Documente Academic
Documente Profesional
Documente Cultură
(list continued)
2006, ISBM - Penn State 1
Presentations (continued): Victor Saliterman, ADP Employer Services. ADPs Strategies to Accelerate Sales Growth
Jeffrey J. Fox, Fox & Company, Driving Your Personal Growth: The Secrets of Great Rainmakers John Jacko, Flowserve Corporation, Mobilizing the Brand for Growth Mark Maxwell, Dow Corning Corp., Two-Brand Strategy: Xiameter & Dow Corning
TM
Keynote Address:
Author of: The Taming of the New (forthcoming from Harvard Business School Press)
TM
Most people are completely confused about innovation. People in vast and overwhelming numbers fail at it .Innovation is not the same thing as invention. Your job as a leader is to spot inflection points in the market, when your customers needs change. Then you have to think of your markets in fresher ways. Never, ever go into an innovation challenge without engineers, but never, ever try to innovate with just engineers. You need some regular people, too. Innovators look for opportunities to build dominant business platforms and powerful strategies for complete transformations in a business. Innovators like General Electric think about businesses end-to-end. Too often we assume that an innovation will take hold everywhere simultaneously, but thats never the case. But we all tend to underestimate the amount of change that will occur in the long run. If you focus on the current battleground in your industry, youll miss the future every time. Always there are frontier issues. Dont underestimate those changing value propositions on the fringe.
The challenge is to be a leader, finding a pathway to innovation when no one has blazed the trail before you. We live in one of the most extraordinary times of change in the history of our species. Innovation is crucial to you. In my research over the last seven years, in more than 400 interviews in 63 industries, not one of the leaders talked about innovation with confidence. They thought innovation was something happening to them, not something they can control and profit from. If any of 3 universal conditions occur in your company, innovation will be difficult. Your job as a leader is to mollify them. Ambiguity: Facing too many options, we wait for more data before making a decision. Complexity: reluctance to try something different and risky. Volatility: punishments for missing your numbers are swift and certain.
TM
Take a fresh look at innovation fundamentals Innovation is not fundamentally technological advance.
3 conditions are very positively correlated with serial innovation excellence, the ability to innovate routinely and reliably. They drive innovation excellence. Curiosity about how the world is changing. Confidence in the tools you use to innovate. Courage to pursue a small number of big ideas rather than, as is common, a large number of little ideas. The notion of a culture of innovation is soft and silly. If you want culture, its easy. Innovate successfully three times in a row. The culture of innovation comes after youve achieved the competence. A discipline of innovation is emerging because: Operational excellence is no longer enough: every good business has it An increased rate of change has made an ability to change more valuable Methods and tools are emerging to vastly improve innovation success rates Designused effectivelyis now an imperative for competitiveness Companies need new insights to achieve growth Doblin expects it will take 2-4 more years for the discipline of innovation to become a robust, mainstream practice, codified in better business schools. Innovation is not about creativity, fundamentally about new products, very costly, or requiring many ideas to find one that works. We have put myth ahead of logic for a very long time. Rather than settle for the norm of a 95% failure rate for new projects, if you know what youre doing you can achieve from 35% to 70% success of projects hitting their ROI targets. The range will shift to 40-80% in coming years.
Innovation myths
TM
Define innovation
The term innovation should be reserved for an initiative that can produce a viable new business concept. This keeps us from the sloppy, but nearly universal habit of just calling anything new an innovation Force expectations. Successful innovations must build value: Throw off enough free cash flow to justify themselves Meet internal hurdles and performance targets Occur fast enough to stay ahead of competition Occur often enough to keep our brands relevant
TM
The five process and offering innovation types dominate how companies think of innovation. Innovation teams generally start at the middle, with new product ideas. Thinking of innovation only within core competencies is a huge mistake. Think instead of radical departures from what you do, rooted in what youre good at, and so develop new competencies. The other five types are vastly more valuable in B2B Delivery innovationschannel, brand and customer experiencewill deepen customer relationships. Visualize your customer set and dramatize everything you do for those folks. Finance innovationsbusiness model and networkingprovide the two biggest market changes. The distribution of all innovation projects, including the 95% that fail:
TM
Dell Computer8 innovation types, but not product innovation. Dell pursues business model, networking, core process, product system, service, channel, brand and customer experience innovations. iPod8 innovation types: business model, networking, enabling process, product performance, product system, service, brand and customer experience. Google8 innovation types: business model, networking, core process, product performance, product system, service, brand and customer experience. Xiameter6 innovation types: business model, networking, product system, channel, brand and customer experience.
