanced” scorecard that measures the customer goals. Specifically, a scorecard that takes into account the customer measures of success and weights each measure according to the priority placed on it by the customer. It will have many of the same metrics — on time delivery, quality, etc. — as a “perfect order” scorecard, but it will be completed by the customer and each measure will be weighted differently by each customer. That’s likely all there is too it.

Peter Smith Nails Why the doctor Does Not Do Predictions

Traditionally, the New Year is a time to think about how we can become better people … and of course, the chance for writers and analysts to sit at their keyboards with a cold beer and make a list of wild guesses, predictions and ill-informed comments, desperately pretending we have some particular insight into the world!
Peter Smith, Ten New Year Resolutions for 2012, BravoSolution.com

the doctor has insight into what you need to do today, but has no more insight into what the Supply Management world of tomorrow will look like for your company beyond what anyone else has. He can predict what is likely, but all it takes is one earthquake, political uprising, or stock market crash to turn everything on its end. Fortuntately, Peter’s paper is filled with advice for today and not tomorrow.

In particular, the doctor likes resolutions:

2. I will make sure we do proper risk assessment on our key supply chains – and that doesn’t just mean our “top ten suppliers”.
How exactly are you keeping track of your key suppliers’ financial situation, their accreditations or quality record? What is your mitigation strategy in case of supplier failure or natural disaster, for each of your critical raw materials / sub-components? Do you have any sense of which firms at second or third tier level in your supply chains could actually cause your organization severe problems? What about corporate social responsibility issues? the doctor would bet that you are not keeping track of key suppliers’ financials, not keeping an eye on the quality metrics, don’t know which 2nd or 3rd tier suppliers could bring your supply chain to a grinding halt, or know about the poor working conditions at the factory in Da Nang.

5. I will put the supplier closer to the heart of our process and technology strategy
As Peter says, if the supplier screws up, you have failed in the eyes of the IT / Marketing / Production VP. So look at your supplier information, risk, development, relationship management strategy — closely. If you don’t help your supplier to succeed, you ultimately won’t succeed.

7. I will move to the next level of Spend Analytics sophistication.
As per SI’s recent white-paper on Spend Visibility: An Implementation Guide, almost any attempt by an organization to analyze spending patterns is likely to be fruitful, especially if there hasn’t been a serious prior attempt. It is easy to find thousands of breathless testimonials about a particular product or method — independent of the quality of the product or method — because almost any product or method will find savings if a spend visibility initiative has never been launched before. “In the land of the blind, the one-eyed man is king“. But, what is not so obvious is that this initial burst of savings is short-lived; and that many of the “quick saves” that result are unsustainable. The key question is what to do next; in other words, how to implement a true strategic spend visibility initiative that will return value and keep returning value over time. There are too many spend visibility products that are lying unused or on the shelf, after the first burst of excitement has passed; and too many organizations who are tired of hearing a spend visibility message that has no further relevance to them. That’s why you have to take spend analytics to the next level and why you should download the FREE, no registraiton required, Spend Visibility: An Implementation Guide today (if you haven’t already).

Find Your Next!

Our last post discussed the need for Next Practices and an innovative approach that will get the organization there so that it can continue to survive, and even thrive, in today’s harsh economic climate. Today’s post is going to review Andrea Kates’ Find Your Next, a new book that describes the “Business Genome” approach — which is a strategic toolkit that an organization can use to identify one or more strategies that could take it to the next level.

The difference between a great idea and a great business result is the ability to integrate insights from lots of different sources and get an entire organization on board quickly.
Mark Vachon, GE Company Officer

No single quote better captures the state of business today and the need for a 360°view of the market in which an organization is competing and an enterprise-wide response to market changes in real-time. That’s why SI agrees with Mark Vachon when he says that Find Your Next is a must-read. Very few books capture the spirit of the approach that an organization must to take in its strategy formulation efforts like this book. As business has progressed beyond the point where a single blueprint can guarantee success, an inquisitive approach that can help an organization identify all of the relevant factors that are influencing the market from a product, process, customer, talent, trend, and innovation perspective is desperately needed as an organization must be continually asking the right questions and identifying the right answers if it is to compete effectively. Getting to the heart of the innovator’s dilemma, this is one of the few books that accurately describes a strategic formulation approach that is both powerful enough to meet organizational needs and easy enough to be adopted.

