why do companies exist? where are the teeth? over the last half of the 1990s, we were all a little...
TRANSCRIPT
Why do companies exist?
Where are the Teeth?
Over the last half of the 1990s, we were all a little bit too shareholder focused, too growth-at-any-cost focused. I tried to get people to flip that around. If we create brands that make a difference to our customers and focus on the fundamentals, ultimately shareholder growth will take care of itself.
A.G. Lafley, CEO at P&G
Over the last half of the 1990s, we were all a little bit too shareholder focused, too growth-at-any-cost focused. I tried to get people to flip that around. If we create brands that make a difference to our customers and focus on the fundamentals, ultimately shareholder growth will take care of itself.
A.G. Lafley, CEO at P&G
Companies exist to meet customers’ real needs,
profitably!
There is only one valid definition of business purpose: to create a customer.
Peter Drucker
Meeting Customer’s Real Needs
News flash: Consumers are actually willing to part with their money!
As Marketing Requested It!As Sales Ordered It! As Engineering Designed It!
As Manufactured! As Installed What the Customer Wanted!
Creating a Satisfied CustomerCreating a Satisfied Customer
Meeting Customers’ Real Needs
To meet customers’ real needs, two processes must be managed effectively and efficiently:
1. New product/service development (the idea
infrastructure).
2. Product/service creation and delivery (the physical flow).
To meet customers’ real needs, two processes must be managed effectively and efficiently:
1. New product/service development (the idea
infrastructure).
2. Product/service creation and delivery (the physical flow).
As Marketing Requested It! As Sales Ordered It!As Engineering Designed It!
As Manufactured! As Installed What the Customer Wanted!
The Idea Infrastructure
• IBM PC• Microwave food• Diet Coke• Lean Cuisine• Macintosh computer• Super-premium ice cream• Chrysler minivan• Tartar Control Crest• Athletic footwear• USA Today• Swatch watches• Nintendo video games• SPF sunscreens
• New Coke• IBM PCjr• Yugo• LA Beer• Home banking• Pontiac Fiero• Disk camera• RCA SelectaVision• Generic products• Fab 1 Shot• Holly Farms roasted chickens
Hits and Misses of the 1980sHits and Misses of the 1980s
Which have you heard of?Which have you heard of?
The Company
MarketingLogistics
ProductionNPDSupply
The Idea Infrastructure
Customer $ervice,
$atisfaction, &
$uccess
ObjectiveStrategicLinkageValue-Added Functions
Core Competency:Cost leadershipDifferentiation
Value Proposition:Cost, QualityDelivery, FlexibilityInnovation
Resources
People
Information & Performance Control Systems
Info
rma
t io
n &
Pe
rfo
rma
nc
e C
on
t ro
l S
ys
tem
s
Materials
Technology
Infrastructure
Remember, Finance is the Language of
Business
Can we meet customer
needs profitably?
The Idea Infrastructure
The Cycle of SatisfactionMeets Customers Real Needs
Achieves Verifiable Profit
Get into the Mind of the Customer
Conceptualize & Develop a Product
Verify Viabilit
yCustomer needs!
The Source of Satisfaction?
Creating a Satisfied CustomerCreating a Satisfied Customer
Getting into the Mind of the Customer
Marketing is the Gateway to Downstream Customers
• What the customer buys and considers value is never just a product. It is always a utility, that is, what a product or service does for him.”
Peter Drucker
• First comes the willingness to rethink, fundamentally, what products are & what they do. Kenichi Ohmae
Satisfaction How do we Know?
Techniques for Understanding Customers:• Surveys• Focus Groups• Expert Panels• In-depth interviews• Shadowing• Ethnographic Studies
Low
High
Getting into the Mind of the Customer
Customer/Service Interface
Satisfaction
Product Service
Customer/Product Interface
Aspects that Deliver Satisfaction
How do we Know?
Aspects that Deliver Satisfaction
How do we Know?
• First comes the willingness to rethink, fundamentally, what products are & what they do.
Kenichi Ohmae
• What the customer buys and considers value is never just a product. It is always a utility, that is, what a product or service does for him.”
Peter Drucker
Satisfaction Emerges from the Customer Interaction
Conceptualizing & Developing a Product
New Product Development is the Future!
The long-term competitiveness of any . . . company depends ultimately on the success of its product development capabilities.
Steven Wheelwright & Kim Clark
Knocking Down the Walls:
• The Sign-off
• The Integrator
• The Cross-functional Team
• The Cross-functional
Department
Who Should be on the Team:
• Marketing• R & D/Engineering• Finance• Manufacturing/
Operations• Sourcing• Logistics• Suppliers• Customers
Target Costing Process:• Supplier Development• Design Change• Material Change• Specification Change• Cost Trade-off
New Product Roll-out &Continuous Improvement
Target Costing Process
Cost Breakdown to Detailed Level of Component/Service
Target Target TargetCost Price Profit= -
Establish Target Sales Price
Identify Product/Service Characteristics
Identify Product/Service Characteristics
Verifying Financial Viability
Six-step ProcessSix-step Process
Measures of Financial Viability:
• Net Present Value
• Economic Value Added
Can we justify the cost of bringing a new product to market?
Can we justify the cost of bringing a new product to market?
Verifying Financial Viability
Who Sets the Price?Who Sets the Price?
Customer Expectations
Competitors’Offerings
Target
Price
Company Uniqueness
For many, pricing power has vanished!For many, pricing power has vanished!