TM
Leadership crafts the agenda. This process provides 10 times the innovation hit rate of other processes. Pay attention to the unmet needs of non-users of your product. In contrast, the Stage Gate Process is the single most likely way to guarantee innovation mediocrity. It amplifies errors of commission and omission in predicting the future. Diagnostic technique that illustrates innovation activity over time in an industry. Has already been used to analyze dozens of industries Scalable, fast, widely respected Published in HBR, September 1999 Patent expected shortly Look for: big peaks indicate areas of extensive activity that will be expensive areas for competing many peaks indicate complicated, multidisciplinary competition valleys indicate possible areas of opportunity, where the industry has ignored an innovation approach.
TM
TM
10
1997
1998
TM
Bu siness Mo dels
Enabling Processes
Netwo rkin g
1996
Core Processes
Service
Chan nel
Brand
11
12
Innovation platforms are the single most important amplifier of value and profitability. Leading B2B and B2C platforms provide enabling processes B2B examples: IBM Websphere, Microsoft Office, Oracle, Linux, SAP, Microsoft Windows. Platforms are the antidote to product-oriented.thinking. They provide connections to customers. Example:the successful publishing franchise of the Chicken Soup series of books (70+ titles) by Canfield and Hansen. When you get a platform right, the market will rise up and create its own source of value.
Platforms Rule!
13
2006 Annual Members Meeting Driving Profitable Growth: B-to-B Is it exhibiting positive growth momentum? Is it getting an unfair share of attention in popular media? Does it permit unanticipated extension & application? Are other firms making money off of it? Are other firms investing R&D around it? Does it contribute to brand value and cachet? Does it exhibit increasing economic returns? Does it enjoy one or more forms of IP protection?
The General Electric example: A distinctive innovation process focused on imagination breakthroughs to increase the rate of organic
growth. 135 projects that are getting direct CEO-level attention Designed to move its organic growth rate from 5% to 8% Blockbuster projects that will take GE into a new lines of business, geographic areas or customer bases. Each IB needs to give GE incremental growth of at least $100 million in 3 to 5 years CEO Jeff Immelt has agreed to invest $5 billion in 80 IBsfrom microjet engines to the GE Money Bank in Europeto generate $25 billion in revenue by YE07
The notion of controlling innovation as if its a linear process is the wrong place to start, because innovation processes constantly change. Even within development platforms, business models change at different phases of development. You must know the appropriate metrics for each stage in order to know if youre still on track. Growth almost always come from non-sers, not your current customers. In our innovation discipline model, the critical diagnosis stage is where counterintuitive ideas surface.
TM
14
Co-author of, most recently: Don Peppers and Martha Rogers, Return on Customer: Creating Maximum Value from Your Scarcest Resource (New York: Doubleday Currency Books, 2005)
TM
15
With more products, channels and capital available today, the biggest limiting factor to growth is a shortage of paying customers, who have value today and value tomorrow. We should strive to maximize the lifetime value we receive from each customer. The Return on CustomerSM (ROC)SM metric is more appropriate than ROI because the number of customers is the actual growth constraint. But because of typical financial budgeting practices, we act as if cash is the scarcest resource and we strive to maximize return on the financial investment: ROI. ROI = (profit + investment value) / starting value of investment ROC = (profit + customer value) / starting value of customer Which would you choose in setting cost and profit margins for a transaction? Maximizing immediate ROI or long-term ROC from your a finite customer base? When customers buy, each transaction alters their likelihood of buying tomorrow. Maximizing the ROI today, risking creation of a less-than-favorable customer experience, could destroy long-term customer equity by reducing customers likelihood of buying tomorrow. Excessive focus on the short term creates a culture of bad management by distorting how a company views the value that its customers create for itthe only source of organic growth for the firm. Marketing can destroy value if a campaign annoys some customers and erodes customer equity. potential future profitmore than it boosts current profit..
