1. lower costs and raise margins 2. expand the business 3. develop capabilities 4. grow market share
Here is how it works....
There is a great cycle that really led my supply chain companies for over 10 years
- next level of customer requires service which requires new investment
- new investment increases our capabilities
- new capabilities allow us to capture new types of customers
- repeat
The problem with this cycle is the investment needed. This can often be quite high for a small business.
Here is a way to handle that...
1. Consider the equipment, location, person, training, certification, or whatever investment you need to make.
What company could you build around that, if it was your only resource?
2. Call around to all your current customers, see if they are interested at all in a vendor with those services.
This is testing the market for interest
If so, test non-customer interest.
3. If interest exists, scale-out a new sub-page of your website with some type of order or call to action for that new sub business.
4. Make the investment in order to serve the original purpose you had in mind.
5. Launch the additional services in order to generate additional revenue.
Make sure you price this correctly, or you will
a. detract from your core business and wont be able to scale
b. will just be trading time and losing focus
6. Update your core business sales content to include your new capabilities
7. Go after the new/next level of customer with your increased capability.
An example: We were getting quotes for parts outside of our ability to inspect and perform quality checks. Calipers and Vision machines were no longer enough.
A CMM was a 70,000 USD investment...
We built out a 3rd party quality service for firms that didn't have proper quality equipment, but need a CMM to verify their parts.
We got 3 major benefits 1. Profit from the venture paid for the machine in year 1, the rest was upside
2. We got to see what parts were being ordered by companies that we didn't supply and tailor our pitch
3. We gave quality incentives for growing the internal startup
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This shows up in business models and strategy all the time.
Trying to get all customers who might buy your product is a sure way to get almost none of them.
Starting with customer motives can help isolate a winning strategy
If the customer you want to serve has many options, doesn't care about quality, and has the means to acquire market information (know all prices), you are serving a cost-focused customer
This means...
... your marketing is focused on how you are cheaper than elsewhere.
Your operational strategy is to run as lean as possible.
Your sourcing and procurement are looking for consolidation and discounts wherever possible.
Proximity is a key ingredient in streamlining anything.
Everything has a switching cost. The closer two things are, generally, the lower the switching cost.
Here are some business ways to use this idea, and some alternative ways to think about "proximity".
1. Locational Proximity
The obvious one is how close one task is to another. The closer you can put similar or consecutive tasks, the faster they can be performed using fewer resources.
2. Similarity Proximity
When looking to streamline a process, put like pieces together.
If entering invoices, enter info related to the payment or in an adjacent screen at the same time... even if not needed until a later step.