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COMPETITIVE KNOWLEDGE NEWSLETTER 

Let's get to it:

"Knowledge is Power." Don't know who said it first but whoever did "hit the nail on the head." Does all knowledge create power? I think not. For example, what good is sophisticated computer systems knowledge if a company lacks the commitment and implementation skills required to convert that knowledge into a world class delivery system. I say that knowledge is power only when a company can effectively convert that knowledge into a relevant competitive advantage.

The most valuable knowledge that manufacturers should pursue is customer knowledge. Lack of in-depth customer knowledge was a root cause of the torrid over production of telecommunication equipment in 2000. Result: inventory write off in the millions of dollars for many hi-tech companies in 2001. Without real time customer data, companies will never improve sales forecasting process, optimize product designs, nor reduce related engineering change activities. Our lead article today address the issue of "Customer Connectivity." Guided by executive leadership, every person in the company should be involved in obtaining real-time knowledge from their key customers.

If your company is to emerge from the business downturn as an industry leader, employees will need to think and act like entrepreneurs. To this end, our second article delineates the "how to." From the "New Work Habits for a Radically Changing World" we present Mr. Price Pritchett's article, "Behave Like You're in Business for Yourself."

"To Get Results, Hit the Right Note." In an article written for Fast Company, conductor Roger Nierenberg makes a great case against criticizing workers. Our third article tells what we should be doing­--it's from the sidebar of his Fast Company article.

Pricing Trends is back by popular demand.

We finish the newsletter with the sidebar, The Power of Focus" from Soundviews book review "Profit From the Core."

When it comes to obtaining Competitive Knowledge, don't pass-up on ordering our tutorials for your business teams. Your teams will learn why and how our Kaizen Based Lean Manufacturing methodology builds the foundation for MRP, ERP and lean manufacturing success. For details and ordering information, Lean Production

We suggest that you both print and archive this newsletter for current and future reference. Feel free to make copies and share with colleagues.

This newsletter has reached your desk because we share a common objective -- to help key manufacturing people avoid "burnout" while achieving their full performance potential. To unsubscribe simply send us an email with "Unsubscribe" as your subject.

Enjoy,

Bill Gaw, President Business Basics, LLC


COMPETITIVE KNOWLEDGE NEWSLETTER - JULY 2000

Featured Articles in This Month's Edition of CKN:

1. Customer Connectivity

2. Behave Like You're in Business for Yourself

3. To Get Results, Hit the Right Note

4. Pricing Trends

5. The Power of Focus


Customer Satisfaction Training for Winners 

1. "Customer Connectivity"
    by Bill Gaw

The reality of Customer Responsiveness is in the eyes of the beholder – the customer. The sooner we realize and accept our customers’ perceptions of our products and services as reality, and accept it as our challenge, the sooner we will earn their confidence and become their permanent supplier of choice.

Customer connectivity represents a set of business processes touching on all aspects of the company. Customer satisfaction is a great deal more than the clichés "getting close to customers" and the motto "the customer is always right". Since some companies sell to a variety of customers with varying and even conflicting desires and needs, the goal of getting close to the customers, and the motto that "the customer is always right", are somewhat vague. We have also found no meaningful business philosophy in the terms "market driven" and "customer oriented". Most business gurus use the phrases interchangeably and have difficulty in defining and communicating their scope and meaning. Successful business leaders go beyond these clichés and strive to provide their selected customers with products and services under the business philosophy of Customer Connectivity. 

Because different customers have different needs, a company cannot effectively satisfy this wide range of needs equally. The most important strategic decision in the pursuit of Customer Connectivity is to choose the most important customers. All customers are important, but invariably some are more important than others. Collaboration among the various functions is important when pinpointing key target accounts and market segments. This done, sales people know whom to call on first and most often, the people who schedule production runs know who gets favored treatment; those who make service calls know who rates special attention. If the priorities are not made clear in the calm of planning meetings, they certainly won’t be when the sales, production scheduling and service dispatching processes get hectic. 

