why do companies exist? where are the teeth? over the last half of the 1990s, we were all a little...

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Why do companie s exist?

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Page 1: 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

Why do companies exist?

Page 2: 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

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

Page 3: 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

Companies exist to meet customers’ real needs,

profitably!

There is only one valid definition of business purpose: to create a customer.

Peter Drucker

Page 4: 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

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

Page 5: 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

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!

Page 6: 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

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?

Page 7: 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

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

Page 8: 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

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

Page 9: 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

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

Page 10: 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

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

Page 11: 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

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

Page 12: 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

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?

Page 13: 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

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!