So what’s been holding companies back when it comes to EXCELLING at differentiation? In summary, it’s been a combination of factors.
- First and foremost, historically, the cost of differentiation has been high in terms of productivity, cycle time and quality. It has taken inordinate organizational support to handle the nuances of each quote or order as a unique solution for that customer. The margins on these less commoditized products have often been weaker – leading to that oversimplified drive toward increased product standardization. Remember the running debate in my CIO days – Manufacturing pushing for STANDARDIZATION with the promise of higher efficiency, better margins and greater on-time-performance; AND at the same time Sales pushing for more DIFFERENTIATION to gain very specific opportunities for increased Hit Rates and Market Share by meeting the exact customer needs better than competitors. That was the dilemma. In the opening example, I mentioned that we overcame this business problem and turned it into a market advantage. Many of you are in companies that have done the same – or are at least on the path.
- Next, Technology has been an obstacle- Looking back to the 1990’s, these were the early days of dynamic configuration. As an example, SAP’s Variant Configuration capabilities were still on the drawing board. The ‘state of the art’ was basically pretty primitive – automated configuration technologies were an arcane practice at best. The software industry was just starting to offer some big engines that could handle the “AI” (artificial intelligence), as it was called, to provide ‘knowledge based solutions’. There were a few very expensive workstation-based software tools for Knowledge Based Engineering, and MRP-II was offering Feature and Option based order configuration support. When my company first took on this challenge we could not find either the commercial software OR the consulting services to facilitate a full fledged solution – so we purchased what we could BUT we had to invest in in-house software development and pay a significant cost for integration of the entire solution. This barrier started to come down as the vendors improved their offerings; but it has only been since the internet revolution (beginning in the dot.com era) that this needed capability has become accessible to all manufacturers without the high costs and risks of internal development. Now, many of the early adopters are falling behind companies that have entered this market later – and they too face significant upgrade challenges. So, the sunk cost and the complexity of many environments remain a HUGE factor in holding back progress.
- A third major impediment has been systematic Management of Product Knowledge. Since the full life cycle of a dynamic product or service requires cross-functional organization knowledge, organizations have often struggled with ‘who owns the problem’ and who manages the solution? In reality, best practices organizations realize that it is a corporate asset to be governed and managed across the entire organization. Along with this realization comes the awareness of the need for a Repository Architecture – the ability to author, govern, and deploy this knowledge across multiple domains, functions, systems and entities. Otherwise knowledge is not current, complete, timely and accessible. The Authoring or Development Studio environment for knowledge management has greatly improved, to the point that non-programmers can author knowledge constraints/rules in many environments – but there is still some room for improvement in the integration across CRM, ERP and PLM stacks. Some of us from CWG have attempted to develop a working group around Knowledge Repository Architecture – but it’s not yet at the top of anyone’s stack for action.
- But perhaps the biggest obstacle of all is a lack of understanding of the VALUE of high performance differentiation – and the ability to truly excel in a world that is becoming more and more specialized. I see many organizations that struggle to develop a clear value proposition for change. Many are stuck in the headcount reduction mode to justify each investment in technology. But looking more deeply into the market factors may be the only way to stimulate a change. Conducting a fact-based VALUE-DRIVEN assessment of your own situation – the strengths, weaknesses, opportunities and threats (yes, there are threats that you may fall behind)… may be the starting point. Some say that ‘good is the enemy of great’ … and this may be the case for configuration in companies with a long history in this domain. Maybe it is time to take another look at the VALUE of excellence… maybe even time to change the game!