I had a web hit from someone at Microsoft today, and what I thought was funny was that the searcher used Google.com. That reminded me of a story.
Way back I got my dream summer job, an internship at IBM, and my first day in the office my boss asked me to make a copy of a bunch of documents, so I went to one of the other people in my office and I said, “Hey, can you tell me where the Xerox machine is?” He responded, “We make copiers here.”
Voice-to-Screen messaging – powered by SpinVox
This month’s PDMA Visions magazine, in an article by Leland Shaeffer, Rafael Lopes and Eric Rose, takes up a little-known part of the product manager’s job: that of retiring old products.
It’s a job that people avoid. As a result, the article states, many companies suffer because they don’t truly understand the downside of carrying too many obsolete products.
In many cases, companies mistake revenue for profit. Products that still have a customer base are assumed to be profitable, especially since any development cost was long-ago amortized.
In fact, write the authors, because they’ve lost scale and scope, old products can easily lose money on a direct-cost basis. Add to this the opportunity cost due to the time and energy these products take up throughout the organization, and hanging onto too many old dogs can significantly affect company profitability.
Getting rid of obsolete products is difficult. There are customers to migrate or fire, distributors to negotiate with, and generally a lack of standards around product retirement.
One interesting suggestion from the authors: plan for product obsolescence in the initial product plan (akin to including terms for ending a partnership in the initial partnership agreement).
Another: set aside “retirement funds” to allow product managers to cover shutdown costs for obsolete products–and thereby remove another reason for old products to persist: plain old inertia.
(Photo from zdeso via stock.xchng)
If you thought cost-plus pricing went out with the Reagan administration, read today’s front page Wall Street Journal article on Parker Hannifin Corporation and the efforts by its CEO to overhaul its decades-old pricing approach.
Parker’s managers priced their 800,000 products using roughly the same formula: cost plus 35%, whether the product was a commodity or a one-of-a-kind.
According to consultant Tom Nagle (disclosure: my old pricing professor), 60% of industrial companies still price in this manner. Yikes!
With the help of outside consultants (and an iron-willed CEO moving aside internal objections), Parker sorted its products into five buckets from commodity through most differentiated, and raised prices on most. Some commodity products saw their prices lowered.
Possibly the most difficult task was to push the price increases though their distributors and customers objections. But the result was a $200 million increase in operating income and a return on invested capital rising from 7% to 21%.
The lesson for businesses is to look at pricing regularly. Don’t let your pricing or your pricing model get stale. And don’t be afraid of raising prices when you find a product priced too low. (Perhaps try some deliberate mistakes by raising prices on a small subset of products and see what happens.) The results can be astounding.
Regular readers of this blog may already realize that I’m hung up on sleep, or lack thereof (see here). Perhaps it’s because, with children just having emerged from the wake-several-times-a-night phase, I’m on a first-name basis with sleep deprivation. It also may be evidence of a career-long struggle to find balance in a culture that celebrates and honors workaholism and sleep avoidance.
At any rate, more good news for people who just want a rest arrived today. The New York Times’s Frequent Flier column profiled consultant Mark Rosekind of Alertness Solutions , a former director of NASA’s fatigue countermeasures program (now that’s a job title). His assertion? In addition to getting more sleep, you also need a vacation. Says Rosekind:
I just completed a study for Air New Zealand that suggests that if people actually took their allotted vacation time, they could improve their performance by more than 80 percent.
If you still don’t get the message, Rosekind includes a truly frightening anecdote about a TV reporter who, apparently out of story ideas, went without sleep for three days. What she experienced the last day will make you want to take a nap straightaway.
Dr. Milton Wexler died earlier this month at age 98. Dr. Wexler was a sucessful Hollywood psychotherapist who co-wrote the screenplays for the films “The Man Who Loved Women” and “That’s Life!” with the director Blake Edwards. But those factoids were not what interested me when I read his obituary in last Saturday’s New York Times.
Dr. Wexler devised a new technique to spur progress on the research of Huntington’s Disease, a terrifying genetic disorder that claimed the life of his first wife. (Here’s a recent story about Huntington’s.) The Times obit stated:
He formed the Hereditary Disease Foundation to gather young scientists from different disciplines and institutions for freewheeling talks about Huntington’s as well as to sponsor research….
His strategy was one he developed for group therapy among creative people: no-holds-barred discussion toward a common purpose in a nonthreatening climate.
The research that emerged “changed everything in the world of genetic disease,” Dr. Housman said, adding that many influential scientists had not expected so much progress for 100 years.
What can a psychotherapist–not a medical researcher–do to attack the disease that took his wife and threatened his children? One would imagine that Dr. Wexler would feel powerless. Instead, he harnessed the power of dialogue and spearheaded significant advances against the disease.
