Two guys walk into a Starbucks and wave to a woman at a table. After getting their lattes, they head over and join her.
Paul: Hey, Caroline, looks like you got here early.
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Caroline: |
Traffic wasn’t bad today. Did you two come together? |
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Rick: |
No. We just happened to arrive at the same time. How are you doing? How’s work? |
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Caroline: |
It’s pretty interesting these days. Today we had a planning meeting to set objectives for the next few quarters. We had a poor performance last year, and budgets are getting cut. I was asked to reduce cost by 20 percent and increase profits by 150 percent. [She smiles.] |
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Paul: |
Are these just goals to see how high you can jump? Or are they somewhat realistic? |
Caroline: It’s part of an ongoing internal discussion. We’ve gotten really efficient at delivering high quality with decent costs. But, you know, everybody else is pretty good at it now. So the discussion is about what to do next. For years, we’ve had the dual strategy of beefing up quality and reducing costs, and that strategy has worked well for us. But now, we’re pretty close to the efficient frontier, and everyone else is catching up pretty quickly.
Rick: I know what you mean. We’re lost as to how to respond to
the latest competitor who is trying to drag everyone into a death rattle on price. It isn’t like there is much more we can do with our manufacturing costs or quality. I am a black belt six sigma, and we’ve integrated the latest on lean manufacturing into our stageGate process. Now that we’re accustomed to putting out high quality at low cost, we’ve settled back into our old bunkers. The sales force is on our back to put out some new product that can compete on cost. But we’re putting out great stuff, so we wonder why sales can’t move product by just showing buyers our quality difference.
Paul, now that I think about it, you guys don’t seem to be in this cost battle at the moment. You guys are thinking innovation instead of costs, aren’t you?
Paul: Yeah, I told you guys about the new CEO a while back.
He has a different focus. Still too early to tell what will happen, but I have to say that there’s excitement in the air that wasn’t there before. He believes that we can no longer compete on price but instead need to be leaders in innovation. A couple of weeks ago, he sent out a memo with suggested reading. I read an article in Business Week about the power of design. Usually, articles about design just talk about industrial design and how they make products better. But this article was different. It said that
product design means that everyone has to be innovative, not just the industrial designers you hire. Another article talked about the challenge of the growth of China, stressing how companies in Asia are getting smarter, not just cheaper, and that means innovation is the only way to compete. He also sent some literature about programs that a number of B schools are teaching on “entrepreneurship and innovation.” He is actually willing to support us getting into those programs. Even he admits the innovation seminars we are constantly attending can only get us to the beginning of what we need to do.
I’ve not yet read the book The Design of Things to Come that he suggested, but I’ve heard it has some pragmatic ideas on creating profit and growth by focusing on customer needs and desires, and that it has techniques that any of us can understand and incorporate into our process….
