process-improvement-solutions.com Blog

The Good Product and the stroke of Genius Capital Raise at $16+…..

The Bad overall go to market strategy. Apple has iTunes eco-system, Google has the Google eco-system, Nokia has the scale and trying to take the eco-system to the next level by creating the content for aggregation/distribution (not just the channel like iTunes), Motorola, well, it is a glorified contract manufacturer like Flextronics.

(Comcast’s acquisition of NBC is a move to own the content for the channel. Following AOL’s footsteps of Time Warner “acquisition” in 2000. Maybe Apple will follow Comcast and “buy” Disney!!)

What was Palm’s differentiator? Multitasking? WebOs? So why do we need a brand new cell phone?

The Ugly relationship management with the Carriers. An exclusive arrangement with Sprint was botched with the early overreaching to Verizon and AT&T. iPhone is still not available at any other Carrier. Sprint spent a lot early on promoting Palm Pre due to the exclusive arrangement and then they (Palm) come out with Palm pre Plus for Verizon. The marketing material I have been getting from Sprint lately does not mention Palm Pre at all (I am a premium Sprint Customer having been with sprint for over 10 years).

Apple took the time to build on its relationship with AT&T (to preserve the channel) and introduced the enhanced iPhone also only on AT&T. Palm showed absolute lack of tact and jeopardized its relationship with Sprint by overreaching.

What’s next? Take under, over? What the heck is “take under” anyway? Licensing WebOs? Game Over? 300 million debt and 300 million preferred stock = zero value for common stock in a year when cash = zero (just over 500 million in cash in 2010 Q1)? Or will Web Os be the Windows/DoS of mobile and Android be the IBM PS2? Or will it be the other way round?

What about Nokia’s Symbian? Will Apple/iTunes go the way of AOL due to the closed system?

The new strategy at P&G appears to be reverse of what GE adopted recently under Mr. Immelt. GE went from too focused on operations and efficiency improvement under Mr. Welch to emphasis on slick marketing and creating an ecosystem for growth as a process (building on the Six Sigma heritage). This transformation accelerated in 2005 when I was at GE with the creation of infrastructure BUs.

In P&G’s case, it appears that the new strategy is to grow the margins by focusing on operations and efficiency improvement instead of single minded focus on growing the top line via new premium products and acquisitions. P&G is starting the process of repositioning for the new environment as discussed in my blogs.

Madison Avenue will need to reposition due to the dynamics of the new environment and work with their clients to help them figure out how to target the right segments once the right segments are established and product positioning strategy is laid out. Will require longer partnerships rather than the traditional model of bringing on the ad agency towards the tail end as showcased in the Emmy winning series Mad Men. The show is set in the 50s/60s so obviously is not ment to be a case study on marketing and advertisement strategy for the 21st century. I mentioned it here since it does depict the typical working relationship between product manufacturers and advertisement firms and not much seems to have changed based on the WSJ article yesterday on P&G..

P&G appears to be taking the bull by the horns and changing the way consumer products are brought to the market and using this opportunity to optimize their own operations and business processes which should help increase the Gross Margins.

Shaker Cherukuri
Managing Principal
Process Improvement Solutions Inc
317 258 3552

My musings from 3/10 WSJ article on reasons for MickeyD’s turnaround since 2003:
- Process rigor for making the food which ensures consistency in their products (less variation thus resulting in consistent experience for the consumers – you know what you will get)
- Even flow that minimizes bottlenecks and allows for capacity to match demand at peak times (less wait for consumers and less lost opportunity for MCD)
- Resulting in Operating Margin expansion even when gross margin does not
- Scale economies on the supply side for Gross margin management
- Constant repositioning based on market dynamics via new offerings (premium salads before and lower cost options now)
- Excellent marketing campaign
- Sound business strategy that emphasized same store sales growth rather than new stores
- Franchise model that takes the most of the real estate off the books (great in this environment)
- Variable pricing based on demand (this one will be hard to sustain in this business, works well for the airlines)
- So in short, they got everything right – Strategy, Finance, Segmentation, Positioning, Targeting, Operations, Delivery.
Shaker Cherukuri
Principal
Process Improvement Solutions Inc.
3209 W. Smith Valley Road, Suite 224
Greenwood, IN 46142
317-258-3552