Eleventh hour! Still on time for the COST KILLER??

It’s never too late… to learn not to be late!
 

 

The costs are born together with the ideas!

Are you aware when you cause costs? Do you believe that they happen at the moment when you select the supplier? Or they arise when you order the service? When you pay the bill?

NO! Much, much earlier… The costs start “in our head”! Similarly, as it is required for the “click ” to happen in the head, to take a decision on cost reduction in your company, an awareness is required to realize that costs are born at the same time as our ideas. Which we, eventually, bring to life.

 

Over 80% of the costs arise while the product is only a design!

The product, which we want to produce and then sell to a customer, starts as an idea in our head. When this idea lands as a concept on a paper, it becomes a goal. By this time it carries desired architecture with already built-in of approximately 80% of the target costs /David Anderson/. Namely, during the idea creation and its design on the way towards the final solution, the product has defined shape, the color, and, what is the most important, the material made of that defines the technology to be produced by.

 

Yes, it’s important to involve cost consideration in the early stage of product conceptualization!

Since most of the costs are defined during the product conceptualization, it is important to introduce cost awareness in very early stage of the product life cycle. Once decisions of the costs in the conceptualization phase of the product  are made and locked-in, it’s not only economically not viable to remove them but also quite difficult to decrease them as well. Because you are limited to structurally influence only the remaining 20% of the OPEX. It might sound to be still a lot, but not be misled! With good negotiation, where you mostly optimize the price, even its decrease for several percentages might still not be competitive enough. Because sunk costs of the development of the product might hamper vital adjustments and taking you from the cutting edge of competitiveness.

 

Days “We develop – you produce!” are definitely over!

The product and the technology life cycle is concerned with time and costs of developing the product and, inherently, the technology produced by. As well as the timeline of recovering costs, and modes of making the technology yield a profit proportionate to the costs and risks involved. So, all involved in a value chain of a product along its entire life cycle should be involved in decision making process, also regarding the costs.

 

Multifunctional teams help to optimize the costs during the conceptualization of the product…

And since the development is never “one man band” approach, the multifunctional teams should deal with this challenge.

Such teams are advised to consist of professionals covering:

·         R&D, technology, quality, production, procurement, but also
·         sales, and sometime even
·         buyers can help expressing what functionality of the product they value most /more
·         and don’t forget the (cost of) finance, support, legal & more and more often the compliance
·         as well as the suppliers.

 

The purpose of multifunctional approach is to introduce competitive price / performance!

We, the mechanical engineers, are able to produce everything – even to send a rocket on the moon. But looking through a prism of the economy, the costs might interfere with the image in a mirror of market competition. Therefore the intention, besides focusing on the functionality of the product, is to embrace cross-functional areas. Because it’s insufficient consideration sooner or later leads to unnecessary (higher) direct or incidental costs due to lack of:

·         of systematic optimization of the costs
·         simplification in production and assembly, product distribution, 
·         availability of the product on the market, its quality and reliability to use
·         easy maintenance and complaint solving procedures
·         safety
·         ability to further upgrade the product functionality
·         environmental demands
·         …

SCORE can help you on the way!

With implementing comprehensive mechanisms of SCORE we approach the target costs that aim to balance requirement boundaries of all participating in such multifunctional teams.

 

 

 

Cost killer or rather an integrative CRO?

Please recognize the right role of a person that should discriminate the wish-list form of requirements and balance these requirements against customer expectations & company resources. So, the cost killer – rather than a “killer”, he or she should be an integrator of changes in the company at least on a cost side of the P&L. And if you let him or her be a Cost Restructuring Officer (CRO), he or she should definitely justify your trust!

So, what is a profile of the cost killer? Read us in the next blog!

 

http://www.avanton.si  

 

 

 

Gimme 5!

Gimme 5 for Low Costs!

 

 

If we have asked you 5 WHY's already, let us take this opportunity that we proceed the inquisition towards cost heresy by striking Gimme 5! When we answer to a WHAT, WHY, HOW, WHO, WHEN, followed by an action plan of a change implementation, after we assign activities on individuals – we go… TO WORK!

 

 

 

 

 

 

http://www.avanton.si 

 

 

 

 

 

 

 

 

Do you know how to answer 5 simple Why's? And when you do that…5 more W's?

We use it. What about you?