For example
TM
16
2006 Annual Members Meeting Driving Profitable Growth: B-to-B If cash is scarce, maximize return on investment, the scarce resource.
Transactions that maximize ROC while exceeding the ROI hurdle rate provide the most value to the firm.
ROC in practice
Verizons wireless division generated $13.7 billion in earnings from 2002 to 2004 (Owned by Verizon Communications and Vodaphone). But during this period the firm also cut monthly customer churn in half, from 2.6% to 1.3%. Cutting churn required balancing immediate profit against long-term customer satisfaction. Verizon created an additional $10.4 billion of value, in the form of increased customer long-term value! Average ROC during the period: 64%.
TM
17
What if we could, and did, measure how much todays decisions really cost? What if salespeople, service reps, account managers, and CEOs were penalized for the customer equity they have to spend today to achieve this quarters revenues? What if Wall Street analysts held companies accountable for customer equity (as the best measure of enterprise value) as well as current revenue? In a learning relationship, we raise customer switching costs by tailoring products, services and interactions. The more the customer invests in talking with you, the greater the customers stake in making the relationship work. To maximize a customers value, we figure out a customers needs and meet them better than competitors do. We anticipate customer needs and take the customers point of view, treating different customers differently to create a culture of trust and build the value of the customer base. Focusing on ROC helps to measure and manage the training, empowerment and motivation of employees to better serve customers via judgment, creativity, intuition and resourcefulness.
18
19
TM
20
The most effective value propositions provide a resonating focus. Value proposition stated as as the one or two points-of-difference (and, perhaps, a point-of-parity) whose improvement will deliver the greatest customer value for the foreseeable future. Simply citing more benefits is not better. Cite the benefits that really matter to the specific customer. Include among parity points benefits that all serious contenders provide. Concede parity for a point of contention on which the customer mistakenly believes the competitive offering is superior. Answers customer question: What is most worthwhile for our firm to keep in mind about your offering? To construct and have sales force deliver it requires knowledge of how own market offering specifically delivers superior value to customers compared to next-best-alternative offering. Potential pitfall: Requires customer value research. Requires more than just thinking up snappy marketing communications slogans.
TM
21
They win in markets others dismiss as commoditized by demonstrating technological innovation, documenting resonating benefits and earning price premiums even on prosaic products (e.g. 55-gallon drums). Their value proposition criteria: Is it distinctive? How is Sonoco uniquely able to deliver better than competitors can? Is it measurable in monetary terms? How can we show the value convincingly? Is it sustainable? How can we provide the advantage for a 3-5-year period? The No. 1 metric on general managers performance scorecard is developing distinctive value propositions for each product for each market segment and key account. Performance metrics must bear them out
TM
22
TM
23
As U.S. income from services continues to grow while income from products declines, new transformative business disciplines adapt to the shift: quality, then reengineering, and now creating the customer experience. The margins products earn increasingly depend on the service functions they provide, meeting customer needs for mixes of tangible and intangible solutions. Companies built to produce products arent necessarily poised to produce services. We know innovation works for products, but what tools guide innovation for intangible-dominant solutions? Academics are just beginning to understand service innovation tools, business model development and service value propositions.
Graphic 2006 Peer Insight LLC.
Interviews: 600 management innovators and 75 recent projects across 30 participating Fortune 500 firms. 65% B2B projects, 70% of sample pure service innovations, 40% of projects new-to-segment, 60% planned internally. Six Sigma works for low-risk projects (incremental and modest service innovations), but a different innovation process is needed for substantial, ambitious and highly novel service innovations
TM
24
Managers close to their businesses have a better service innovation success rate than specialist groups.
TM
25
TM
26
Innovation research gets beyond specific needs. Commercial lending service example.