One of the great things about the book is the author states right off the reality of business strategy generation: there is no science to prediction. You can sit down in a laboratory with rats for a month and track what you see. Even armed with data on how biological change has occurred in the past for each rat, you wouldn’t be able to figure out what changes will happen next. And why not? Because you have not been trained to see the world of rats through the subtle cues and environmental shifts that would allow you to see ahead to the next phase. In other words, there’s no way to know for sure.

In addition, Andrea then goes on to note that forecasting is rarely enough. The traditional tools don’t adequately address the significant trends that shape today’s competitive arena. This is partly because adding up the elements of the past doesn’t get you to the full impact that you can have in the future but mostly because no model is complete — the market is continually shifting — and you have to keep up with it.

Just like Nilofer Merchant provided us with a simple five-step approach for achieving The New How when he noted that we needed a framework for collaboration if we were truly going to collaborate on business strategy, Andrea Kates presents us with a simple four-step process to the business genome approach that anyone can follow. But that’s not what makes this book great. Anyone that has been keeping up with recent thinking on innovation and innovation trends can probably figure out a process. What makes the book great is the advice provided on implementing each step and the detailed lists of important questions that need to be asked, that are not always so obvious. And then there’s the case studies that explain the importance of asking the right strategies and using the business approach to Find Your Next.

Consider the questions posed in relation to your secret sauce:

  1. What is it about you that keeps your customers coming back? Do they see all that you are and all that you have to offer?
  2. Who stands a chance of stealing those devotees or encroaching on your competitive space?
  3. How can you stay wired to the market pulse, even as it vacillates?
  4. What will make your company a market leader in the next year or two?
  5. What’s the secret to differentiating your brand in today’s competitive landscape. Have others in industries outside off yours figured it out?

Each of these goes beyond the traditional set of questions asked by a company employing standard best-practices when trying to determine it’s next product. A typical company

  1. would ask what is keeping customers coming back and not if the customers are seeing everything they have to offer now — this is important as your company might already have it’s next killer product on the market or might be offering products and services the market doesn’t want, and mis-applying resources that should be reapplied
  2. would focus on current competition and not on potential new market entrants that could move into its space and change the game — like Netflix changed video rentals and the iPad changed laptop sales
  3. would be focussed on reading the market now and now how it could ensure it could read, and react, to the market as the product was released and competitors’ products were released
  4. would be focussed on now, and not after-now, and overlook the importance of minitrends to continued success
  5. would focus on its market space, and not other market spaces where a new market entrant might have figured out the key to new customer acquisition in what was thought to be a stagnant or non-existent market (like Starbucks changed the coffee shop)

Find Your Next is a great book and a must read for any executive or strategic planner that wants to understand the foundations for asking the right questions that will be the ultimate key to success in a strategic planning session. As Seth Godin says:

Every great strategic thinker uses the ideas in thsi book … but it took Andrea Kates to write them down for the rest of us.

New Year, New Genome?

A new year is upon us. A new year that will not only be fraught with Risk, as per our recent series on Risk 2011 / Risk 2012, but a new year that will be brimming with opportunity, for those with the insight to identify it and the innovation to capture it.

And when SI says innovation, it means innovation, not renovation. Sergio Zyman may have preached renovation before innovation, but it’s not enough anymore. Any company that has survived the recent downturn relatively intact has more than likely already renovated its brands, products, and core competencies to the max and needs something to get it to the next level. And, more than likely, that something has to go beyond a traditional Blue Ocean innovation strategy (as one never knows if that’s a sea anyone wants to sail) to a Golden Apple strategy that will enable the company to deliver products and services that the majority of customers in its target market segments want (and that will sell out months in advance in pre-orders).

This will require a shift from Best Practices to Next Practices as the organization redefines how it does business. One way an organization can achieve this is to employ the “Business Genome” approach described by Andrea Kates in Find Your Next.

The Business Genome approach is based on a genome mindset [that] sparks new insights for translating the DNA of one business to the growth challenges of another as this allows strategists to see through a new lens — an absolute necessity if an organization is going to identify the Next Practices required to take it to the Next Level required to develop, and deliver, a Golden Apple strategy. [In olden times, everyone wanted the Goose that Laid the Golden Eggs. Today, everyone wants an i-Device — an iPod, an iPhone, and an iPad — these are the golden eggs of modern consumerism and the Apple strategic mindset that created it transformed Apple from has-been to global leader.]

Our next post will discuss the Business Genome approach, described as the Key to Next, and review Andrea Kates’ Find Your Next. Stay tuned!