7. B-to-B Innovation—The New Frontier of Fantasy
Companies in business-to-business (B-to-B) markets often look at innovation as a consumer-driven revolution and not as something that applies to them. Their primary customers have been all about price and functionality, not lifestyle and desire. Because only one company can be the cheapest and most price-driven, commoditization stifles growth; these companies must find the power of innovation. Now the same high-value user experience is starting to be expected even for business-to-business products and services. Meeting these expectations requires not simply research and development but also a thoughtful strategic plan.
Trenton, NJ. It was a evening in November. Joey Russo and his team were getting in place for a long night. They would have 12 hours to get their work done and then inspected so that the day crew could move on to the next segment of pipe. Every day, the day crew relines decaying sewer pipes. Every night, Joey and his team surgically “cut the laterals.”
In every major city in the developed world, the sewers are more than 50 years old. The original piping was mostly clay-based, a material that becomes fragile and susceptible to cracking with age. Sewer pipes are typically 8 inches in diameter, too small for humans to physically enter to repair. There are two approaches to rehabbing sewer lines. The oldest is to dig up streets and yards to gain access to the pipes and replace them. This approach is prohibitively expensive and undesirable for everyone who lives in the neighborhood. The second, noninvasive procedure is to pull tools through the pipe. These tools are used to lay out a liner and then cut out the openings that connect the main pipe to the outlet to the homes, called “laterals” in the industry. The process is still essentially manual. Locations for the laterals are mapped out ahead of time, and a machine with a camera and cutting tool is then pulled through the pipe with a winch and is stopped at the locations that have been mapped. A skilled person like Joey then sits in a truck and looks at a video monitor that shows the location where the lateral is to be cut. (The liner has a dimple in it where the pipe coming into the main pipe intersects.) The person in the truck controls the cutter and watches the dim and colorless images on the monitor as he directs the machine to cut the lateral. The process is slow and tedious and takes years of experience to master, but it is instrumental to the success of the operation. Although this approach is preferable to brute-force digging, it does have its downsides. First, this expert lateral cutter demands a hefty salary (in some cases, more than $100,000). Second, this person and the equipment are the bottleneck to the speed of opening the pipes that lead to people's houses. Third, the crew has up to 12 hours to open the lateral, or else sewage backs up into the house, forcing the sewer rehabber to quickly dig up the yard and open the pipe while irate homeowners look on.
Joey is that master cutter. He is often away from home at night, but the salary is worth it. His boss, Sal, knows Joey can jump ship and go to another company at any time, so Sal has to make sure he treats Joey well. Sal is nervous because Joey is not easy to replace, and if he is sick or leaves, Sal will not be able to get the jobs done. Joey's apprentice does not have enough experience, and Joey is not interested in giving him on-the-job training to create his own competition. Even though Sal does not have to stay and direct the night crew, he often loses sleep hoping that the morning will bring a completed section of cut laterals. Sal loses a small fortune if the laterals back up because they are not cut in time. He faces crews showing up with nothing to do if the laterals do not pass inspection. His agita is so bad that it prevents him from eating his favorite foods, and his blood pressure is off the charts if he fails to take his medication. Whereas the day crew's work is important, the night crew critically impacts both the physical output of the business and its income statement.
Everyone had thought the liner technology was the perfect answer when it was invented. When he bought the business, Sal was told how much pipe could be lined and how profitable the business was. The lateral cutting seemed like a small part of the operation, with a specialized cutting tool to do the job remotely. But a large chunk of the profits go to Joey and his team. Plus, his current cutters break down all the time, so the crew has to travel with spare parts and be expert repairmen on-site. The business is really not that profitable after all. Sal would love a better pipe rehab process.
The Industrial Frontier
In one industry after another, people fantasize about the perfect product or environment. It may be the worker on the job, the manager who does not sleep at night, the family member who wishes that a spouse could return earlier and less fatigued from work, or the children who wish their parents could attend their hockey games. Sometimes, the fantasies are in direct conflict. Joey wishes he could work better hours. He is the master of his job and competition is scarce, but he is concerned about burnout. Sal wishes there were three guys who could run his lateral cutter so he could pay the operators less and reduce his cost, have more options for who is working, and rotate his crew to limit burnout. The important thing to realize is that fantasy and value expectations are now desired in the realm of business-to-business products and services. The fantasy economy has expanded from the home and into the workplace.
