Gluten-free beer and fruit flavoured shandies any one?

Having blogged yesterday about new product development in the guitar industry, I came across this article about NPD in the American beer industry.  It seems that millennials and women are not drinking beer.  So the major brewers have been trialling new kinds of beverage designed to appeal to these two groups, such as gluten-free beer, fruit flavoured beers and shandies.  With very limited success.

In the UK, there has been more success with fruit-flavoured ciders, first introduced in 2007.  But in 2017 and 2018 the trend has been to developed “craft-based” beers and ciders to be sold as a premium product.

This illustrates that market research can suggest what to do, but it is only actual consumer behaviour that determines if NPD is a success.

Posted in Chap 12 New products and services, Sector: Manufacturing | Tagged | Leave a comment

Robot electric guitars have not halted the guitar makers woes

Attending the IoW Festival in 1969 was a seminal moment in this young man’s life – Dylan The Who, Moody Blues, The Nice, Richie Havens, Joe Cocker, et al.  So yesterday’s headline on The Economist website “Is this the end of the rock guitar?” plucked a few of my heart strings…

It is not the first such headline.  In June last year the Washington Post had a long article entitled “Why my guitar gently weeps – the slow, secret death of the six string electric”.  Both were prompted by news that the iconic manufacturers of electric guitars – makers such as Gibson and Fender – have been posting losses over the last few years.  The simple fact appears to be that there is a significant slowing in demand for new guitars.  The articles speculate that this is for a number of reasons:

  • less “guitar-led” music in the charts
  • fewer so-called “guitar heroes”
  • a market awash with good quality second-hand guitars

So is this a classic case of a product life cycle going into decline?  Is the electric guitar simply a modern version of the buggy whip and tin opener?  If so, can operations management thinking resolve the challenge such a decline presents?

Well the classic response to decline in demand is product innovation.  And this was what Gibson attempted by working on self-tuning “robot” guitars.  In 2015 all Gibson guitars had this feature, and sales dropped like a stone.  The guitars were more expensive and the added “new” feature was not something that customers wanted.  In 2016 this feature became just an optional extra.

Fender on the other hand have gone down a different route, developing service innovation.  They have developed a number of online tools to help people learn how to play the guitar; they partner with The Music Experience in setting up “try-out tents” at live music festivals; and support the School of Rock music education programme.

The other response is more strategic, shift from just making guitars into future growth products or categories.  Gibson have also done this.  In 2014 it acquired Philips audio division in order to get into consumer electronics, especially headphones, speakers and digital recorders.  This also does not seem to have solved the firm’s financial problems (which is probably why Philips were happy to rid themselves of their division).

What would Dylan say?

“Once upon a time you dressed so fine
Threw the bums a dime in your prime, didn’t you?…
You used to laugh about
Everybody that was hanging out
Now you don’t talk so loud
Now you don’t seem so proud…”

Posted in Chap 03 Processes and life cycles, Sector: Manufacturing | Tagged , , | Leave a comment

Starbucks customers are much appier now….

Yesterday’s blog focused on the idea that you do not start with the technology, you start with what it can do for your order winners…. So it is almost unbelievable that Starbucks introduced an app that enabled off-site ordering without considering the in-store processes that would be needed to support this.  (Actually not unbelievable – because the Operations function can be low in the pecking order in some companies, so are often the last to know what the Marketing people have done…).

This Business Insider story is a classic case of the technological cart being put before the operations horse.  And then, how on a trial and error basis, the firm went about fixing the problem that they themselves had created.

Starbucks knew that an increasing number of customers wanted to order via an app.  These customers expected two things.  First, they could place an order without standing in line, and waste time queuing.  Second, if they placed this order before they got to the store, it would ready waiting for them.  Unfortunately, when they released the app customers found that only the first of these benefits were delivered.  In fact, customers who ordered via the app found they were waiting longer than those that had queued to order, leading to high levels of customer dissatisfaction.  This was so bad that a 2% decline in customer traffic was attributed to this.

Apparently it took Starbucks around a year to fix this problem (far too long).  They did a number of things :

  • provided pick-up shelves for the online orders, so that these were not confused with orders made in-store
  • modified the app so that customer were informed when their order was ready
  • reassigned tasks to employees so that some could focus exclusively on online orders
  • implemented an upgraded staff deployment system which was more effective in matching staffing levels to levels of demand, and even better at assigning tasks to employees to match variation in demand.

(So glad that even in 2018 that there are big companies – who should know better – still screwing up so that I have stories to tell that illustrate operations management concepts and ideas).

Posted in Chap 03 Processes and life cycles, Chap 08 Queuing and customers, Sector: Hospitality & Tourism | Tagged , , , , , | 1 Comment

Don’t put the digital technology cart before the strategic horse

I’ve blogged a lot about the fourth industrial revolution and the technologies that are transforming the way in which business is done.  And I’ve provided links to a lot of articles like this one from the MITSloan Management Review – “Seven technologies remaking the world“.  I’ve also identified that it is not just a case of plugging a new technology into an operation to make it more efficient, but more a case of creating an entirely new business model to fully exploit the capabilities of these new technologies.  Moreover, to fully exploit these capabilities it is necessary to utilise more than one of the technologies in combination with others to achieve their full potential.  But knowing how to fit the technologies together is extremely challenging and is often being done on a trial and error basis.  OK so far?