5 Why's analysys is one of the most important and simple methods for finding and eliminating the root causes of our daily issues in private and professional life. It is almost innate way of thinking that already our three-year-olds  and their continuous Why-s of everything master. It has a long history and is worldwide spread. In Slovenia is used rarely or inconsistently. It was first used by Toyota that is known to establish also other simple ways of managing company’s challenges and processes. Already in year 1950 Toyota wanted to find out and eliminate the “right” causes in car manufacturing. And that after other more famous and eminent methods did not do their job right (example Ishikawa diagram ) 

How does it work?

The method is in its essence a way of asking questions. For every issue we ask Why and look for answers as long as the issues are decomposed in a clear causes that can be handled individually. In every stage when the “final” answer to the question Why is reached, we design the solution and conclude the analysis.

What is the last time that you adjusted the mirror?

One of possible situations, in which companies today find themselves, is presented bellow in the example. Sounds familiar? What is the last time that you analyzed your business? Where lay the reasons for the market position and business operation health? What can you do right away to improve it and what must wait. Let’s have a look.

 

When finished with Why’s and finding Because’s, we have to design the solutions by answering a new set of questions: 5 W’s (What, How, Who, When, Where).

As a whole our example has one and only conclusion: systematic rationalization of costs, processes and organization. In this way conditions will be establish that enable better understanding of customers, cost effective product offerings (from our and customer’s view) that respond best to the customers’ needs and consequently better profitability demanded by owners.

 

 

Take a chance on change!

Overcome the black box of commonness!

Seize the opportunity; find the courage to make the choice and act.

 

 

Take a chance and change! Enable the progress…

Is there something different in life?

•       Nothing personal…

“During a negotiation, it would be wise not to take anything personally. If you leave personalities out of it, you will be able to see opportunities more objectively.”

Brian Koslow (trener of business skills)

 

•       Professional…

“The most difficult thing in any negotiation, almost, is making sure that you strip it of the emotion and deal with the facts. And there was a considerable challenge to that here and understandably so.”  Howard Baker (the most successfull US senator)

 

•       Basis for tactics is simple…

“Negotiation in the classic diplomatic sense assumes parties more anxious to agree than to disagree.”   Dean Acheson

 

•       Do not defeat the opponent!

“If I should ever be captured, I want no negotiation – and if I should request a negotiation from captivity they should consider that a sign of duress.”  Kissinger, Henry A

“Only free men can negotiate. Prisoners cannot enter into contracts. “ Nelson Mandela

 

•       Count to ten…

“This is a classic negotiation technique. It’s a gentle, soft indication of your disapproval and a great way to keep negotiating. Count to 10. By then, the other person usually will start talking and may very well make a higher offer.” Bill Coleman (musician)

 

•       Don‘t waste the advantage…

“Don’t bargain yourself down before you get to the table.” Carol Frohlinger

 

•       Meet me in the middle…

“The most important trip you may take in life is meeting people half way.” Henry Boyle

“The fellow who says he’ll meet you halfway usually thinks he’s standing on the dividing line.” Orlando A. Battista

 

•       Firmly, but with only moderate sharpness…

“Never cut what you can untie.”  Joseph Joubert (musician)

 

•       Nothing should be donated…

“In business, you don’t get what you deserve, you get what you negotiate.”  Chester L Karrass (writer)

 

•       Prevention is better than…

“Let us move from the era of confrontation to the era of negotiation.”  Richard M. Nixon (US president)

 

•       Position or a starting point…

“If you come to a negotiation table saying you have the final truth, that you know nothing but the truth and that is final, you will get nothing.” Harri Holkeri

 

•       WIN-WIN… Partnership with the suppliers…

“If you are planning on doing business with someone again, don’t be too tough in the negotiations. If you’re going to skin a cat, don’t keep it as a house cat.”  Marvin Levin

 

•       Silence should be your ally – listen, „listen“…

“Never forget the power of silence, that massively disconcerting pause which goes on and on and may last induce an opponent to babble and backtrack nervously.”  Lance Morrow 

 

•       NO? YES?

“The single and most dangerous word to be spoken in business is no. The second most dangerous word is yes. It is possible to avoid saying either.”  Lois Wyse (Life, Vogue, Cosmopolitan)

 

•       Negotiator should be versatile…

“A negotiator should observe everything. You must be part Sherlock Holmes, part Sigmund Freud.” Victor Kiam (CEO Remington, Ronson)

 

•       Diplomacy…

“Diplomacy is the art of letting someone else have your way.”  Sir David Frost

 

•       Don‘t bring anger with you…

“Anger can be an effective negotiating tool, but only as a calculated act, never as a reaction.” Mark McCormack (Founder Int. Mngm. Group)

 

•       Key…

“Place a higher priority on discovering what a win looks like for the other person.”  Harvey Robbins (Why teams don‘t work – Financial Times Award)

•       In life… is there something different?