Jeff Calhoun, vice president of product development for laboratory equipment company VistaLabs, says that industrial products are the “last frontier” in new-product development. The B-to-B product domain in general suffers from a lack of good design, a lack of attention to the experience of use, and a general lack of connection to the user. The goal, then, is to tame the industrial frontier. To take the wild landscape of mundane and functional but undesirable technologies and transform it into an oasis of user experience, of fantasy.
Many industrial technologies are mass-produced but are usually designed and manufactured with a cost-cutting commodity mind-set. A bolt is a bolt is a bolt, so the company that makes them cheapest will sell the most. But someone will be the first to design a bolt with attention to ergonomics of use, with color codes that instantly communicate different thread sizes, and with a brand identity that associates those innovations with the company that makes them. That company will find itself with growing profits while everyone else desperately works to stay in the black by continuing to cut production costs. In other words, the form and function will create value for both the company and the purchaser.
Fantasy in Industrial Products
There are already many existing examples of industrial and business-to-business products that fulfill fantasy. Consider, for instance, the agriculture industry. What if there was an agriculture combine that not only was extraordinarily efficient at its main function but also was designed with an eye toward ease of maintenance, with easily opened panels to provide complete maintenance access along with a built-in service platform and foldaway maintenance ladder? What if its electronics were the most sophisticated in the industry, not only adapting the performance to field conditions but even including a system to identify and remove stones from the field? What if the combine looked so sleek and exciting that it seemed almost fun to drive, was comfortable to sit in, and had state-of-the-art lighting and a global positioning system? New Holland created just that combine, with an international team of American and Belgian engineers along with industrial designer Russell Strong of Integrated Vision. This combine, the CR, has won awards worldwide, such as the 2002 Gold Business and Industrial Product IDEA award, given jointly by the Industrial Designer Society of America and Business Week magazine.
What if a machine tool operator could just flip a lever to quickly release and change a tool bit and then flip the lever again to secure it in place? This rather than taking an Allen wrench and unscrewing each bit, replacing it, and then having to screw down the bit with the Allen wrench again. A tedious job and one that is typical in the industry, the standard approach may change due to the patent-pending ergonomic lever design by mechanical engineering students at Carnegie Mellon, working with Paul Prichard and others at Kennametal's Breakthrough Technology Group.
What if you had constant continuing education via a hands-on magazine, one that even provided samples of new materials and technologies so that you could incorporate the most cutting-edge technologies into your product? And what if you knew this because you could subscribe to such a magazine provided by the company Inventables? Every third month a technology kit called DesignAid would be delivered to your door, complete with Web support to keep you abreast of the latest developments not only by text, but also by touch and feel. Inventables is a supplier of knowledge, of the building blocks for technical innovation. Zach Kaplan and Keith Schacht, the principals, developed the company after meeting in college. Today their customers include GM, HP, and IBM. Although their main goal is to provide information for teams to use in product development, the kits have been applied in a host of different ways. For example, they are used to help to stimulate teams to think out of the box, and managers are using the kits as a creative education tool to open up individuals and teams as a warm-up exercise.
The final example considers respirator masks. In every hazardous work environment, employees need to wear respirators. The problem is many of these masks are so uncomfortable that workers often fail to comply with health and safety rules. What if workers in hazardous areas wore comfortable masks that were made to be comfortable not only during work but also during breaks? Hired by the Aearo Company, Elizabeth Lewis and her team at Product Insight, Inc. designed such a respirator, and it won the Bronze IDEA award in the same competition as the New Holland CR. Lewis, her company, and the mask are discussed further in Chapter 11, “To Hire Consultants or Build Internally—That Is the Question.”
The farm machinery combine, the quick change for machine tools, the DesignAid technology kit, and the respirator mask may not seem to have the aura of Quidditch, or the Trek bike, or the OXO salad spinner, or a Starbucks nonfat double latte with a shot of caramel. But they are still examples of form and function fulfilling fantasy. The fantasy here is to have an experience that exceeds the standards of current products, beyond the reality of the industry status quo. Even on the farm, the combine provides a comfort level and an aura of a high-end office space and yacht. Even in the midst of a production tool room, the fantasy is a clean environment and effortless maintenance of the machines. Even in the midst of a rapidly changing technological world, the fantasy is continuing education that explains the complexity of the latest technological advances with the simplicity of “show and tell.” Even in the midst of hazardous environments, the fantasy is the ease and comfort of a world especially designed for humans rather than opposed to them.