It might not be a stretch to call the Hereditary Disease Foundation the world’s first open source project. In that, Dr. Wexler was twenty years ahead of his time.
Innovation via employee-generated ideas fails at most companies. Employees generate a number of ill-thought-through concepts that management, to its embarrassment, must quickly discard. “Winners” get a handshake, a plaque, perhaps a $100 check. Eventually comes a suspension, termination or petering out of the idea-generation initiative, which then finds its way into the lore of company failures, never to be repeated.
I’ve seen that happen at more than one company. Gary Carini and Bill Townsend, writing in the April Harvard Business Review (free link through April 2007), suggest two fundamental changes in these programs: (1) require employees to flesh out their ideas and develop realistic business cases for them and (2) increase the rewards for those ideas that work to more than symbolic levels.
The authors write:
Companies that required employees to present business cases for their ideas and offered substantial rewards saw the number of workable ideas rise significantly…[increasing] in the 20% to 40% range.
They suggested rewards such as half the first year’s savings for a cost-reduction idea. For one administrative assistant, that was worth $152,000. For that kind of potential reward, I’d put my thinking cap on, no matter what my job.
As discussed a few weeks ago when DaimlerChrysler first revealed the option to sell Chrysler to another investor, untangling the connections between the Mercedes and Chrysler operating units poses a challenge for buyer and seller. Perhaps to reassure investors, and get a better price for their asset, Daimler yesterday announced (as reported in the Wall Street Journal) that it would be willing to continue many aspects of the cooperation between Mercedes and Chrysler.
Daimler’s offer of joint purchasing, component sharing, etc., after a divestment is more appealing to a private-equity buyer than another car company, which might have strategic and competitive reasons for limiting such sharing (as might Daimler).
Splitting operating siblings who are in the same business is the corporate equivalent of separating conjoined twins. After years of union, each has grown to rely on systems and processes provided by the other twin. When the units are separated, those systems must be recreated. Daimler’s offer to continue important partnerships allows the weaker twin (i.e., Chrysler) to continue to benefit from the stronger twin’s systems, as well as save expenses, even if they aren’t formally connected anymore.
(Photo still from the movie “Stuck On You”
Lots of talk this week about design, including Business Week writer Bruce Nussbaum’s broadside on arrogant designers, and reaction here, here and here.
I am a rank amateur when it comes to the aesthetics of design. For example, my wife created the vision and look for our house’s new addition, specifying materials, sizes, configurations; my biggest contribution was to appreciate the result.
With regards to technology products, I perhaps have more to offer. Aesthetics are a small (though significant) part of what constitutes design for tech products. A much larger component is answering this question:
What will the product do, and what will it not do?
The functions of traditional products (buildings, furniture, housewares) are typically constrained by tradition, physics and the properties of the materials used. Designers of high-tech products, especially those that are software-driven, face innumerable choices about what to include (a term has emerged describing a typical result: “software bloat“). The first personal computers sidestepped these decisions by providing platforms with little built into them (except a compiler–the message to users was, “use it for whatever you can build!”). Word processing programs, spreadsheets, Powerpoint, games, web browsers, anti-virus programs, e-mail programs, etc., followed.
Formerly lower-tech products like automobiles and airplanes now confront this scoping problem. BMW replaced radio knobs with iDrive, a function-stuffed, nearly unusable system. Delays in Airbus’s A380 project stemmed not from issues with airworthiness, but from problems with the 300+ miles of electrical wiring.
iDrive and PCs demonstrate the biggest negative side effect of the urge to function-stuff. The more things a product can do, the harder it is for mere mortals to use. Consider the following question: if you have one PC in the house, in which room do you place it?
Apple’s genius with the iPod, iMovie and other products was to design them to do less, to make them supremely usable (and good-looking) and of limited functionality. For them, the iPhone will pose a challenge: how to create something with as many uses as a Swiss Army knife but which doesn’t baffle its buyers.
(Picture by Annette via stock.xchng)
The man who led the creation of Fortran, the first successful high-level computing language, John W. Backus, died Saturday at age 82. According to this obituary in the New York Times, Mr. Backus grew tired of “hand-to-hand combat with the machine” via assembly language, and convinced his superiors at IBM to let his team create a new language that communicated with the computer at a higher level of abstraction; i.e. closer to the process of human thinking. The first Fortran compiler was completed in 1957, a year before the word “software” had even been coined.
The Times added:
Fortran was also extremely efficient, running as fast as programs painstakingly hand-coded by the programming elite, who worked in arcane machine languages. This was a feat considered impossible before Fortran. It was achieved by the masterful design of the Fortran compiler, a program that captures the human intent of a program and recasts it in a way that a computer can process.
People who once programmed in Fortran are getting older, and many have moved onto other professions, like marketing.
Rest in peace, Mr. Backus.
innovation, software, programming languages, obituaries, New York Times
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