3. Change management plays a big part in building innovation capabilities. You cannot innovate without change. Enroll the internal stakeholders early and keep them involved. Seven ways to turbocharge a change program Build a sustainable operating model Kill something big in public
Bring in a hired gun Set a BHAG (Big Hairy Audacious Goal) Move to a new address Commission a big visible project Get on the board of directors radar Change how people are compensated 2006, ISBM - Penn State
TM
28
The biggest differences are at the process front end, where B2C makes much greater use of early-to-market feedback, robust customer experience design, deep customer insight and leveraging the contribution of outside parties.
Q & A (highlight)
Q Are services enough to keep the American economy preeminent in the world? A Our know-how can be exported; Europe, for example, is studying service innovation more than before. Im optimistic about the U.S. because we are customer oriented rather than putting operations at the center of business strategy. Washington might have it wrong, however. Technology does not equal innovation. Innovation is really about the customer.
TM
29
30
Definition
Alliances are close, collaborative relationships between two or more firms with the intent of accomplishing mutually compatible goals that would be difficult for each to achieve alone. That implies that alliances are open-ended contracts between separate firms with shared governance.
Reduce duplication and gain efficiencies Increase market power, access new markets Gain new knowledge Exploit synergies and gain knowledge Promote standards Alliances have drawbacks. There are pirates who will partner just to get your technology. Incompatibility with cooperation and interests of the firm Loss of control of vital technology, sharing control Coordination increases transaction costs Creating a potential competitor
31
Decision-Making Trust, Culture and Teamwork Alignment of Systems, Processes Risk Preference Quality of Relationships Leadership and Commitment
2006, ISBM - Penn State
Systems Integration Performance Processes Integrative Mechanisms Fast Time Implementation Complementary Process Capability
32
There are advantages to taking equity positions in lieu of licensing - Provides claims on future earnings of the company - Aligns the goals of the partners especially towards the commercialization of the technology - Based on the credibility of the organization it could add legitimacy to the venture There are also risks Source: Management Science, vol. 48 2002 - The obvious no earnings, zero economic payoff - 100 disclosures 10 patents 1 commercial success - Culpability in that you become liable for the unintended consequences Licensing involves selling the right to use an invention for fees (upfront royalty + recurring fees for sales that result) Choice of governance equity alliances Ownership: 51% doesnt really give you control of the JV; 50-50 partners have equal skin in the game. Equity alliances (JVs) - Chosen when Transaction Costs are perceived as high - Since incentives are aligned, there ought to be less free riding and less chance for opportunism - Are described by Admin monitoring systems like a board of directors Greater and more accurate flows of information More adaptable to change because of alignment - Disadvantages Hard to establish, untangle, or fundamentally change
TM
33
Choice of governance Non-equity alliances (more contractually biased) - Can take many forms from licensing, tech exchanges, sourcing, production and marketing/distribution agreements - More easily entered, terminated and at a lower cost - Yet, demonstrate less commitment given the ease of entry and exits. - Most run into trouble within 4 years, as conditions change.
Roberts Rules
Alliance success is a function of both direct and indirect ties Managers must consider the impact of indirect ties although these secondary and tertiary alliances might not be readily known While the number of ties does have a positive impact on performance due to knowledge sharing there is a darker side - Free riding - Opportunistic behavior - One can be trusting but the other might not be trustworthy - Raises questions of partner selection and competencies sought Alliances are not one size fits all look for fit and alignment Partnership success is a function of - Closeness of effort to in-house R&D - Ability to learn from partnership and partners - Absence of problems with appropriation of information - Efforts to absorb from partner and partnership go up and mechanisms to protect IP exist The more you stray from your core the likelihood of success falls Complementary works best as it builds on individual firm strengths Invest in your peoples alliance capability; it can make a difference
TM
34
Relative size is not important; it is better to measure ability to teach and learn than to argue over percentages Remember the majority fallacy and the elevator test Alliances work, take hard work, and simultaneously are durable and fragile Growth comes from ideas, inspiration and interest but is based on people working in an open and trusting environment Networks both give new ideas a chance to bloom but have a darker side you are known by the company you keep Be wary of pirates in partner suits Start small and then grow. Dont attempt to solve world hunger at the start.
