Those employed in manufacturing companies spend much of their time thinking about the product. The features, benefits, specifications, cost structure. The production process and how to improve it. How the product compares to the competition, its design and ease-of-use. These factors drive new product and process innovation.
In a recent article (1), I posited that companies who manufacture products make a critical mistake. They fall in love with their product and forget why customer’s purchase in the first place: to solve a problem.
In addition, manufacturing process efficiency is a focus using lean methodologies. Unfortunately, “leaning” out the organization as a way to create value often displaces developing products that customers will pay more for compared to competitive offerings (2).
But do manufacturing firms miss opportunities to differentiate themselves by using the power of simple thinking? A recent example from the restaurant industry illustrates the point (3). After years of declining sales, Olive Garden improved its financial performance. While new products help, executives believe that keeping it simple and shunning gimmicks has been the key. CEO Gene Lee points out: “One of the things we’re focused on is trying to keep things simple. Doing simple things every day is really hard. That’s what given us the biggest lift at Olive Garden.”
To differentiate your company using the power of simple thinking, you must first understand your business model. Simply stated, the business model is defined as the rationale for how your business creates, delivers and captures value. Based on this simple definition, you should immediately recognize that how your company generates revenue involves many other factors above and beyond the product.
A powerful tool I recommend is the “business model canvas” (4). I use this in my innovation coaching services to emphasize the role of business model innovation. This framework utilizes a grid with nine building blocks that encompass all the key aspects of your business model.
In my experience helping product-centric manufacturing companies grow their business and find sustainable competitive advantage, they frequently ignore the important role of service in the business model. Understanding how service impacts your value proposition is a way to utilize the power of simple thinking.
There is nothing ground breaking with this concept. It’s about truly understanding what customers need in order to fully extract value from your products throughout the entire life-cycle, from purchase to disposal. And doing those things extremely well vs. your competition. Maybe that’s why we tend to ignore it. We would rather focus on the next big thing relative to our product vs. being really, really good at the day-to-day, seemingly boring customer-facing processes.
There are many tools for mapping the processes where you interact with your customers during the product life-cycle (5). When was the last time you considered these processes in terms of creating a differentiated offering, driving customer loyalty and higher margins and earnings? If there is a focus on these processes, it is more likely on how to make them more efficient. Maybe you should actually spend more on the processes, which might mean additional headcount, not less. Or investment in technology.
Once you understand the primary processes where you interact with customers, now it’s time to find some targets for innovation around these processes. Here we can apply an idea from Michael Schrage’s book The Innovator’s Hypothesis (6). Give a diverse team of 5 people no more than 5 days to come up with 5 ideas for either process improvements or new processes that can be tried for no more than $5,000 each (or whatever limits make sense) and take no longer than 5 weeks to run. The emphasis is on the lean methodologies to run low-cost experiments, maybe with specific groups of customers, and see what works and what should be rejected as quickly as possible. Successful experiments can then be scaled.
A good example of how service can be used to create competitive advantage in the B2B industrial world is illustrated by an analytical instrument company, TA Instruments. Customer support is critical to the company’s success and is viewed as a key differentiator compared to competitors. They invest significant resources in the service and support infrastructure, and just as importantly the culture of the organization is supportive. In other words, everyone who works for this company understands that the company’s success is not only due to sophisticated, high-performance instruments, but how well they provide service and support. The benefit to the company is that customers are willing to pay more for their products compared to competitors providing higher margins and earnings compared to industry averages.
In summary, it’s not always about developing the next big thing. It may be as simple as first completely understanding the elements of your business model, finding ways to improve your interactions with customers and supporting them throughout the entire life cycle of the product better than the competition.
- See this article: “The Dirty Little Secret: It’s Not About Your Product”
- See this article: “Abusing Lean Methodologies”
- See this article: “Olive Garden Sales Soar With Simple Restaurant Fix”
- Alexander Osterwalder and Yves Pigneur, Business Model Generation. (Hoboken, NJ: John Wiley & Sons, 2010)
- For instance, process/value stream mapping, cause/effect diagrams and matrixes; see David Silverstein, et.al., The Innovator’s Toolkit. (Hoboken, NJ: John Wiley & Sons, 2009 and 2012)
- Michael Schrage, The Innovator’s Hypothesis. (Boston, MA: MIT Press, 2014)
Jeff Groh is President of New Product Visions located in Flat Rock, NC. New Product Visions helps companies drive revenue and earnings growth by improving their innovation management practices. We focus on processes, organization, management engagement and culture. Services include consulting, Innovation Coach™ Workshops, Your Innovation Coach online coaching service and software enablers. Mr. Groh spent 30+ years in industry in a variety of management roles in sales, manufacturing and new product development prior to starting New Product Visions. For additional information or to join our mailing list, contact us. Available for select speaking engagement.