Uncertainty, Volatility and a new operating advantage

Uncertainty mixed with volatility, such as what the financial markets and various macro-metrics are signaling is an explosive mix, even for very well-run companies. In times like these what companies can earn (Revenue, Profit) becomes uncertain. One thing remains certain – there are many opportunities to learn.

But, when it comes to learning that’s useful for the operations of hardware product companies, there are far too many stories wasted on a few large companies and speculative, often misplaced assessments made regarding specific ‘traits’ and ‘tools’ of successful companies that helped them achieve operational excellence (a la Apple, Cisco, etc.).

Here are four specific, contrarian lessons from dynamic, younger companies that despite their smaller size and vulnerabilities took on much larger competitors, often successfully, achieving solid operating success.

You would find these useful for your operations to tide over this period of variability/ volatility in demand-supply, and utilize the operating capability outlined here to your advantage in 2020 and beyond.

From a new vantage point – Contrarian Prudence

Contrary to conventional wisdom, companies can learn a lot more from smaller, younger companies that despite their smaller size and vulnerabilities, took on much larger competitors and often prevailed, and attained an enviable customer and revenue base in a (relatively) short period of time.

Finding patterns in this group is more relevant, especially for younger or smaller companies and startups, looking to carve their niche.

As a part of a startup, Zyom, we have learned something quite counter-intuitive working alongside some dynamic, highly competitive smaller companies. One, in particular (let’s call it Company “RapidR”), stands out, among peers. We will use a sum-total of our experience at this and other companies to highlight a few key learnings, some quite contrarian.

This company was able to navigate through the last ‘Deep Recession’ in the US (2007-2008) while still a small company, and came racing out of it, scaling steadily and then at a furious pace, taking on, often successfully much larger competitors, and establishing a strong position for itself.

What follows are a few lessons learned working with this (RapidR) and other companies in the networking and broader Hi-tech electronics products industry, some of which fly in the face of conventional wisdom and “management best practices”

1. Find & manage multiple sources of supply – Distancing themselves from conventional supply-chain wisdom that – hardware startups should stick with single-sourcing (less management complexity, deeper links), one of the successful companies instead went with multi-sourcing in their supply chain, early on, with solid results (in on-time delivery, total product & delivery cost).

Multi-sourcing-in-Supply-Network-ZyomInc


The learning – Do not stick to single supply source. Experiment with, evaluate and deploy multiple sources of supply, even for the same product (i.e., multiple Contract manufacturers/ CMs). Build a flexible, resilient supply network from the get-go, so you are more than prepared when shipments start ramping up.

More recently, with the onset of the US-China tariff battles, this company has found the going much more painless versus its peers – easily switching to non-China based supply source to avoid tariffs.


2. Define the most important processes, align it with operating goals, design and utilize systems to ramp-up – Answer these questions as soon as shipments start ramping up –

What’s the most important operations process? Why?


When it comes to ramping up operations, no two companies, even in the same industry, face the same challenges.

It follows that there are different answers to the above question for each company.

In the case of one of our customers it was – collaborate deliberately, quickly and accurately with their outsourced manufacturing partners (CMs, ODMs). In another case, it was totally different – Setting up a speedy, hierarchical demand planning process, experimenting with different data streams to use as inputs into the planning process, was the priority.

Once the process is identified, focus on defining the process to enable speed and accuracy in those key processes. Eliminate manual tools and workarounds which “appear” inexpensive in the short term but end up costing a lot more in unnecessary complexity, inaccuracies and poor decisions.

One symptom noticed by one of our customers was – big and growing spreadsheets

used to ‘contain’ and ‘calculate’ plan and execution data. The spreadsheets kept growing and growing. At this rate more people would be needed to manage the ‘spreadsheet sprawl’.

They decided they needed to get off of their large spreadsheets and on to a system quickly.

The corollary which follows –

In the heady days of growing an operation, the temptation is to keeping adding and growing spreadsheets. Stick to this ‘mindset’ and soon you will add more team members to help grow your organization. Don’t rush down this path. Instead, start with a small, ‘skeletal’, hands-on team that can cover all bases, equip them with the “right” system, which they have helped define. Other team members can be added easily as volumes ramp-up and new pressure points emerge. Done right you can anticipate where the next set of pressure points would emerge quite accurately, and keep your eye on the ball.

 

3. Source system providers smartly; Don’t fall for the allure of large systems providers – Find and work with a systems supplier who can work flexibly with you, meeting your needs and not simply pushing you into their ‘templates’ and ‘best practices’. Often, best practices are ‘best’ in a specific context (organization, operations approach, systems implementation and usage), and will likely not be ‘best’ for your context (development stage, ramp-up, etc.). In the worst case, they can be downright creativity and money sinks – where you are constrained to, or build out a plethora of ‘functionality’ without really internalizing how it is helping your company’s operations achieve its goals. In short, you lose sight of the forest (key capability needed) for the trees (feature/ function).

It’s important that this systems provider should be sourced as a strategic supplier, who not only meets your needs but challenges you as well to achieve more with your operations, avoiding vital systems’ ‘blind spots’.