TM
35
TM
36
Our business
Best known for our outsourced payroll services, the lions share of our human resources solutions offerings. 53% market share and $5.8 billion revenue.for Employer Services; $8.9 billion for ADP in total. ADP moves more money than any other organization save for the U.S. Social Security Administration. $930 billion in client tax, direct deposit and related funds. Including the float involved, those services provide 45% of our revenue. Market growing only modestly: ~5%. Maintaining a reputation for uncompromising ethics and integrity is critical. ADP is only one of five U.S. industrial companies rated AAA by S&P and Moodys. Our financial growth is fueled by new clients, the success of beyond payroll products, and growth initiatives. Were seeking other markets for organic growth. Broaden traditional areas of advantage (e.g., distribution) Teleweb Sales Lead Sharing Between Organizations Expand into new / adjacent markets Insurance Distribution Pay-by-Pay Workers Compensation BPO (COS, ASO, F&A) single process to multi-process outsourcing International Expansion and working with multinational clients Leverage untapped assetse.g.additional services for 24 million recipients of ADP payroll checks. Worksite Marketing ADP National Employment Report based on our massive database.
37
Small Business Services & TotalSource (new organization bundles small-business services) Pursue similar size prospects Significant client base -- potential to upsell Strong / established relationships to leverage Key Challenge: Cross organizational boundaries to share ADP assets vs. maximizing individual business results Solution: Established SBS & TotalSource lead sharing process Implemented Grass Roots Strategy; top down approach would not have built buy-in Partnered at all levels, starting at district sales manager level Matched product -offering organizations to identified prospect needs; a major culture shift for us. Designed incentives program to reward partnership / team behavior Results after 5 years experience Lead sharing represents over 30% of TotalSources dollar sales / new clients Stronger competitive positioning; improved customer retention Observations / Lessons Learned: Grass Roots Strategy offered: Non-threatening environmentshare a lead and still get paid Benefit to both sales teams, small business account reps and TotalSource reps work jointly. Ease of entry into new markets Complex product offering Requires ongoing training / education commitment Difficult to implement up market in 100-250 employee firm range, where small business rep can set up a key account program without enlisting TotalSource assistance.
TM
38
39
40
41
Author of, most recently: Secrets of Great Rainmakers: The Keys to Success and Wealth (New York: Hyperion, 2006)
TM
42
The dictionary definition of value specifies a numerical quantity. "Value should always be expressed as a number. Customers will figure it out. You sell value with numbers, not adjectives."
"The rationalization for dollarization rests on a common misunderstanding, that customer buy things. They do not. Customers don't buy products, features or benefits or technologies. They buy what they get from the technology. People don't buy BTUs, they buy a nice air conditioned room."
TM
43
"Nobody on the planet cares about technology. They don't care about how things work. Customers care about what they get. All of the benefits you offer can be dollarized. It's our job as marketers to teach our advertising agencies and our salespeople how to say that, to show how our products represent that, and to price accordingly. You price to value, and value is a numerical quantity." "Nobody in the business-to-business world wants to buy anything. They want to invest to solve a problem. Our job is to help the customer quantify the return he gets on the investment." "For your careers as marketing superstars: Superstars help customers make money, and money is what the customers get, the return on the investment in you. The customer's investment is what you get, ergo, the more customers make, the more they will invest and buy."
44
Company Patriot
"Don't ignore the common, ordinary product that is just turning out money. Marketing music is 'Ka-ching, ka-ching.' Who cares as long as it rings the cash register?" "Be a flag-waving company patriot. You've got to be Mr. or Ms. Outside, selling the story fearlessly, not worried about the price. Inside, you lead from the middle: quiet, humble, ask questions, remove frustration and give credit. Only marketers can do it." "Ask yourself, what would you do if you owned the company? If you don't break the laws or God or man, do it." "Marketing is the greatest job in the company, the most important but the least understood job in the company. Without customers, there ain't no company."