What I have not stressed is that firms are in danger of adopting these new technologies willy-nilly – either simply because they exist, or because they hear that their competitors are.  But technology is the wrong place to start.  The starting point has to be the firms strategy and how it achieves competitive advantage.  Now I would argue that it achieves this through identifying and delivering on its order winners – five types of cost, nine types of quality, eight types of flexibility, five types of dependability and five types of speed.

It is iterative of course.  But start with a blank sheet of paper and identify what a technology would need to do in order to modify existing OWs or create new ones.  Second,  examine the technologies and what they are able to do.  Then go back to the OWs and look for a match between these and the technologies.  This makes it sound easy.  It is not.

PS I know you want to know what the “Seven Technologies” are so here they are:

  • pervasive computing –  the Internet of Things but more so
  • wireless mesh networks – agile networks of mobile devices
  • biotechnology
  • 3D printing
  • machine learning and analytics
  • nanotechnology
  • robotics
Posted in Chap 03 Processes and life cycles, Chap 14 Operations strategy | Tagged , , , , , , , , | Leave a comment

The ‘Concept Sprint’ concept (and an anecdote)

In our book we have a Operations Insight about IDEO, the industrial design company that utilised their ‘Deep Dive’ process to develop new products.  This link, on the other hand, takes you to McKinsey’s website, where a young consultant talks about her participation in a ‘Concept Sprint’.  I would venture to suggest that there a quite few similarities between the two processes, such as:

  • co-creation – tapping into the ideas and thoughts of potential users of the new product or service.
  • room organisation – having a specific format for the meeting room and the materials in that room.
  • clear stages in the process.
  • voting on the best solutions.
  • prototyping.

Over the years I have run a number of innovation workshops for a variety of different clients.  They have always worked best when there was a strong element of co-creation.  For instance, I once ran a workshop for a company that made the small security seals put on airline catering trollies.  Their competitor had just won a contract with a major airline by undercutting them by 1 cent per unit – a tiny amount it would appear, but significant when you consider the seals were selling for 10 cents per unit.  So my client knew they had to redesign their product so that it could be made cheaper.

So I organised a small, one day workshop designed to come up with design solutions to the problem.  As well as managers and industrial designers from the client firm, I asked along three cabin crew from an airline and arranged for us to have a catering trolley and seals with us in the room.  When we assembled for coffee ahead of the workshop it was fairly evident that the designers were sceptical about what the cabin crew could bring to the table; and the cabin crew were not sure if they would be any help in the process.

I started the workshop by outlining the problem and explaining why we were all there.  I then asked the cabin crew to demonstrate to us how the seals were used.  So one was put on the trolley and one of the cabin crew showed us how they broke the seal – by taking a pen from their pocket, putting it through the seal, and using it as a lever to break the seal.  The designers were appalled.  They had designed the seals so that when they were twisted it would break at a cleft in the plastic bracket.  When they explained this, the cabin crew said the cleft was ineffective.  So another seal was put on the trolley, and one of the designers was asked to open it by twisting it.  He couldn’t.

At this point two things happened.  First the designers realised why it was a good idea to have the cabin crew there.  Second, the cabin crew realised that the designers were not as clever as they thought they were.  The co-creation process had begun…

Posted in Chap 12 New products and services | Tagged , | Leave a comment

Operations Insight: The Model Group

I’m always on the look out for companies or organisations that are out of the mainstream, often making things that you’ve never thought of before.  So it is with The Model Group, who are specialists in making scale models.  Is there sufficient demand for such a company to exist I hear you ask?  Well when you see the industry sectors that they serve it is clear that there is – architects, developers, local authorities, filmmakers, photographers, planners, and etc.

When you come across a niche operator like this, the Insight that is always worth considering is what are their order qualifiers and order winners?  Well it is difficult to be sure when you are unfamiliar with the operator’s competitive environment, so I am going to make some assumptions…

  • Cost – assuming that there is not strong competition, price and manufacturing cost are not likely to be relevant.  Value added on the other hand may well be an order qualifier.
  • Quality – aspects of this are likely to be order winners, most notably aesthetics – their models do have to (and do) look beautiful.  But since they are scale models they also have to ‘perform’ well.
  • Flexibility – the criteria in this area are nearly all order qualifiers.  This is because each model is bespoke and made to order, so by definition they are flexible.
  • Dependability – this is typically an order qualifier.
  • Speed – they might win business by responding to enquiries and quoting a price quickly, but otherwise it is quality of output rather than speed of delivery that is likely to be important.

What do you think?