RedZone Robotics: Going from Projects to Products
A common business model for industrial technologies is that of one-off projects. A one-off project is a single solution made to a given specification of functional requirements within a cost constraint. These projects are means to flex technical prowess, and each one is satisfying to the team that develops it. But one-off industrial technology projects are produced by companies that typically have no brand identity, no contact with end users, and no understanding of a customer-based value proposition with attention to the experience of use. This kind of project-based company faces operational hurdles, both with the constant need for acquisition of new projects and with the internal needs to juggle people and resources to meet delivery dates. At the same time, no equity is being built. The company possess capabilities but no repeatable income stream that generates profits for company growth. This kind of company works to keep up, not get ahead.
The alternative is to focus on repeatable business and develop products and services that can be reproduced or even mass-manufactured. Here, technical prowess would translate into complete product proficiency. An example of a company that has successfully made that transition is RedZone Robotics. Previously a custom robotic project shop, RedZone robotics will be the company to resolve Sal's indigestion and high blood pressure caused by his sewer rehab company.
Founded in 1987 out of the robotics technologies developed at Carnegie Mellon University, RedZone went into Chapter 11 bankruptcy in 2002. Although RedZone's technology was state-of-the-art, its one-off project business model was not. The key words in the markets for robotic technology are “dangerous, dirty, and dull,” and RedZone had especially focused on the dangerous. Prior to its bankruptcy, the company built high-profile, one-of-a-kind robots for tasks where humans could not or should not go. For example, RedZone developed robots to help clean up Chernobyl and Three Mile Island.
Current CEO Eric Close and his investors acquired RedZone Robotics while it was in Chapter 11 and brought it out of the bankruptcy process. Close says he “loves bankruptcy.” He should. He has been dealing with it for nearly a decade. But he doesn't get companies into bankruptcy—he gets them out. Close is a turnaround specialist. He buys companies in bankruptcy and turns them into profitable enterprises. In his short career, he has bought four troubled companies. These companies were either on the brink of bankruptcy or already in bankruptcy when he took control of them and turned them around. According to Close, bankruptcy has its advantages, providing “great bargains” if chosen well. The problem with starting a new company is that it is hard to develop technologies, infrastructure is expensive to buy, and it is hard to get the first customer. Close says that companies in bankruptcy can get you through these first hurdles. They come with technologies that they have developed but could not turn into profitable revenue streams. They come with facilities and equipment where that technology was developed. Oddly enough, they usually have happy customers.
Happy customers may seem like an oxymoron for a company in bankruptcy. But, according to Close, these companies often have a small customer base that they have given a lot of attention to. They must, because it is their only hope for sales. Surprisingly, suppliers are not a significant roadblock either. Although some may stop doing business with the company, many are happy to maintain the account and are pleased to see new management trying to turn the business around. Even though the company has normally defaulted payment on its obligations to the supplier, most suppliers want to retain the company as a customer. If you can convince suppliers that you will be a stable customer going forward, they want to work with you.
The big problem with companies in bankruptcy is the employees. Many are disgruntled; morale is down. The culture is a negative one based on a long period of cost cutting and a stifling environment. Often, these employees may be technically talented but may not be team players. So the task is to reinvigorate the employees.
RedZone was one of these companies. Close purchased RedZone in June 2003 and became its president and CEO. The “bargain” he got was some of the most advanced robotics technology commercially available at that time. His challenge was to turn RedZone from a project-based company into a product-based company. How could he use the impressive technology basis to produce an assembly-line product, one that could be produced on multiple runs, if not mass-produced? As he searched the social, economic, and technological (SET) factors looking for trends, he realized the $120 to $200 billion possibility in sewer rehabilitation in the United States (and two times more worldwide in developed countries). More than 600,000 miles of small-diameter sewer line exists in the United States alone, and a significant percentage is more than 50 years old. The vitrified clay pipes are beginning to crumble and clog from debris and tree roots. Sewage is leaking into the environment and finding its way into streams. All that sewer line will need to be repaired in the next 40 years. This is a great opportunity for robotic technology.
Close's business plan was as good as his reputation, so he had been able to attract funding. But he had two other major challenges. One was to motivate employees, to get everyone in the company focused in the same new direction, and the other was to make an impact in an industry completely new to RedZone. The solution for both was to connect the vision of the robotic product with the company's vision. Close wanted a product where service, product performance, and interface all smashed current industry standards, a product that would achieve fantasy status. This is the only way that sewer pipe rehabbers like Sal would leave behind existing equipment to buy the RedZone system.
