ASSIGNMENT FOR WEEK 7

INTRODUCTION

For the last few weeks, I have been focusing assignments around how to do the chronological steps in the "service reinvention process" that is summarize in slide #9 in slideshow #10 at this link: ./articles/Identify_Customer_Niches.pdf.

The steps of slide #9 have been:

    1. Define our #1 customer niche(s). We can do this better by looking for common sub-groups of customers with similar item and service needs within the top 10 most profitable customers using a good enough activity-based cost approach. (assignment 4)
    2. Visiting the customers that personify the heart of our #1 niche to listen better, more deeply and creatively to their frustrations and unmet activity outcomes that intersect with our products and needs all to better define and refine our measurable definition of what "perfect service" is for them. (assignment 5)
    3. Report our discoveries back to our entire organizations. (assignment 6)
    4. Overhaul all 7 steps of our kinetic chain to be able to consistently deliver what the customers want (partially addressed by assignment 6 and more in this assignment #7)
      5. (and the following steps to be covered in future assignments)
    5. Market our distinctive, valued, TPC lowering total service value proposition to the targeted customer niche (next week�s assignment #8)
    6. Get paid for our unique service value by either getting last look plus a value-based premium or convincing some customers to work with us on an inter-company re-engineering of the buy-sell process. We also will start to grow faster and more profitably than our competitors and wonder how long, if ever, the competitors will match, and perhaps pass, our total value proposition.
    7. Most competitors will: a) never understand what we are doing; b) understand it and not be able to change from their frozen past practices; or c) at best imitate some of the superficial aspects of what we are offering while crowing that they are doing it all and cutting the price.
    8. Because our motivated, flexible, strategically focused employees will be providing the lowest total cost, highest service value output, we will dominate and thrive while the competition will die or exit our targeted niche(s).

THINGS TO READ FOR THIS WEEK

I would like you to read/skim 5 articles of mine posted at my web site as background preparation for discussing a case study article on ABC Bakery Supply Company.

In this order, check out the following articles:

  1. "Why Aren�t Best (Distributor) Practices Happening" at this link: ./articles/2_17.asp. This article is the first of several that points out that "best practices" don�t work in a strategic vacuum. A company with mature products must first precisely define both the customer niche and its measurable total product needs to guide the strategic shaping of any best practice discipline. In "kinetic chain of profit power" terms, if we don�t have step #2 "strategy" nailed down, then "best practices" for any of the following steps 3-7 are nearly worthless. And, the article points out that the change process is a journey that requires a lot of group learning tools and attitudes.
  2. "Good Wholesalers to Great Ones � Quickly" at this link: ./articles/2_14.asp. This article takes the 5 big conclusions from the book "Good To Great" and just makes them more distribution specific. (And, like many of my articles, it shamelessly plugs my video.)
  3. "E=MC2 Measurements for Distributors" at this link: ./articles/2_16.asp. This article follows up on the fourth of the five guidelines that are developed in the book "Good To Great" which is: "determine the economic measure that will drive the entire plan". For distributors I recommend "GM$/employee" and "PBIT/Customer". The article then goes on to explain why these North Star metrics are so "profound". Please read this article thoroughly.
  4. "Business Stinks: Time to Share the Numbers" at this link: ./articles/5_14.asp. This article explains why "open-book management" is necessary to make high performance change ideas happen and carefully looks at three waves of resistance that entrenched managers typically have against sharing numbers. This too is an important read, especially if your company doesn�t share the numbers with all employees in an effective way.
  5. "Tackle the Small Order Problem - Now" at this link: ./articles/2_15.asp. This article addresses a big negative activity area for both manufacturers and distributors � small, money losing transactions � from multiple sources. It�s a good read and necessary for having more insight into the case study that follows.
  6. "Re-thinking Distributor Profitability- A Case Study". ./articles/2_19.asp. Read this case, the attached analysis/discussion and the final #s exhibit carefully. The "PBIT" numbers were calculated by taking the total annual GM$ for an account and subtracting the product of "the # of trx" by the average cost per transaction of $132.

With that nonsense out of the way, the discussion questions for all of you to consider and take a crack at are below in the "assignment" section.

ASSIGNMENT/DISCUSSION QUESTIONS

  1. If you were the new CEO of ABC Bakery Supply, what would you do to improve the profitability and the growth potential of this company? What resistance do you think that you would encounter to your plans?
  2. Does your company have losing customers as well as too many losing orders from both your break- even and profitable customers? If so, how can you free up the operational slack to re-focus it on doing what you do best better? Isn�t having a lot of profit draining activity like spinning your corporate wheels on ice? If you just push harder at what you are doing, why won�t you capture even more losing activity and spin your wheels even faster? If any of these statements apply to your company, what will you do to be a prospective agent of change for your employer?

End of Assignment 7

Bruce Merrifield

Merrifield Consulting

101 Black Oak Place

Chapel Hill, NC 27517