Platt Perspective on Business and Technology

Meshing innovation, product development and production, marketing and sales as a virtuous cycle 4

Posted in business and convergent technologies, strategy and planning by Timothy Platt on April 30, 2017

This is my fourth installment to a series in which I reconsider cosmetic and innovative change as they impact upon and even fundamentally shape the product design and development, manufacturing, marketing, distribution and sales cycle, and from both the producer and consumer perspectives (see Ubiquitous Computing and Communications – everywhere all the time 2, postings 342 and loosely following for Parts 1-3.)

My goal for this posting is to explicitly discuss virtuous business development cycles and their vicious cycle counterparts, and I begin this by noting that I have already begun doing so, by way of two specific working examples:

• A more positive, proactively planned and carried out example as drawn from garment manufacturing, where more expensive metal zippers are replaced with less expensive plastic ones (see Part 2), and
• A reactively and at most shortest-term, short term planned negative example that I have come to refer to as the restaurant death spiral, as I explained when presenting this scenario in Part 3.

Let’s begin this by playing what-if in reconsidering those two working examples, starting with the one that I presented in its more positive light: the manufacturing decision to switch from using a more expensive metal zipper to a less expensive plastic one.

First of all, I note here that when manufacturers take steps like this, they often approach this possibility with a goal of effecting change throughout their materials selection and manufacturing process systems, and not for just one decision point such as selection of zippers to include in their finished products. And they start that analytical, decision making process at the points in their design and manufacturing systems where they can predictably affect the greatest savings, at the lowest quality control risk: maximizing the positives while minimizing any negatives there. So in the case study example examined in Part 2 and under reconsideration here, this manufacturer would have done their homework before investing in or entering into this type of specific change so they would know in advance, basic details such as:

• How well these newer plastic zippers work,
• How long they last,
• How easily they break and certainly in comparison to the metal ones that they have been offering,
• And if and how customers accept them,
• Where the answers to the sets of questions that the above points raise would vary depending on where these zippers would be sourced from.

That last point highlights what in most cases would be the ultimate due diligence decision making criterion, where at least one source would have to be able to provide acceptable answers to those questions for a potentially purchasing manufacturer to proceed here in making this materials-used change.

Some third party providers would offer better quality plastic zippers than others and some would offer lower priced ones, and the trade-offs between quality and cost would be crucially important in all of this. But this only reflects two of a larger set of important issues here, and certainly as framed by the first four points here. The answers to the questions raised by the above bullet points and to others that would have to be asked, would vary from source to source for these pre-manufactured parts. And deciding where to source these items, would involve making trade-off decisions for what might be directly competing considerations such as per-unit cost of purchase, versus durability. And with that noted, I turn back to more fully examine the fourth bullet point from above, and the customer’s perspective on this.

That means durability and how long these zippers last before breaking but it also means ease of use by a garment wearing customer. Do they jam too easily, and even if they come through any effort to jerk them open again or closed without breaking? A finding that the zippers might be cheap and durable, but that they tend to jam when used and with unacceptably high frequency would not be a positive here. Quality, ultimately, is determined by the end user customer and not just by the manufacturer as for example when considering issues such as ease and cost of putting these zippers into garments on their assembly lines.

Ultimately, if the customer is dissatisfied with the zipper on a new jacket they have just purchased, they are going to be dissatisfied with the garment as whole and probably with its manufacturer too as a whole. But if they are satisfied with this change they are unlikely to even really notice it at all. So there is a real asymmetry of impact here. Risk analysis and quality control evaluation and follow through would focus on the more impact expanding possibilities of, in this example new plastic zipper failure and on the overall potential costs that this could lead to. So here, and particularly when this is a manufacturer that seeks to offer quality: not just cheap knock-offs, higher quality and a more modest per-item savings in manufacturing might win out. And it probably should.

But let’s play what-if here. Let’s assume, and I will be a bit cynical here, that a third party provider sent a specially selected lot of zippers to this manufacturer for trial use when they knew that they were being evaluated for a possible large and long-term contract with them. And now that this manufacturer has signed this contract with them, they just ship them whatever comes off of their assembly line for the make, model and size zippers ordered – and with less quality control added in for any given batch: no pre-shipping extra-step screening for possible defects or other problems.

