Customer Connections: New Strategies for Growth

Robert E. Wayland and Paul M. Cole

Harvard Business School Press, 1997

267 pages, $29.95

To order: Call (617) 495-6117

The authors pose an intriguing question: Is it possible to make both customers and shareholders happy at the same time? The answer, they say, is yes...providing that you apply the same rigorous approach to customer relations as you do with other investments.

This means moving beyond traditional product-driven strategies to one driven by customers, or more specifically a portfolio of customers. The authors suggest building a portfolio-management strategy based on four key drivers of customer value: (1) Choosing the customers you want; (2) selecting what you want to offer; (3) deciding what role you should play in meeting their needs; and (4) working together to create mutual value. The challenge is to determine how far to move along each of these four dimensions, based on the value created for both customers and shareholders.

The book contains insightful examples of innovative ways that companies connect with their customers. Harley Davidson, for example, uses the famous "HOG" owner events to gain valuable information on how it can customize bikes to core customer needs. An example from American Skiing Co. describes how this company turned customer knowledge into profit by finding out what kind of snow customers considered "ideal" and then creating it for them.

Robert E. Wayland is president of Robert E. Wayland & Associates, a corporate strategy firm. Paul M. Cole is national director of Ernst & Young's Customer Connections Solutions Practice.

The Keys to Unlocking Your Supply Chain's Competitive Advantage

Pittiglio Rabin Todd & McGrath

16 pages, no charge

To order: Call Kevin Keegan at (617) 647-2800

In its fourth annual Integrated Supply Chain Benchmarking Study, the management consulting firm of Pittiglio Rabin Todd & McGrath (PRTM) once again demonstrates that the best in class at implementing supply chain process improvements are outdistancing their competitors. And the gap is getting wider.

This booklet is the executive summary of the full benchmarking study. Among the key findings: best-in-class companies enjoy on average a 45-percent advantage in supply-chain overhead costs over their median competitors; their cash-to-cash cycle time is half that of the median; they are able to maintain half the inventory days of supply; they can boost production at least twice as fast; and the best in class boast far better on-time—delivery performance.

The study examines performance measures in eight industry segments: telecommunications equipment, computer and electronic equipment, semiconductor devices, automotive components, appliance and industrial products, chemicals, pharmaceuticals, and packaged goods. It also reports on overall performance along a number of key supply chain management indices.

At the core of the benchmarking study is the Supply Chain Operations Reference model (SCOR). This is a cross-industry framework for improved supply chain management performance developed by the Supply Chain Council, which itself was organized by PRTM along with Advanced Manufacturing Research. SCOR attempts to define common supply chain management processes and match them against best practices and benchmarking data.

The second section of the report outlines PRTM's three-phase supply chain improvement process. That includes an assessment phase, followed by high-profile pilot projects, and finally by companywide rollout. It's an instructive publication for any company seeking to become better by studying the best.

Outsourcing: Implications for Supply Management

Lisa M. Ellram and Arnold Maltz

The Center For Advanced Purchasing Studies, 1997

139 pages, $20 contribution

To order: Fax requests to (602) 491-7885

What role can outsourcing play in a supply chain strategy? That's the issue examined by two researchers at the Center for Advanced Purchasing Studies, established in 1986 to address the need for industry-oriented research in purchasing. As part of their research for this book, Arizona State professor Lisa Ellram and New Mexico State University professor Arnold Maltz surveyed 127 providers and users of outsourcing services.

The study gathered data on such issues as the participation of supply chain managers in the outsourcing decision process, the types of purchases and activities that are considered prime candidates for outsourcing, and expected trends in this area. The authors also examined the issue of whether supply chain management can be outsourced entirely or in part.

Ellram and Maltz explore the extent of outsourcing in three types of purchases: strategic, non-strategic, and MRO (maintenance, repair, and operating supplies). Strategic purchases are those defined as goods and services essential to the mission of the organization; non-strategic purchases are defined as non-essential to the mission; and MRO purchases include such things as office supplies, shop maintenance, and janitorial supplies.

The authors present a number of interesting findings. Among them is their conclusion that MRO supplies tend to be outsourced more than strategic purchases. From the findings, they also forecast that MRO outsourcing will increase at a greater rate than the strategic or even non-strategic purchases.

Ellram and Maltz also found that supply chain managers conceded that third parties performed better than internal resources in making MRO purchases, particularly when it came to lowering administrative costs. Finally, the authors noted that a number of survey participants were fairly adamant in insisting that supply management was a viable candidate for outsourcing.

Supplementing the research are case studies of eight organizations, including two providers of outsourcing services. Among the companies spotlighted are Kodak, Shell Oil Co., and NYNEX. In brief, there's an abundance of data, charts, and observations packed in an informative booklet.

The Innovator's Dilemma: When New Technologies Cause Great Firms To Fail

Clayton M. Christensen

Harvard Business School Press

225 pages, $27.50

To order: Call (617) 495-6117

At first blush, the thesis of this author's book defies common sense. Sound business practices can sometimes be counterproductive?