The Strategic Plan
Designing a product that is so fantastic that it is beyond the status quo experience of expert users requires not simply research and development but also a thoughtful strategic plan. That plan includes three major parts: first, an understanding of who are the key stakeholders and what are their needs and desires; second, a complete product strategy that includes the development of the product and the services required to support the product through its entire life cycle of use and its interaction with its stakeholders; and third, a corporate strategy that establishes its brand and aligns itself with its products and customers.
Strategy One: Identify and Understand Stakeholders
In terms of stakeholder analysis, Close used the Powers of 10 analysis described in the previous chapter to identify and understand his stakeholders. As a result of that analysis, Close visualized the product on all levels of its functionality and recognized stakeholders at each of those levels. These stakeholders included not only owners or general contractors like Sal, and crew members like Joey, but also the inspectors of the pipes, the engineers for the communities, the politicians who set policy, and homeowners and taxpayers who are affected by the efficiency and effectiveness of the process. The scenarios that were developed for all the stakeholders made it easier for Close to see all the players as real, tangible people, like Joey and Sal. It was then clear that the product had to be easy to use, easy to learn to use, and easy to repair on-site. It was also clear that the product had to generate reports that would be easy for inspectors to review. As an outcome of the Powers of 10 analysis and scenarios, Close had a road map to show the direction in which the product and company needed to head—specifically, what the different levels and scope of the product would be, as well as the user needs for each level.
Strategy Two: Planning the Product
The next step was a micro-level analysis of the product itself, a strategy for the development of the product. RedZone's long-range product strategy is a sewer robot that will accomplish a variety of tasks. The trade-off with any multipurpose tool is accuracy for a given task. If a number of tasks, say six, need to be accomplished in sewer repair—such as inspecting the state of the main pipe, removing debris from it, lining the pipe, identifying locations where other pipes join the main line, cutting the laterals, and grouting the resulting joints—the easiest product approach would be to produce multiple stand-alone machines specifically designed to perform each task. The problem is that the customer then would need to purchase, store, and maintain each machine. At the other extreme, a single product that does it all is difficult to have as an approach to accomplish all the tasks well. Such a machine would look like something out of a Dr. Seuss book!
Rather than a line of separate machines, and rather than the Rube Goldberg approach of all in one, the solution for RedZone is a simple, robust, and powerful base machine that is the platform for multiple modules. The modules are designed to attach at a given place in a given way that each serve an individual task. The platform, loaded with a module, goes into the sewer and accomplishes one task. The platform is then removed and the first module taken off, and then the next module is placed on the platform for the next task. The core platform needs to have certain capabilities, some of which may not be used for a given task, and others that will always be used.
The product strategy is to design the platform and modules, and this strategy has implications for the product development team. The team needs to design an interface that will connect all modules to the platform. The team must understand all the capabilities the platform must have to meet the demands of each module. The physical interface for the modules must be easy to understand and use. Changing the modules will require some training for the crew, training that the RedZone team must design into the product system. The platform and the modules individually and together must be easy to manipulate in accomplishing the task. The robot platform, together with a module, must be easy to carry from the truck where it is stored, easy to manipulate through a manhole into the sewer main, and easy to remove from the sewer. It must be easy to clean and maintain. The accuracy of the tool must be at least as good as each of the individual machines available today.
Anything less than this will jeopardize the success of the product. In any established industry, it takes a true breakthrough in cost or performance to convince a market to make a change in how it performs its job. RedZone decided to improve both: decrease price, increase the speed of accomplishing the task of lateral cutting, increase the quality of the cuts, and decrease the skill level needed to accomplish the task, thus further reducing the customer's overall costs. What a task to put on a development team!
The advantage to RedZone and the only way it could meet this seemingly absurd challenge is the “bargain” that Close purchased when buying the company. RedZone has some of the world's best robotic technologies and the know-how to create new technologies to meet challenging performance conditions. RedZone has some of the best minds in the industry who, time and time again, were able to overcome technical challenges to design and manufacture machines that few others could have created. So, although the team had the most outrageous challenge to date, it had the confidence and experience to know that, through sweat and turmoil, it could get the job done.
Strategy Three: Planning the Corporate Approach to Product Development
To go a step futher and provide vision and direction for not only the product but also the company, Close used a Powers of 10 analysis on the company itself and its approach to develop its product. Every company should perform this self-assessment to better understand how its products relate to its corporate mission and brand. So many industrial companies lack any brand statement. Creating a brand statement can be a difficult task for an established company accustomed to a project-based philosophy. But the company's brand statement is critical to its conversion to a process of organic growth. The company's brand can lead the brand directions for the products themselves.