TM
45
TM
46
Flowserve is a market leader, $2.7 billion sales, in the global fluid motion and control business (56 countries). with pumps, valves and seals that move, control and protect the key strategic processes of our customers. Serving the process industries with a strong stable of heritage brand names and industry experience. More than 50 acquisitions since the companys 1872 founding. The respective pumps, valves, and seals businesses constitute three strong silos were trying to integrate. As we expand, into key markets such as China, we try to go in as the Flowserve brand, a unified brand approach which is not part of our legacy.
Acquisition employees repeatedly contrasted the good old days of the past with the Flowserve present..
TM
47
Customer and employee focus groups and interviews indicated problems to overcome
19% of customers said Flowserve name means nothing to them. Employees tended to think of Flowserve as nothing but a name and a holding company of brands. 35% of customer unable or unwilling to cite Flowserve strengths. Companys heritage brands known for good products, but the Flowserve name itself was an empty vessel. 30% of customers could not cite company weaknesses; they didnt know us. Customers and employees alike often cited poor communication, poor coordination and a confusing structure. Both customers and employees chose working together with you as the most appealing positioning for us. Because our different units tend to sell to the same customers, we decided to be a branded house promising a consistent customer experience, rather than a house of brands. Chose a dual-branding strategy associating heritage brand strengths with Flowserve Experience in Motion. We enunciated a specific brand promise, brand position, brand support points, and the 6 Cs of brand values: (Commitment, Collaboration, Creativity, Competence, Confidence and Character) Built consistent employee key messages through internal communications stressing: We All Represent The Brand Be Agents Of Change Help Drive Improvements Respect Our Heritage As We Build The Flowserve Brand Use The Power Of Our Portfolio For Growth Think Customer Everyday No Penalties For Doing The Right Thing! Built consistent external key messages: Moving from Products to Products and Solutions Company Power of the Flowserve Portfolio Strong, Strategic Business Partner for Emerging Markets Integrated Platform combining many different customer systems
TM
48
Culture change has taken longer than we expected. Launched the Spirit of Flowserve incentive recognition program for living the values of Flowserve as well as making the metrics goals. Improved internal communications programs, corporate image building and a brand standards Web site for internal and external users. Three-month-old Web site is our largest brand touchpoint. 2.5 million hits so far. Site once aligned just by products is now also aligned by industry served, services and solutions. Cross-divisional compliance drives consistency in marketing materials.
TM
49
Q & A (highlights)
We still organize our profit centers by product, but we know that has to change. Depending on products and customer size, we sell direct or through distributors. Weve been doing a lot of work to bring distributors into the processdistributor councils, Web site, etc.and were just finishing a channel management study. Its a tricky issue; you cant change the channel too quickly without losing sales. We are implementing quick response centers, now 50 around the world, for customers which will impinge on distributors. Regional champions played a critical role in breaking down local resistance. They have to be seen as collaborators. Compensation depends on meeting the numbers and living the values of the collaborative culture.
TM
50
Two-Brand Strategy:
Xiameter & Dow Corning Mark Maxwell
Global Marketing Communications Director Core Products Business Dow Corning Corporation
mark.maxwell@dowcorning.com
TM
51
Dow Corning, a global leader in silicon-based technology with more than 7,000 products for diverse global industries; a JV launched in 1943 by Dow Chemical and Corning Inc. New approach to market needed The industry is maturing Customers are more selective and more demanding Competition increasing globally and locally Pricing pressures are constant Globalization pressures Challenging business environment Harder to differentiate in mature markets Looked at business through customers eyes Consolidated customer survey research over 5 years (plus ongoing VOC input from Commercial team) Customers want to reduce costs to increase their profitability Customers want easier ways to do business with suppliers Customer survey identified customer segments Some need proven performance and reliability Others need help keeping up with innovation changes and the latest innovations Mature businesses must drive down costs Some want the lowest price and dont need high levels of support. A revelation to us, a company built on technology and innovation. We had to learn that some customers dont care about that. Customers want easier way to do business with suppliers based on their needs, exactly, No more; no less.
