The Grey Chronicles

2009.March.31

Doing More With Less



The Silver Lining

Scott D. Anthony, president of Innosight wrote The Silver Lining (2009), which will be published in June by Harvard Business Press. Innosight is a consulting firm co-founded by Clayton Christensen and Mark Johnson specializing in innovation and disruptive strategy.

The book describes “the thresholds and tradeoffs of target customer segments and smartly re-featuring existing solutions that allow to get the customer’s job done in a way that meets cost objectives.”

Anthony writes:

“When times get tough, innovators have to figure out how to improve the productivity and profitability of existing products, services, and processes. Cost-cutting is rarely a fun activity. But thoughtful approaches can actually result in reconstituted offerings that provide better value in the eyes of external and internal customers.”

Anthony itemizes some specific areas that companies can choose to “dial down” include:

Raw material: The analysis might highlight that certain raw materials that provide “gold standard” performance lead to performance differences that are imperceptible to the customer. Maybe you can use less raw material, or find a completely different way to produce your product.

Sales staff: It is possible that some customers don’t value an intimate sales process with substantial hand-holding. For example, small businesses looking to find a simple way to manage their customer contacts don’t want to deal with a complicated, customized pitch from a company like Oracle. They’d rather use simple solutions from Salesforce.com, 37Signals, or NetSuite that they can obtain and begin using quickly and easily.

Post-sales support: Companies can expend significant amount of money providing the exact wrong kind of post-sales support to customers. While some customers undoubtedly want human interaction when they have a problem, many want the ability to find precise answers to their questions quickly, and see how other customers have solved similar problems. Cisco Systems, for example, has created online forums where customers can learn from other customers.

Features: Maybe there is a whiz-bang feature in your product that doesn’t matter that much to a particular customer set. For example, many newspaper companies have reduced or combined sections of the newspaper, or moved away from daily publishing. The readers that missed particular features could still find the information online, and the companies could save on printing and distribution.

Marketing: Generally, our perspective is that much of a company’s investment in marketing is a waste—particularly for young companies that feel pressure to “build brands.” One of the dot.com era’s biggest flameouts, Pets.com, invested tens of millions of dollars building a brand when it had a shaky business model and little source of competitive advantage. Its “sock puppet” is still widely recognized today, but the company shut down more than six years ago. ”

Are these ideas applicable to steel manufacturing, particularly GSPI?

As discussed before, GSPI’s Raw Materials are from Stemcor or Steel Traders Corporation (STC), thus any change in raw material requirements would have to be dealt with them.

Post-sales support is GSPI’s Quality Assurance department. Moreover, GSPI’s customers are demanding more stringent quality aspects since 2004 than what quality standards are stipulating. With its recent ISO 9001:2000 certification, Features of GSPI’s products would hopefully not be subject to much scrutiny as GSPI have had dealt before.

GSPI’s Marketing, also its Sales staff, is primarily Makati-based. One possible way to improve customer communications is to beef-up the corporate website discussed in a six-part series. Another idea is Marketing and Sales personnel should visit the plant more often to understand what is going on in the manufacturing side to enable them to effectively sell more products.

In these troubled economic times, most organization are looking for ways to control costs, do more with less, and minimize disruption caused by reduced budgets. The silver lining to the economic downturn may be the resulting need for aggressive change — change that in turn can lead to innovations in products, services, and the way an organization operates.

From the looks of things, apparently GSPI is primarily dealing with controlling of labor costs.


Notes:

Anthony, Scott D. (2009). The Silver Lining: An Innovation Playbook for Uncertain Times. Excerpted from Innosight LLC, 23 February 2009, to published in June by Harvard Business Press. Also excerpted in Forbes.com, 26 February 2009. back to text

Disclaimer: The posts on this site does not necessarily represent any organization’s positions, strategies or opinions; and unless otherwise expressly stated, are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Philippines License.

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