I once worked with an organisation who for three years were one of 12 shortlisted companies providing IT Services for home users and businesses for a large US technology company. They suddenly, and without any warning, found themselves bidding to be one of the tech company’s three remaining suppliers.
My client was now forced to provide a compelling reason to be one of the final consolidated three companies - in return the outsourcing USA tech company expected to pay less for the overall service. The US tech company assumptions were that by giving the three successful bidders more business they would have more ‘synergies’ and ‘critical-mass’ and therefore with the higher volume they would be able to operate a much reduced operating cost. The US Tech company intended to get at least their fair share of their suppliers cost reductions.
It didn’t work out that way because the company didn’t appreciate an underlying issue. While their way of measuring the end-to-end service seemed logical enough by splitting the end-to-end measure by each supplier they assumed the real delivery to the customer would be the same.. you guessed it, the reality was far from the functional company measures would have you believe.
The real end-to-end service delivery metrics were falling well short of their promised service levels to customers but they were disguised by the functional metrics which made it all look good. A case of the feasible parts making an infeasible whole. And who would know? because the US tech firm had set up their own people to monitor how each company was performing Individually without understanding how everything combined to provide the end user with a seamless service. Microscoping management methods used when telescoping ones were needed.
So here’s what we did to help our client leverage a sticky situation into a growth opportunity.
First we spoke to company that was looking to reduce the number of suppliers and listened carefully to their plans to reduce the operational costs of running it’s end-to-end service provision
When faced with the US tech companies selection panel our client’s COO did something most unexpected. He said “actually, we want to put the price point up.”
He quickly followed with an offer to show how his company could knock two days off overall product delivery time across North America. He also highlighted delays in the technical diagnosis centers, the inventory planning, the five logistics transportation companies and the five engineering companies who tasked engineers to problems.
Intrigued, his client asked him to explain.
Before we go any further let me explain how we got to this point. It really is odd for a supplier like my client to propose a solution that was outside of their core competency.
Indeed, when I first started working with the COO’s company, they were in a bind. They couldn’t afford to cut their margins enough to make it into the top 3 providers. They also knew that not landing the contract would throw 2,000 people out of work.
They needed to change their business model.
Our solution was to give them a new way of thinking, and a new way of competing.
Instead of competing as a diagnosis centre we decided to compete as a whole value chain. Monitoring and measuring how all the downstream activities including their own met the customer’s needs.
The result? They discovered that while all the companies in the value chain were meeting their functional goals the end to end service was nowhere near where the measurement system was telling them they were.
They went further and were able to devise a system where they could predict the actual end-to-end repair service down to zip code and product type and highlight the companies that were causing the delays.
It goes without saying that this client already knew about their dissatisfied customers. They just didn’t know how to drill down to find out why this was happening. Our client’s company did know because we taught them how to do it.
And because they offered something their competitors couldn’t, they got a contract despite the higher costs. As a footnote, nothing succeeds like success: their company not only kept their 2,000 employees but also doubled that number shortly soon after.
The key to this was looking at the end-to-end business as a whole including all other companies in the value stream and making the decision to compete on a value stream basis not just an outsourced functional basis.
In order to do this they had to become more adaptable and highly inventive and make it a core competency. It was clearly time for them to not only think outside the box but work outside ot it.
If you want to learn more about how Lloyd Parry can work with your company to stay competitive, please get in touch.