TM
52
2006 Annual Members Meeting Driving Profitable Growth: B-to-B Value propositions based on customer needs-based segmentation for value
Segmented customers needs based on their product life cycles Created new business model to address mature needs segment, the price seekers. We no longer say We cant do business that way Launched a new brand and value proposition for a specific group of customers No longer give service and expertise away Introduced a Solutions Platform within the Dow Corning Brand Value proposition emphasizes the importance of choice and meeting customer needsexactly.
TM
53
The Xiameter business model: enforced to prevent brands creeping to the middle
Global introduction in 2002 launched in 50 countries simultaneously Offers customers choices and an easy way to do business online. But its not a model for everyone. Targets customers who buy in large volumes and know what they need and how to use materials Fully utilizes our SAP capabilities Simple, clear business rules are extremely critical; must be respected and followed Self service on-line registration, on-line ordering Logistics order lead times, minimum/maximum order quantities Pricing market-driven prices completely transparent, confirmed during order placement Web-enabled business model reduces costs. Roughly 30-35% of our business is conducted online. Online order entry electronically linked to global real-time production planning An order is placed and immediately scheduled in production planning Automated documentation Order acknowledgements, shipping confirmations, invoices Transparent, dynamic real-time pricing. Market-driven prices for large volumes of standard products.
Customer choice among unique brands. We dont force customers one way or the other.
TM
54
Customers want choices. Some customers buy both brands, but from different Web pages or channels. Continuously seek new ways to address customers needsInnovation critical in all we do, including business model innovation. Change management is essential Education is critical to success Internal & External Create and stay true to the business rules New business models can be disruptive but can spur growth and innovative thinking. Go fast, accept risk, and learn. We felt we had talked with the right customers for the right amount of time.
Successes
Very little business was cannibalized from Dow Corning brand. Less than 10% of Xiameter customers were Dow Corning customers. We tapped a new market we hadnt seen. Customers do not buy from both brands to receive the Dow Corning services. We monitor this very closely. Customers have stayed with Xiameter. On-going surveys indicate customers like the business model. Xiameter has made significant financial contributions to Dow Cornings bottom line Financial results show our strategy to focus on customer needs is working: 2004 sales were US$3.37 billion, up 17% from 2003 2005 sales were US$3.87 billion, up 15% from 2004 Maintained industry leadership position Brand Research results: Annual survey has been 5 years running Customers understand the value propositions of our two brands Customer satisfaction is extremely high for both brands Customer choices: Customers appreciate having a choice in how they purchase silicon-based products Employees have options in offering customer choices based on the needs of their business
TM
55
Q & A (highlights)
We will borrow expertise from Dow Corning to back a warranty claim a Xiameter customer might have. We maintain contact with Xiameter customers, to ensure that they properly are buying the right brand choice. Salespeople get credit for the first year volume for Dow Corning customers that switch to Xiameter. We set Xiameter prices based on market prices. Dow Corning prices also affected by services provided and competition. Competition has been surprised. It could meet our prices, but not our cost efficiencies, back-office capabilities and ordering ease. Its not as easy as it looks on paper. We improved cost accounting, particularly for non-manufacturing costs. We have a better handle on costs at the brand and product level, and are working on costs at the customer level. We didnt face a lot of changes at the manufacturing level. Positively, we eased some production processes. We do offer an a la carte service menu for Xiameter customers with a limited specific need. We havent done a lot of that; most customers go to one brand or another. We dont want to give the middle ground away. Because silicon is a commodity, you might see Xiameter spot prices exceed long-term contractual Dow Corning prices for a short period of time. Customers tend to understand that when they play the spot market game. Weve had some interesting discussions about that internally. Change management is a big part of our transition, going after transaction-oriented customers in a company with a culture of innovation and value-added. Transition requires the full support of senior management. The real change occurred at the customer interface, to get marketing and sales people to feel okay telling customers, Yes, we can meet your needs. But its different than weve done it before. People needed to see it working to believe it. When they saw it, it became a sustaining process. This is the one thing that could have killed the program, but that didnt happen. I give all the credit to our senior leaders.
TM
56