Future Competition From Emerging Markets

Monday, November 22, 2010 - Permalink
During the recent recession, many companies turned to low cost suppliers that hadn’t previously “made the cut” simply because of the economics of the time – they couldn’t afford more traditional and established suppliers.  This is a classic example of competition “from below.”  And the classic outcome has occurred in many instances – namely, the supplier figured out how to measure up to the expectations.  Those low-cost suppliers are now part of the permanent competitive picture.

This lesson is valuable when thinking about the emergence of competitors from emerging markets.  Their history may be rooted in serving customer segments whose purchase decisions are driven by price, but their future will involve entering mainstream markets.  Our colleague David Hartman has written a new research paper titled The Mandate of Global Presence, in which he argues that most of the competition in the future will originate in emerging markets.  You can download this paper in .pdf format from on the Publications page.

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How To Avoid Becoming The Subject Of An Implementation Horror Story

Monday, November 08, 2010 - Permalink
Avoiding being the subject of a “horror story” told by a customer is high on the priority list of most businesses.  Our research has found that the vast majority of horror stories involve failures in implementation.

One of the ways we’ve seen firms avoid this situation is an explicit process through which they and their customers agree on performance scorecards, defining the metrics that matter and the achievement levels that are considered to be appropriate targets.  While some exceptions exist, we’ve found over and over that reasonable agreement can be reached on both the metrics and the targets.

There are two major advantages of doing this.  First is avoiding after-the-fact charges of unacceptable performance.  When the targets are clear and known, that type of finger pointing is eliminated.  Second and more important, well-understood targets allow the supplier’s management team to take the actions needed to meet the targets, including corrective actions if their firm isn’t hitting targets that they had previously agreed to as reasonable.

No firm should ever be surprised to hear it was the subject of a horror story told by a customer.

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Introducing Innovation

Thursday, November 04, 2010 - Permalink
One firm that we worked with lamented the fact that an innovation that they thought was a breakthrough had failed to gain traction in the marketplace.  When we spoke with them, we learned that they had tried to sell this innovation to companies where they had no prior business relationships, basically trying to use it to open new doors.

Our research strongly suggests that innovations are unlikely to be accepted by firms that don’t have confidence in the relationship and implementation skills of the company bringing the innovation to them.  And the more dramatic the innovation, the more that such fundamentals matter.  Firms won’t go out on a limb unless they know it’s strong.  Learn from firms that are successful at innovation and make sure that the foundations are in place to allow new ideas to be successful.

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Managing Information Flow Essential To Avoiding Adversarial Relationships

Wednesday, November 03, 2010 - Permalink
In a research paper titled "A Blueprint for Success with Suppliers," we summarized our findings about the characteristics of best-in-class customers, those that attracted the best suppliers and motivated their strongest contributions.  One of the attributes of these best-in-class customers was their effectiveness in sharing information with suppliers.

One supplier commented in an interview about a customer where the relationship was strained so that “they keep us in the dark, and then expect us to magically be able to respond to some last-minute need with respect to a new product launch or some change in their product’s technology.”  This supplier went on to say that most of the times where they’ve disappointed this customer could have been avoided had they been given advance information with a reasonable leadtime.

To avoid adversarial relationships, look carefully at the information flow between the companies involved.  Make sure not only that the necessary information is being provided, but also that it’s being done in a timely manner.

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"Take Time Out" To Differentiate Your Firm From the Competition

Monday, November 01, 2010 - Permalink
When looking at the question of how to compete, the options involve a product or service advantage, a price advantage, and a relationship advantage.  In recent years, we’ve found many instances in which strong project management skills create an effective service advantage.  This is particularly true for construction projects associated with new facilities or modernization or expansion programs.

The benefit to the customer often involves “taking time out” – completing the project more quickly.  An oil and gas company which was doing repairs on a refinery calculated the value of a day saved in the millions of dollars.  We saw a similar valuation from a telecommunications firm rolling out a new network upgrade.  Firms with a strong implementation competency are the ones that are able to deliver this contribution to their customers and win business as a result.  Showing your customer how much time your project plan can save, and translating that into dollar benefits, can be a genuine basis of differentiation from the competition.

