Every product company faces the dilemma of balancing growth and profitability, irrespective of where the company and its products are in their lifecycles. For small and mid-size companies the problem is especially acute given limited resources. However, larger companies are not immune either. The big challenge - How to balance growth with the needs of overall Operations and Product profitability? Sales & Marketing lead the field in executing on the growth path. But who takes the lead with this Balancing Act? How to achieve this balance? At Zyom, we have found that with the right leadership, Operations is in the best position to lead the balancing act, working in close concert with Sales. Why? Since Operations has to constantly balance supply with demand while keeping product cost low.
Fortunately, whatever the lifecycle stage of a company's products, or its strategy high growth" or "high profitability" or some combination of the two - the big lever at the disposal of management to measure Operations is "Inventory" or, Is it such a good lever? Inventory and its variant (Lead time) most often is the symptom and the root cause lies elsewhere. With multiple, indirect Sales channels and outsourced manufacturing, managing Operations profitably becomes a bear. Companies have been hamstrung with this single lever approach to managing Operations. This is similar to driving a car which has an accelerator and a brake only, with very limited ability to make turns. The car rides well on a flat, straight path, but when it has to navigate twists and turns the car stalls, or it can lose traction and skid off the road. There is a better way to manage a Company's Operations. We have been working on this - collaborating with our customers, prospects, utilizing the latest resources - since the very beginning (in 2003).
Our work across different companies and industries has shown us that there is a better way - something we call "Lifecycle Profitability". With this approach, the single lever approach to managing Operations is dropped. Instead, this allows Operating teams - Operations, Sales and their ecosystem of partners, including Suppliers such as CMs/ODMs & Channel Partners such as Distributors, make decisions and plans that are based on where the company's products are in their lifecycles, and then execute on these plans with a new set of metrics, which may require rapid re-planning.
The good news is that managing profitability across lifecycles is possible. All Operations improvement initiatives to date - Constraint-based management, Lean, Six-sigma, Postponement, ABC, Sales & Ops Planning - contribute in a positive way to Lifecycle profitability. However, this is not enough.
Lifecycle profitability requires a new thinking, new processes and new systems that can draw data from existing systems (ERP, CRM). This will enable Operations navigate the twists and turns on the road at fairly high speeds without falling off the road.
And yes, this is not prohibitively expensive to implement.
The two critical elements of this are -