Customer connectivity starts with customer selection, however, the next phase is just as important. Company executives must gain a thorough understanding of their customers’ buying influences and their relevant needs. Such customer information must be communicated by these executives beyond the sales and marketing functions and permitted to "permeate every business function" – the R&D and design engineers, manufacturing/quality people and field-service specialists. When these technologists, for example, get unvarnished feedback on the way customers use their products, they can better develop improvements on the products and the production processes. If, on the other hand, market people predigest the information, technologists may miss opportunities for improvements. 

Customer connectivity must be predicated on team dynamics and commitment. Serial communications, when one department passes an idea or request to another routinely, without interaction can’t build the team dynamics and commitment needed for Customer Connectivity. Successful new products don’t, for example, emerge out of a process in which marketing sends a set of specifications to R&D; R&D sends the conceptual design to design engineering which sends finished blueprints and designs to manufacturing. But joint design/development reviews and decision-making, in which customer's and supplier's functional and divisional people share ideas and discuss alternative solutions and approaches, leverages the different strengths of each party. Powerful internal and external connections make new product development communications clear, coordination strong and commitment high. 

Establishing effective business relationships with key customer personnel is paramount to making it easy for customers to do business with your company. From the shop floor to the front office, we must establish "one-on-one" customer communications that provide real-time customer input relative to business relations, product performance, and field service. We must convert these communications to action plans and put forth our best effort to quickly resolve all issues. Let’s remember that being nice to people is just 20% of providing good customer service. The important part is designing systems that allow you to do the job right the first time. All the smiles in the world are not going to help you if your products or services are unsatisfactory. 

Individual and team direct-line communications with customers is the best approach to obtaining timely and relevant "how are we doing" feedback from customers. Customer satisfaction surveys are tedious, possibly supplier biased and not very accurate in their customer service portrayal. We prefer a "one-on-one" customer connectivity system


Customer Satisfaction Training for Winners 

2. "Behave Like You're in Business for Yourself"
    by Price Pritchett

Your employer wants more than your body, more than just your arms and back and brain. Your employer wants you to act like an owner.

Why is this? And what does it really mean?

One reason why you need to think and behave like you're in business for yourself is because organizations are breaking into bits and getting flatter. There's less hierarchy. Fewer layers. The move is toward small scale, decentralized business units−sort of like mini-enterprises, or self-contained work groups−that operate more independently

Organizations are reshaping themselves in an attempt to become more entrepreneurial. They want to get closer to the customer. They want decisions to be made by the people who are closest to the information. And they want to be able to move faster. The idea is that only small units are agile and adaptable enough to thrive in today's world of high-velocity change.

So now we're seeing a lot of self-directed teams, "Empowered" employees. The management ranks are shrinking rapidly, and this means more power, information, and responsibility flow through to you.

You'll need to assume more personal responsibility for the success of the entire enterprise, rather than focusing narrowly within the boundaries of your old job description. To act like an owner you need a sense for managing the whole. You need peripheral vision.

Consider how you−personally−can help cut costs, serve the customer better, improve productivity, and innovate. Constantly think in terms of commercial success, how you and your group can add directly to the financial health of the organization.

This could prove to be more "freedom" than you prefer. For example, if you've found comfort in "working for somebody else"−e.g., having other people call the shots, supervise you, and stand accountable for problems and results−you may start to sweat. On the other hand, behaving like you're in business for yourself gives you the chance to really shine.

Besides all this, though, thinking of yourself as "self-employed" is the mindset that serves you best in the years to come. Organizations simply aren't going to look out for people's careers like they did in the past. Odds are you're on your own. Much like an independent contractor, you have to "build your business," uphold your reputation, and satisfy the people who pay for your work.

So operate as if you're self-employed, and carry personal responsibility for your own career mobility. Whether you look at it from the perspective of your employer, or from the angle that you'r3e a one-person show, it pays to behave like you're in business for yourself. 