“There’s no road map on how to raise a family: it’s always an enormous negotiation.”  Streep, Meryl (actress)

                                                                                                                                                                Source: AGBeat.com

 

7 myths of negotiation

1.      In negation somebody always wins and somebody looses

·         If you make it to the end of negotiations, both sides are winners!

·         Maybe not according to expectations, but not less as acceptable.

 

2.      Good negotiators are born

·         Negotiation is like golf – in both skills you will get better with time

·         But a lot of knowledge and experience needs to be combined – not solely practice nor theory, both.

 

3.      Good negotiator is hard and inexorable

·         “Good negotiator” by rule takes high risks?

·         But often it does not pay off.

 

4.      To be successful you have to mislead and use little lies.

·         Bluff– not lies – can be a part of tactics …. However, how much and when to bluff?

·         Tactics: do not hold anything back, but do not say everything…..

 

5.      Friendly people “are loosers”.

·         We all love to work with ethical people with high moral standards (=friendly), that keep their word.

·         Believe me – in the long run it always pays off.

 

6.      Good negotiators always get what they want.

·         Often these are the least efficient negotiators

·         Good negotiator rarely gets what he wants.

·         Do you always get what you want? ...RAISE YOUR GOALS!

 

7.      Good negotiator relies on intuition.

·         Intuition is important, but first come tactics and dynamics

·         Otherwise, negotiation is a set of hard work and preparation.

 

Project: a shortcut for a failed process?

TO COMPENSATE INEFFICIENT PROCESSES? When we observe how companies operate ,we often can see that with setting up projects in a company we try to compensate inefficient business processes. We try to do a shortcut.  Why do we do this?

TO GAIN CONTROL? We set up a project to reach a certain goal, to deliver result in a controlled, monitored way. And we say, because it is important, so it will be a project. And another one, and another one. And they are just alike. Organization in the organization. Why do we not look at these projects closer, set up a proper process and from that point on do the repeatable task always in the same manner. And more efficiently, the knowledge that we have gained delivering the results does not get lost; it is used over and over again.

TO SAVE TIME? We need to do something quickly. We find that doing it in a “normal” way we would lose too much time as “our way of doing things around here” is too slow and too complicated. So, we set up a project, to do it with people we know, not following regular processes along the way. Hmmm… not very smart. Maybe the way we do things around here is not right?

TO OVERCOME SPECIALIZATION? The specialization of tasks in a company has led to the thinking that everything that needs to get done is somehow a “project” that requires putting together the people with the proper set of skills to do the work, following a project plan to execute.

And, it works just for a limited period of time and for a limited number of tasks.

But you know, SHORTCUTS ARE THE LONGEST PATHS BETWEEN TWO POINTS.

 
At some point things become interesting.

 

 

 

SO, WHERE ARE YOU?

1.     First, figure out what the word project in a company means? Does the company even know which tasks are considered projects? If the answer is NO, this is quite a strong sign, that its processes are not defined.
 
2.     Second, what kind of projects does the company has? Long-lasting or short and defined? The first is quite a good sign that the processes should be defined.

3.     Third, how long does it take to get the list of projects in a company? A minute, a day, a week? Is the list clear, goals defined, projects related, connected, benefits and deliverables clear or are there double counts, missing goals different names for the same projects, lack of information on duration, budget, and benefits?

Well, by now you will know what we are talking about.

 
WHAT IS THEN A PROJECT? There have to be strong rules, what is really a project, when to set up project, but common sense has to prevail at the end. Otherwise, everything in a company will be a project. At the end there will be so many of them, that none will be finished.

ACCOUNTABILITY. When you are starting your project, it is important to note that just because a particular task requires accountability from a certain person and has a due date, does not necessarily mean that it is a project. It can be just a task from an operational process that has to be defined. So we do not lack projects or processes we lack accountability. And accountability is key for efficiency.

NOT JUST ONE PROCESS! And if you think that with setting up a project you can be sure to do the work in a controlled way, fast and with high quality results, remember that if you define your one and only process of project management into perfection, it simply will not work. Why? Because all the processes are connected and dependent. Sooner or later one of them will jeopardize your projects. You have to have your key processes in good shape.

TOO SIMPLE FOR YOU? If you are more into sophisticated methods, you can run a process maturity assessment we will write about in one of our next blogs. Keep alert!