Posted in Chap 02 Winning Customers, Sector: Construction, Sector: Entertainment & Sport | Tagged | Leave a comment

Franchising messy play

Little Learners is an award winning start-up that provides messy play for children up to the age of 5.  It is expanding rapidly throughout the U.K. by franchising its operations.  This is what they have to say about the concept to potential franchisees (here) in their promo video…

Posted in Chap 03 Processes and life cycles, Sector: Entertainment & Sport | Tagged | Leave a comment

It’s not about running a shop, it’s about building a community

I grew up in a shop – at least in the flat over the shop my parents ran.  It was a bit like the shop in the TV sitcom ‘Open All Hours’ – except it was four times the size and had a row of five petrol pumps outside.  In fact it was remarkably like most filling stations that you find on the roadside these days – except in my case I am talking about the 1960s.  (My father always was a visionary.  Again in the early 1960s, he had a fleet of three motor caravans which he hired out – this at a time when most people had never seen such a vehicle, let along holidayed in one).

So from the age of five I learned a lot about customers and customer service.  And one of the big lessons was how many of our customers were regulars, and how many of them my parents knew on a first name basis.  The shop was truly embedded in the local community.

Of course, you say, it is not the same these days.  Most stores are big chains and it has all become impersonal.  But I am not so sure.  In fact I can think of many operators who are still embedded in their communities, even if it is in a different way to my parents.  Deep Blue Dive Centre is one such example.

Deep Blue is a retail outlet in the north east of England specialising in diving and swimming gear.  It’s physical store is big – 10,000 square metres, and it also has an online store with a huge product range.  But in addition to running these two operations it does a whole host of other things in order to centre itself in the diving community, wherever the divers  may live.  These include:

  • Social media – like many operators these days it has a Facebook account, Twitter feed and a blog on its website.
  • Swimming pool – it has a 5 x 10 metre swimming pool in which it gives scuba diving lessons to initiate customers into the sport, as well as more advanced course so that divers can quality as trainers.  The pool is also used for children’s parties.
  • Magazine – it publishes a Deep Blue Dive magazine on the web.
  • Gallery – it hosts photographs, not of its products, but of underwater scenes taken by customers on various dive sites around the world.
  • List of Best Dive Sites – it provides details of where these are and what their attraction is.  It plans to shortly make this interactive on their website.
  • Sponsorship – they sponsor the long distance swimmer Charlotte Brynn.
  • Jade’s Open Water Diary – Jade is a newcomer to diving and in her diary she recounts all the dives she has done and the lessons she has learned.
Posted in Chap 08 Queuing and customers, Chap 14 Operations strategy, Sector: Retail | Tagged , , , | Leave a comment

Augmented gaming climbing walls now part of the shopping experience

I’ve blogged before about how shopping malls have to offer their visitors an ‘experience’.  Well “augmented gaming climbing walls” are now part of this experience, as Aerial Adventures in  the East Kilbride Shopping Centre so ably explains and illustrates here.  And if you not sure what such a wall is like, take a look at this 40 second video.

Posted in Chap 04 Location and design, Sector: Retail | Leave a comment

How Airbnb is developing its business model

In the new edition of our Operations Management textbook we present a new approach to thinking about ‘business models’.   This is proposed by Christensen et al (2016) at Harvard Business School.  It has two “priorities” (what it does and why):

  • Customer value proposition – what the company provides that meets specific consumer needs (in effect their order winners)
  • Profit formula – how the company makes money out of delivering the proposition (includes how it manages its inventory and capacity)

And two “capabilities” (how it does things):

  • Key processes – the way in which the firm operates in order to deliver the proposition to the customer (what processes it adopts, how it manages the service encounter, and manages quality)
  • Key resources – the people, the technology and the materials the firm deploys in order to deliver the propostion. (how it designs its facilities, configures its supply chain, utilises technology, and employs people).

Christensen etc al (2016) emphasise that all these things are interdependent and must be full integrated one with the other.

This new approach helps to explain what Airbnb are doing with regards their business model, explained here.  There are four new developments:

  1. Airbnb Plus will be a new tier of homes that have been personally verified for quality and comfort via a 100-plus point checklist that covers cleanliness, comfort and design.
  2. Additional property types – the three original property types, Shared Space, Private Room and Entire Home, continue.  To these have been added four new property types Vacation Home, Unique Space, B&B and Boutique.
  3. Improved Superhost programme will add 11 new benefits to the 7 that such such hosts already enjoy.
  4. Launch of Superguest programme to be trailed with 10,000 guests this year, before the details of the programme are confirmed.

All of the above modify the existing customer value proposition or create new value propositions for new customers.  Airbnb clearly believe that these new propositions will modify their profit formula so that higher margins can be achieved.  To achieve this it has modified some key processes, in particular it has developed a quality inspection programme for the AirbnbPlus properties.  But being an ecommerce company, wherein its major assets are owned by its hosts, it has had to make little modification to its key resources.

Posted in Chap 14 Operations strategy, Sector: Hospitality & Tourism | Tagged | 1 Comment