The Best Ops leaders and teams utilize the same principles of lean and smart sourcing they utilize in spades in their supply chain, to identify systems partners.

So, instead of being deterred by the smallness of an energetic systems supplier, they focus on the mix of capabilities the supplier brings.

Having a good mix of systems-development, process design, integration and deep understanding of the pain-points of operations is a must-have. Equally important is to probe deep to find out if they bring any new, potentially audacious, but feasible ideas to the mix.

Go ahead and embrace a small systems supplier, as long as they are long on capability and experience. Press hard on them to articulate why sourcing from them will serve your operations better.

4. Tryout new approaches fast: experiment quickly, use to learn, modify to use operationally and internalize fast – This requires uncommon courage to begin with.

Good operations leaders and their teams are a no-frills, no-nonsense, get it done now, at the best cost – bunch. The best ones roll-up their sleeves to collaborate thoughtfully and implement new capabilities at stunning speeds.

In one case, working with the Operations leader we identified key elements of supplier collaboration needed to ensure rapid visibility into inbound supply, as well as proactive heads up from vendor when anything changed that could throw a monkey-wrench into their committed supply.

Key system setup and data entry was performed over a single weekend by this customer, led by the Ops leader. The system handshake tests with the first Vendor (CM) was done within 5-6 days of start, and the system usage itself by both parties – our customer and their vendors – within 14 days from start. The value was quickly understood by both parties[1], and feedback emails regarding system started hitting our inbox soon. Within 4 weeks of start they charged ahead achieving full usage across all vendors, which were 5 CMs at that time.

Advantage – A new Capability-set, Gains from a speedy operations fly-wheel

The net result of these learnings implementing and supporting operations planning and execution at our customers was – the development and fine-tuning of a set of capabilities which is out of reach of operations teams even at much larger and feared competitors. Or, as we found in one case, is too prohibitively expensive to implement even for companies that have achieved respectable scale (roughly $700 M to $2 Billion in annual revenue).

The sum total of this capability-set is called “Responsiveness” – through which product companies can quickly understand and capture demand signals on the one hand, and despite all changes ensure a high-fidelity supply response on the other, and follow-through with impeccable execution at a granular level (shipments to channel partners/ customers). In addition, they can see how it moves the needle at the macro level (revenue/ margin/ attainment, etc.). And then do it again and again, week over week, quarter over quarter, year over year.

pic-SmarterCycles-key-planning-cycle-time-n-reductionIn fact, done right, the Responsiveness capability-set once set in motion gathers speed and transfers momentum much like a fly-wheel to help achieve much better results rapidly (in plans, decisions, execution), drastically slashing large chunks of operations cycle times, freeing up badly needed time for high ‘value-add’ data and analytics-driven decisions.

A singular aspect of implementing this capability-set is this – done in collaboration with the right partner, this reduces structural operating costs in hardware product companies.

This implies – for the same volumes and supply chain complexity (shipments, regions), Responsiveness-enabled Ops have significantly lower base operating costs. This fact dawned on us from a study that Zyom conducted over 5+ years ago, utilizing data from Zyom’s customer-base, and a survey which also included data from outside our customer base.

It is estimated that a ‘Responsiveness-centered’ approach and system solution can result in 45 to 60% lower structural costs, if implemented at a desirable point of time in a company’s growth and development cycle with the right partner, in addition to achieving the operational benefits of responsiveness,

more on the specific benefits in a future post.

With such cycle times reductions, the time freed up can be used for focused analysis to guide revenue and profit-maximizing decisions. This combined with the capital freed up due to lower structural costs, puts Responsiveness-centered, systems-enabled companies in a strong position to tame the unpredictability in demand-supply unleashed in variable and volatile times.


Using the freed up capital, they can go faster and gain a crucial lead over competitors in the innovation race – launching, iterating and identifying which new products/ accessories/ services yield the most.

Interested in learning more?

For more on what is the capability-set needed by the supporting system, head on over to this recently published report–

The Responsiveness Advantage– Gain an operating advantage with this elusive capability-set

The Responsiveness Advantage – Summary of Report

Dive in, and feel free reach out to us directly via comments here, or at

contactus@zyom.com


REFERENCES:

1)     The Responsiveness Advantage – Gain an Operating Advantage with this Elusive Capability-set
A ZYOM INDUSTRY REPORT
(August/September, 2019)
The Responsiveness Advantage Report

2)     Implementation Notes from Zyom Inc. Projects at Ruckus Networks, Samsung Electronics (multiple Business Units), Aerohive Networks and Cambium Networks among others (proprietary & confidential information of Zyom, Inc.)

3)     On Operations and Scale – A Key Driving Force: from Industry Blog sponsored by Zyom
On Operations and Scale – A Key Driving Force

[1] Product Company and its Supply partners (CMs/ODMs)

Author: Rakesh Sharma

President and Founder of Zyom, Inc. Zyom is committed to making Companies and their Value Networks Demand Responsive, while maintaining the tricky balance with Profitability

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