The macro-level analysis of the corporate strategy sets the tone for the culture of the product team, the corporate requirements for a product, the interaction between the company and society at large, and the corporate values and brand attributes. The corporate strategy determines resources for any product and, at a high level, how those resources can be distributed. It sets the direction for partners with other companies in developing and delivering a product or service. The corporate strategy determines the relationship between the company and the local community and the global infrastructure. The corporate strategy must recognize who competitors are and what threats they present, or how the threat of a new technology from the corporation may trigger responses from the competition. Most important is that all of these aspects have a direct impact on the direction and quality of any product developed.
For RedZone, a key component of the corporate strategy is continual innovation. To achieve that goal, it implemented a state-of-the-art product development process to provide a continuing stream of innovations. RedZone began with the innovation process discussed in this book with aspects detailed in Creating Breakthrough Products. It then developed a tracking mechanism that followed user research into customer requirements through to engineering specifications. Close believed this to be a necessary step to turn a tech-focused company into a complete-product company.
Another key component of the corporate strategy is to build a corporate identity, a brand. In a business-to-business context, the product is the primary communicant of brand, so product identity and corporate identity are strongly linked. Discussion of color, form language, and logo early in the process connected the product identity to that of RedZone as a company. A mantra of “innovation, not invention” required the company to maintain its expertise in robotics but focus on delivering technology to meet market needs rather than developing the next cutting-edge technical capability only because it could. The product, then, needed to communicate innovation, technical expertise, and the importance of the user, because these were core to the company's identity.
Why would the company care about a color scheme for a robot that will sit inside a sewer? Because the robot spends a good amount of its time outside the pipes, where people see and interact with it. At industry trade shows the robot will stand out against the competition to clearly communicate that “there is something different here.”
The realization of the need to communicate corporate identity via the product as well as product identity, and the realization that how people interact with the product will make or break the intended paradigm shift, led Close to hire an industrial designer as one of the first employees of his newly invigorated company. Close charged him to develop a color scheme for the product, an ergonomic interface, and the communication and visualization of all the ongoing stakeholder research that the team participates in. Because this product would establish the company's brand, it was critical to adopt a look and color scheme that would protect the product from competitive reaction. The market was worldwide, and existing U.S. companies tended to make their products look like Star Wars spacecrafts, a look that Europeans did not appreciate. So the product was given a clean, simple geometric look that appealed to both U.S. and European buyers, a decision to help both product sales and the company's image.
The Result: Sewer Repair and Beyond
The result is an industrial product that works in extreme environments. The product, called the Renovator, functions off a sled platform with cylindrical components that fits into pipes. The functional need of the product's environment—pipes—produced a natural visual theme. The cylindrical features create continuity in the visual aesthetic. Cylindrical skids on the bottom of the robot curve upward, forming ergonomic handles that make carrying and deploying the robot easy to do. The robat's weight, distribution, and overall dimensions are specified to enable easy manipulation by the crew. Even the camera has a circular theme, with its spherical shape and circular lens openings. Because the platform will house multiple tools, and because quick swap-in/swap-out components are used to make maintenance and repair rapid and on-site, all handles are color-coded for high visibility and are textured to maintain grip in slippery conditions. The name RedZone was extended into the product aesthetics by using red anodized components as highlights on a basic aluminum finish with black details. This theme was also extended to the printed material. For safety, sensors connected to indicator lights positioned on the robot and attachments warn users before tools are activated. The functional capabilities and device aesthetic create a brand language for the product and company.
The stakeholder analysis, the corporate strategy, and the product strategy are integrated with each other. For example, if the crew is enthusiastic in using the robot and becomes more effective in their job, the general contractor (like Sal) who initially is testing the new approach will have positive reinforcement, causing him to purchase additional equipment. RedZone's brand equity will increase, and the products success will reinforce the development team and its process. Their renewed energy will continue to produce successful products that meet the customer's needs. Society as a whole will have a positive response as their tax dollars are more effectively spent and their lives have less disruption, with their yards no longer being dug up. Environmental groups will be positive about improved sewage and less leakage into the water stream. They will petition for new policies that set RedZone's approach as the standard, reinforcing the company's brand and profitability.