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Sources of New Ideas For Overcoming Implementation Challenges

Friday, October 29, 2010 - Permalink
We worked recently with a manufacturer looking to modernize their ‘e’ business systems, a project driven by customer feedback saying that they were “not easy to do business with.”  The approach we took to provide guidance to them involved going to their customers and asking individuals in their purchasing organization to identify the suppliers that they ranked at the top in terms of providing the right information and facilitating transactions like ordering.  The most significant new ideas came from suppliers in totally distinct product lines.

One of the ways in which best practice companies manage implementation involves bringing lessons from other environments to the project team.  Virtually every implementation project involves venturing into new territory along some dimension.  Look to firms in other industries with experience in those new territories for insights that can help your own firm address them effectively.

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Building Win-Win Relationships

Thursday, October 28, 2010 - Permalink
In our research relating to the relationships between manufacturers and their channel partners, we found that the most significant cause of conflict was a failure to address “margin management” – basically a failure to ensure that the relationship made sound business sense to both parties.  Manufacturers and the distributors, dealers, wholesalers, and the other channel partners through which they go to market are both business organizations.  If the relationship isn’t contributing to their business success, it won’t get attention.

Best practice firms come to a shared understanding of key elements of the business models in place with their partners, and look for actions that create value all around.  Negotiations between the two firms are a fact of life, but avoiding situations in which the outcome of a negotiation makes the relationship unattractive is a mandate.  And, at the same time, firms with strong relationships look for alternatives to zero-sum negotiations, trying instead to find a way to make the relationship a win for both parties.

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Planning For Good And Bad Business Environments

Monday, October 25, 2010 - Permalink
In 2008-09, as the recession took hold, we observed some incredibly solid plans for managing into a downturn.  Relative to prior recessions, firms were very skilled in quickly cutting inventories and taking other actions, many painful, to get through the difficult times that were coming.

What is interesting is how many of these same firms have told us about how hard it is to get their organizations ready to implement growth plans as markets improve.  We’ve had numerous organizations tell us “We’ve missed some chances this year because we weren’t ready.” 

One of the reasons for this is that when growth resumes after a recession, it’s always a bit different than what took place in prior years.  We find that the firms that are best able to take advantage of growth are ones that look at different scenarios, and put implementation plans into place that are able to respond to a changed business environment.

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Building Life Cycle Relationships With Customers

Friday, October 22, 2010 - Permalink
One of our colleagues recently published a paper titled 'Equipment and Aftermarket Growth Strategy.'  What he found was that for firms that made equipment with long life cycles, there was a tremendous opportunity to link strategies related to the original equipment to strategies for aftermarket parts and service support.

His paper includes case studies of firms that used their parts and service superiority in order to build a preference for their equipment.  Another firm’s business model involved equipment design that facilitated modernization and upgrades over its life.

When your product is going to be used by customers for years and years, there is a great opportunity to learn from firms that have built life cycle relationships with their customers.  These firms not only get the parts and service business, but also are well positioned when it’s time for their customers to replace the equipment itself.

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Choosing The Right Customers

Thursday, October 21, 2010 - Permalink
One of the insights we’ve learned is that picking your customers is as critical as any other element of strategy.  Not all customers are open to a strategic relationship.

At a Strategic Accounts Management Association meeting recently, I presented a paper titled “How Important Is Your Firm to Your Customer?”  The paper suggested a scoring system to determine whether a supplier was important to their customer’s strategy and operations, and also whether a supplier was important to their customer’s own customers, helping them make sales or giving them a competitive edge.  Not every supplier-customer relationship is important in either respect, and even fewer are important along both dimensions.

Picking out the customers that are going to value the relationship is an important first step in getting beyond adversarial relationships.  With scarce resources a reality, there is no use in fighting too many uphill battles.

-Atlee Valentine Pope

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