That's exactly the point that Clayton Christensen makes in this fascinating book on business strategy. An associate professor at the Harvard Business School, Christensen studies the management of technological innovation. Before joining the Harvard faculty, he served as chairman and president of Ceramics Process Systems, a firm he co-founded in 1984 with several MIT professors. He also has been a White House fellow and a member of The Boston Consulting Group.

Christensen argues that sound business practices—such as concentrating investments and technology on the most profitable products that are currently in high demand by the best customers—can ultimately weaken a great company. He notes that breakthrough innovations are often initially rejected by customers who cannot use them at the time. Furthermore, companies are wary of these technological innovations because they result in new products that compete head-on against their own established products.

This mindset can lead firms with a strong customer focus to allow their most important innovations to languish. As companies unwittingly bypass opportunities to create new markets and find new customers, they allow more nimble, entrepreneurial competitors to take advantage of new technology.

Companies, therefore, face a dilemma. On the one hand, they need to tend to current products and their customers for their livelihood. On the other, their long-term growth and future success depends upon embracing new technologies and markets that can ultimately "upset the apple cart."

Fortunately, the author does offer advice on how executives can better position their companies to handle such changes. The second half of this book discusses how to succeed when confronted with technological change.

In the high-tech age, Christensen reminds executives not to become complacent with their current success because product life cycles are finite. He builds a compelling case that smart companies and executives always should stay on the lookout for the next wave of technological innovation.

Dangerous Company: The Consulting Powerhouses and the Businesses They Save and Ruin

James O'Shea and Charles Madigan

Times Books, 1997

355 pages, $27.50

To order: Call (800) 793-2665

In Dangerous Company, James O'Shea and Charles Madigan, veteran Chicago newspapermen, take a deeply skeptical look at what they call a "secretive and elite army...at work deep inside corporations everywhere..." They are talking about management consultants.

This new release examines both the glittering successes and the disastrous failures of some of the world's largest and most influential consulting firms. The horror stories include that of Figgie International, a billion-dollar conglomerate that spent $75 million on consultants and found itself with plummeting revenues and on the brink of bankruptcy; the failure of AT&T to find a steady course despite half a billion dollars in consulting expenses; and the one-time consultant for one leading firm who turned state's evidence in the United Kingdom, landing a former client in jail.

Though the overall tone may be cautionary, the authors do offer success stories that illuminate what consultants can do well. For example, they chronicle how Sears first got into trouble, then, partly through a careful and limited use of consultants, recovered. They also detail The Boston Consulting Group's key role in developing health-maintenance organizations in the United States.

Finally, the authors survey challenges facing major consultants. These include a new wave of relatively small but aggressive competitors and the growing reluctance of senior managers to pay the fees demanded by the biggest firms.

Readers should not expect a primer on choosing and managing consultants in Dangerous Company. Ostensibly aimed at managers, the book is more likely to appeal to a general business audience. A great deal of space is devoted to the personalities of major executives and innovative consultants as well as to the details of the cases the authors selected. The dramatization of events makes for entertaining reading.

The book is less successful as instruction: A checklist of guidelines for working with consultants that concludes the text is fairly rudimentary. Even so, anyone who has hired consultants, worked with them, or felt threatened by them will find himself in familiar territory in Dangerous Ground.

From Mind to Market: Reinventing the Retail Supply Chain

Roger D. Blackwell

Harper Business Press, 1997

272 pages, $25

To order: Call (212) 207-7708

New rules govern the retail marketplace. That's the tenet put forward in this book by Ohio State University professor and Fortune 500 consultant Roger D. Blackwell.

Blackwell asserts that the conventional retail supply chain soon will give way to the customer-oriented "demand chain." In the traditional retail environment, the manufacturer pushed goods through the distribution channel for the consumer to buy. But those days of manufacturer dictatorship are history, says the author.

In the current competitive retail climate, consumers—not manufacturers—are driving demand. As a result, the channel flow has shifted with consumers pulling the products they want.

The new retail environment calls for mind-to-market leadership. Accordingly, executives need more customer knowledge than ever to fashion a demand chain that serves consumers. For retailers to succeed, Blackwell contends, they need to know about changing lifestyles and demographic shifts.

Along with gaining more insights into consumer behavior, companies will have to streamline the supply chain, Blackwell contends. Indeed, he believes that the retailers of tomorrow will be hard pressed to do all the things required for success—from meeting the needs of consumers to offering personal service and merchandise while instituting cost-cutting, targeted-spending, and micromanaged data-mining programs.

In the end, Blackwell believes that functional areas in the demand chain may have to be shifted to new parts of the organization or to other channel partners. At the same time, companies must develop the best logistics, transportation, and distribution methods to deliver products and services.

For anyone in the retail supply chains struggling with change, From Mind to Market offers interesting ideas on how best to prepare for the brave new world of retailing. It provides a number of strategies that managers can adopt in constructing a demand chain that meets the requirements of the changing marketplace.