We worked with Close in developing this strategic plan. It became clear that this robot was not just a product. It was the future of RedZone. This robot would establish the company and its brand, and the initial product release would set up all the company's subsequent products in the industry. As we write this book, RedZone is involved in its launch of this product. Initial customer reaction has been strong. The upfront strategic planning exercise and extensive research on its stakeholder base has expanded the company's vision of its product platform. If it succeeds, it will corner the market. RedZone will have opened doors for new products with different functions—not only for lateral cutting, but for all the major steps in sewer and water-pipe rehabilitation. Eric Close has the vision and courage to go for this biggest prize, to use this product to define the company and its brand. You never get a second chance to make a first impression, to define fantasy for an industry.
Like those highlighted in Chapter 1, “The New Breed of Innovator,” and throughout this book, Eric Close is a new breed of innovator. To him, innovation is “the ability to enter a marketplace, anticipate the needs of the consumer, and put together a product or service that makes their life better.” He is a technical guy who loves products. Complete products. His approach is to take successful product development methods from the commercial and retail sectors and apply them to the industrial sector. The innovation process outlined in Chapter 9, “A Process for Product Innovation,” does just that. It helps people move away from individual solutions to team-based results. It helps teams communicate with each other and with their customers to understand the requirements and demands from the market. It provides an approach for the team to weigh the conflicts between different stakeholders' needs. By putting together a team that complements each other, and by developing a culture that relishes creativity, Close can build a company along with a product.
Close sees himself as a pragmatist. He embraces design and implements the innovation process we have described because “it works!” and a company in any field “must have it.” In the industrial frontier, this leads to a differentiated business model, one that allows his companies to stand out from and lead the pack.
RedZone Robotics is just one example of an industrial-based product company that embraces the mantra that form and function fulfill fantasy. The form and function together stand out in terms of performance and comfort to the user, providing not only a great experience, but also a fantasy projection of a more amenable work environment. For a crew working in the sewer, the form and function of the sewer robot fulfills fantasy. Rather than work deep inside the sewers, the crew can stay clean inside a comfortable cabin, controlling this high-tech robot with the same skill and enthusiasm they had with video games as they grew up.
The World Above the Sewer
From sewer robots to respirators to machine tools to agricultural equipment, innovative companies understand that if they don't embrace user-based design as a means to profit, others will. We are seeing a renaissance in how the industrial frontier is envisioned. As with the first Raymond Loewy-designed Sears Coldspot refrigerator, which in 1935 transformed the refrigerator from a utility machine that stayed on the back porch into a lifestyle device that became an interior feature of every home, the industrial frontier is being transformed into a lifestyle environment where people spend the significant part of their day. Good design is often found and highlighted in the consumer world. But design to create fantasy—yes, even fantasy—has a place in every world where humans interact with their environment, including the world of B-to-B.
When Eric Close took over RedZone, it had a reputation for invention but not for pragmatic innovation. Close could have gone completely the other way to become a component supplier of robotic core technology for other companies. Close realized this was not a sustainable option, instead seeking an opportunity to develop and manufacture a core product with a long-term strategic plan. Close sees the potential of RedZone as a company to branch out and find new applications for its unique robotic design capability.
In Hong Kong, companies are forming a new strategy supported by local government and industry. They have described it as moving from supplier to designer to strategist. Many companies in Hong Kong have been service companies for large global corporations or have found a niche in low-end consumer markets. They realize their future lies in moving from a mind-set of supplier to product designer and producer and, eventually, to industry strategist, setting the future of product development. Hong Kong wants to become the gateway to the Pearl River Delta on the mainland and to help existing and emerging Chinese companies make this same strategic shift.
Suppliers are primarily cost-driven and directed heavily by external companies that purchase their products and services. Original product designers and manufacturers move to develop their own products that, although they often meet current demand, may not be trend-setting. Japanese and Korean companies went through the phase of product design and producer, but now they are at the strategist level. Toyota used to make cheap cars that undersold U.S. and European competition; now it leads the world as a strategic design-driven company that is arguably the most successful car company in the world. In Korea, Lucky Gold Star used to be a supplier making inexpensive components for the computer industry. It then broke out to design and manufacture its own computers, but still it competed by price. It became an industry strategist when it shifted to LG and started to produce world-class electronic equipment. Samsung and Hyundai followed the same path. If your company is built around a supplier mind-set, you must start the process of shifting from supplier to product designer and manufacturer on the way to industry strategist. If you don't want to fight the low-margin battle to be the lowest-cost provider, you simply have no other choice.