• Did this garment maker do their homework, checking to see what other garment makers have experienced when sourcing zippers from this company for use in their products? Or did they make their decisions to buy from this source essentially entirely on the basis of their own reviews of a sample lot shipped to them?
• And let’s consider that contractual agreement. How does it cover quality control issues and for terms of payment, requirement for replacement of items found to be problematical, and contract termination if quality control issues from this source reach a level of significance? That last detail is the one that will come back to haunt this garment manufacturer if anything does, and certainly if they have entered into an agreement to buy at least some minimum volume of zippers from this sourcing business to among other things cover their claimed costs of setting up a production line for that work.
• Who actually wrote the terms defining what would qualify as a contract breech defining loss of quality control here, and what does it say? Does it favor the zipper manufacturer here, or the garment manufacturer that would purchase these items from them, or both and if so in what way? Assume that it would be impossible to prove that the zipper manufacturer knowingly sent a highly unrepresentative sample of their product offerings for trial use, where that in and of itself would qualify as a deceptive business practice that would nullify most such contracts. Assume that any binding resolutions made would be based on the terms of this contract itself as if entered into in good faith by all involved parties.

Proactive only works here if the right details and considerations are in fact all proactively considered. And as soon as a significant one arises that was not addressed in advance of contract signing, everything becomes as reactive and after the fact for this scenario too, as was outlined in my more negative working example, restaurant death spiral case.

Now let’s reconsider that example too. And let’s start out with a detail that on the face of it sounds crazy, but that I have in fact seen done. A restaurant buys canned goods and even when local seasonally grown fresh produce alternatives are available, because no one there has the time or expertise to go to the wholesale markets or directly to the local growers to source that way. They start out as a modestly consistently profitable business doing this! And then they get into trouble and in this case the owner decides that they have to make the sweat equity and learning curve investment of cutting costs (and improving quality) by at least seasonally buying locally and using fresh where they can. This changes everything; their cost cutting is now being carried out at least in part with an intense awareness of ongoing quality and as a matter of reducing cash flow challenges to the business by accepting greater owner burdens – but ones that would in fact improve the restaurant. I have just reframed this away from being a death spiral scenario per se and certainly if this type of more positive change predominates in what is done overall and if this approach is expanded in a next redevelopment cycle.

I have reframed this example from simply representing a death spiral scenario and certainly if more positive changes predominate in their overall impact over more negative ones, and particularly in the eyes of their customers and potential customers in their reachable marketplace. And this brings me to a second foundationally important point that I would make here:

• If the difference between these two basic scenarios and approaches discussed here lies in thinking through and examining the right details and factors and proactively getting them right,
• It also plays out in considering all of these factors in the larger context and for how everything fits together – and in how this larger perspective impacts upon the customers who ultimately pay the bills and who would or world not contribute to keeping the business viable and successful.
• This is a point where the garment manufacturer and the restaurant, and essentially any product providing business face essentially the same challenges and issues.

And this is where virtuous and vicious cycles enter this narrative. Both take place as cycles: and with at least two and probably many more rounds of proactive where possible, and reactive where necessary action and reaction.

• Virtuous cycles positively build on successes achieved and on how they were arrived at, and
• Vicious cycles seek to endure where viable paths to positive business building do not seem to present themselves, at least at acceptable costs to the business owners.

To follow-up here on my second example from Part 3, if the owner of restaurant realizes and accepts that they are going to have to step way outside of their usual comfort zone to identify and reach out to local farmers in their area, to buy local produce from them and enter into supply chain agreements with them for continuity of supply, they are creating a foundation for what can become a very positive virtuous cycle. And if they couple this first change with a shift to a seasonal menu where they can always offer best-price, best quality and as locally as possible, they might find whole new types and levels of business success from that. But if they are never willing to take that first step – here let’s say with sourcing and buying local spring and summer produce, none of this potential good can happen.

• Ultimately, the difference between virtuous and vicious here is in the details, with larger positive or negative patterns emerging from the perhaps individually small decisions made, actions taken and commitments made, or not.
• And ultimately, a business owner can decide which of these two paths to take, simply by virtue of whether they are willing to step outside of their comfort zones and attempt what for them at least, would be their new and still at first unknown.

I am going to continue this discussion in a next installment where I will more explicitly consider paths of change, and in both their gradual and disruptively intrusive forms. And in anticipation of that, this means building for agility and resiliency. In anticipation of that narrative, consider the potential consequences of weather-related crop failure for the virtuous cycle restaurant owner of above, who has sought to develop their newly reframed business in buy-local terms and with that as a defining feature of who they are now as a restaurant.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And see also Ubiquitous Computing and Communications – everywhere all the time and its Page 2 continuation.

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