Customer Satisfaction Training for Winners 

3. "To Get Results, Hit the Right Notes"
    by Roger Nierenberg

If you're in charge of a team that has been under performing, how do you change its behavior? How do you communicate without offending or alienating members? "No one wants to under perform, yet so many people do, "says conductor Roger Nierenberg. Why? "Because there are an enormous number of parameters for judging performance and most people don't know what aspect to work on. But as the leader, you stand on a podium and therefore have access to the big picture. Things that are amazingly obvious from the podium and not at all clear from the chair. Your job as a leader is to communicate a sense of how things could be−and to show people how to achieve that vision.

How do you do all that? By giving direction, not criticism. Direction points to the way things could be. Criticism, on the other hand, points to the way things were. It doesn't enlighten people. Direction tells people what to do whereas criticism tells people what not to do. Here's a criticism: 'The percussion section is playing too loudly.' A direction is. 'Make sure the audience can hear the woodwinds.'

It's much harder to process a 'do not' instruction than a 'do' instruction, because the 'do not' means you have to locate a behavior, inhibit it, figure out what to replace it with, and then replace it. The 'do' instruction means something more direct: 'do this.' You're offering a new vision, a different tool. Leadership is about preparation. It means actually inventing a whole new experience and then communicating it to the people you work with. If your team executes your direction and results improve, then people begin to put their trust in you. That's how you gain credibility as a leader.


Customer Satisfaction Training for Winners 

4. "Pricing Trends"
    adapted from Bottom Line Business

MIXED OR WEAK

Computers: A good time to buy, with prices dropping more than 8% so far this year, as manufacturers step up efforts to reduce excess inventories.
Computer Screens: Prices of flat-panel models continue to slide. Some 15-inch screens sell for as low as $499 after a manufacturer's rebate.
Copiers: More price erosion ahead---especially for machines that do 20 to 69 copies per minute (cpm)---as printer manufacturers promote new multifunction products.
Data Storage: Due to slack demand, prices are declining nearly 24% per quarter---double the pace of late last year.
Steel:
Latest 10% to 20% boosts on sheet won't stick, as demand continues to lag well behind year-ago levels.

NEW PRODUCTS/NEW PRICES

Phones/computers: Samsung's SPW-1300 cell phone/PDA (with Palm OS) comes with an innovative color display. Availability: August. Price: About $500.

HEADING HIGHER

Electronic components: Prices of SRAM chips, currently weak, should firm up after mid-year---enough to push up the average 2001 price by 11.5%, to $5.87.
Power transmission equipment: Rising material and component costs could result in a 3% price increase this year.


Customer Satisfaction Training for Winners 

5. The Power of Focus
    by Chris Zook with James Allen

Companies that have a few, highly focused core businesses are more likely to exhibit sustained growth than companies that are diversified and more unfocused in their building of growth platforms. Ample evidence supports this viewpoint:

  • Most companies that sustain value creation possess only one or two strong cores. A tightly focused, sustained value-creating company will usually pull ahead of a rival embedded in a diversified company with no clear purpose or core. Anheuser-Busch leads in the beer business over Miller, which is part of a packaging foods conglomerate. Nokia leads the cellular phone business over rivals like Motorola and Ericsson, both companies with many separate parts.
  • Private equity companies often achieve their greatest success by buying orphan businesses from diffuse conglomerates, thereby creating focus. Many of the most successful leveraged buyouts stem from strategically under managed, noncore businesses (with profitable cores at their centers) that are purchased and revived by new owners who allow those companies to become freestanding businesses.
  • Spin-offs usually create both focus and value. Before PepsiCo spun off its $14 billion restaurant business (which consisted of Taco Bell, Pizza Hut and Kentucky Fried Chicken), that business deviation from the company's soft drink core was seen as an anchor, keeping Pepsi from mounting a firm challenge to the more focused Coke−and keeping the restaurant business from challenging McDonald's supremacy in the fast food market. Since the spin-off, both Pepsi and the restaurant business (re-christened Tricon Global Restaurants) have done well.
  • The few companies that became smaller and still created value are those that restructured to focus on a strong core. Guinness, the famed Irish brewery, had entered into more than 250 non-core businesses and watched its core business−its Stout beer−erode in market share. Once it sold 150 of those businesses, moving operations back towards its core, its stock increased in value more than 10,000 times in eight years.

Customer Satisfaction Training for Winners 

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