Sunday, 6 March 2016

Industry Practice – 'Value Stream' Exploitation – Identifying New Possibilities (Part 5.1)

Thus far, the four previous parts of this web-log have variously described how a new understanding regards the creation of 'added-value' (at high and low value levels of the organisation) will need to appear upon the mid-horizon executive agenda.

As the US begins to experience its renewed economic traction – domestically initially and latterly with international influence – and China's own global economic contribution is seen in new industrial and service realms (with 'mid-growth' consistency of 5%), so business leaders need to begin seeing beyond the seemingly endless 'fire-fighting' of the past 8 years, and begin look toward how their own companies will need to develop so as to maintain long-term value creation.

New Food for New Thought -

Well understood is that the depth of the global recession had meant a slow and painful worldwide resurrection, even if that means a notional “return” to a possibly pervasive low-growth 'new norm'. Yet, though itself problematic to handle deftly, even that slower-pace of expansion will continue to be welcomed as long as a new stability reigns.

With such an outcome there still remains an expectation that the Triad's future 'business as usual' atmosphere will be constrained by both commercial caution and a new era of debt consciousness amongst consumers. So perpetuating the slow-growth path. This scenario perpetuated by the fracturing of yesteryear's conventional practice business models, themselves increasingly disrupted through the opportunities and challenges of the increasingly digitised broad economy. Moreover, a new generation of western consumers and the altered perceptions of many even in middle-age, means that for a substantial portion of the triad populations the very essence of consumption has shifted. 'YOLO' (you only live once) has become the ingrained mantra for so many precisely because of a cynicism regards old social 'grande narratives'; given the absorption of manifold new-era sociological beliefs themselves perpetuated by social media.

This change then means that for Triad facing firms, beyond the challenge of actually moulding consumer consciousness in a cynical age, new perceptions and perspectives will be required to create not only value and added-value in the yesteryear sense, but additionally the need to find new areas of added-value. This to be mapped-out well in advance of the possible saturation-effect of conventional business practice.

[NB The saturation-effect the concept that the historic competitive business approaches of: Cost, Differentiation and Niche – themselves largely stemming from a production perspective – could become less definitive because of the saturation of offerings; so requiring commerce to identify a new suite of supplementary insightful client-facing approaches. That new mindset replicated within the organisation to find hidden value].

Critically, twentieth century consumerism as known will continue to be highly effectively replayed across EM and Pioneer regions, done so most effectively given the remaining scale of opportunity, even with the present contraction stumble.

Yet possibly unavoidably, within what may increasingly become recognised as the 'Old-World' West a different evolved approach by corporations, through best-practice adoption over many speheres – internally and externally - will be required.

Hence, the old-guard of western multi-nationals (and indeed the new guard of EM originated global players seeking a true global foot-print) may well need to become intentionally bi-polar if they are to fulfil their global ambitions.

That newly created additional facet of the corporate brain will need to investigate exactly how the 'value-streams' of internal and external activities may be re-configured to create further 'added-value', both financially for the bottom-line, and increasingly socially for a less disfunctional and so more harmonious society.

Food for thought for business leaders, government policy makers and professional and activist investors.

Such a need to re-configure the very basis of socio-economic structures requires much deep thinking, far beyond the remit of this essay.

Past Learning -

Instead, as promised, investment-auto-motives here-after provides what are deemed to be useful historic case studies relating to the automotive industry, on a function by function basis.

The positive outcomes detailed ostensibly arrived at through intellectual investigation of how :

1. Conventional practice could be further exploited through enhanced rationalisation, or
2. New philosophical approaches toward the goal of step-change value-enhancement

This description starts at the 'front-end' of the company, with Marketing, and over the upcoming instalments journeys through the remaining departments, with the 'back-end' of Sales and Services likewise returning to the external customer environment; thus creating the endemic virtuous circle.

[NB this seen in a clockwise orientation on the accompanying base-layer graphic, detailed with the specific case studies].

The Marketing Function :

Overview -

Once what was simply called 'the customer' or 'sales', because of the probing academic attitude of leading FMCG firms since the 1920s, has since been dissected into the prime elements of:

1. Product / Service
2. Brand
3. Consumer.

This deepened analysis meant that each of these entwined perspectives has long underpinned the much expanded role of Marketing; each section itself grown immensely. Activities are diverse and range from the early arena of Research wherein what were once 'what if' exploratory exercises have been much assisted by ever newer forms of real-time monitoring, to ever more questionable Communications campaigns.

[NB achieved through the subversion of the spoken word, use of associative music lyrics or strategically placed associative items – all within what should be trust based inter-personal relations. Marketing has long used the pseudo-science of psychology and sociology, but never has it been so endemic].

From the Product angle, it could be said that the provider's connection with the market and user has been entwined ever since the village blacksmith specialised the design of horse-shoe, plough, gate-post or armour to better befit the needs of his customer.

That level of personalisation obviously much diminished with the first introduction of mass manufacture and so inevitable standardisation. Whilst the masses gained through efficiencies in scaled production leading to price reduction, with the general improvement in livings standards and earnings, so the opposite of personalised bespoke using craft-labour inevitably became ever more expensive.

This said, a new middle-ground appeared. With the proliferation of mass-manufacture across multi-various spheres plus expansion in other fields such as chemicals, by the late C19th, promoted the idea and availability of what could be termed “base-plus marketing”. Initially formalised in the C17th with the increased availability of affordable colour options on items varying from ornamental ceramic tableware to royal-court fashionware, by the mid C19th the availability of optional colour palettes for mass-manufactured things was expected. More complex products often designating status, together with perhaps multi-role functions, meant that by the late C19th the idea of “options and accessories” had become the norm, from horse-drawn carriages to furniture. Thereafter, a combination of colour choice, functional options and accessories meant that by the 1920s the average person could both afford increasingly complex items which could be effectively personalised for them in the factory; or so it would at least appear.

So much so that by the 1950s there was an adage that GM's American customers could make choices from an innumerable number of colours and configurations: said to be “more combinations than the number of stars in the universe”. Following this rational to create a market for a new group of aspirational middle-class customers – though with a far more limited colour palette - the likes of Britain's English Rose, by adopting the American approach, offered revolutionary metal-fabricated and paint sprayed kitchen units, literally taken from the car production line model, so as to transform a previously stark and dreary domestic space.

Obviously the highly influential fashion, design and lifestyle media channels have essentially led those fashion trends which comprise much of modern era consumerism. But less recognised is the manner in which those apparent leading lights have actually aligned styles to broadly commercially befit the optimism or cautiousness of business within the prevailing economic environment.

Thus far more style flamboyance was enabled during high growth periods, so providing for incrementally increased manufacturing and marketing budgets, as with the 1950s and mid-1980s onward. Whilst during periods of downturn and stagnation, such as the early and late 1960s, 1970s and post 2008, has seen a typically reduced availability of multi-various styles. Instead commercial rationality dictating that fewer model styles of whatever – clothes to cars – would be produced over a longer time-frame to lengthen the investment cycle. Instead simple and effective efforts have been made for low-cost differentiation to maintain buyer interest – typically regards colour and minimal modification - to reduce marketing and manufacturing outlay.

[NB herein investment-auto-motives previously disproved the oft believed hypothesis that car colours could be viewed an economic indicator, since bright colours are typically actually applied during recessionary periods to maintain vehicle purchase interest, with more sophisticated colours applied to provide the idea of taste and discernment during upturns].

Whilst core to the automotive firm, it may the case that the Product aspect of Marketing has ironically become increasingly considered the poor cousin to its sibling entities of Brand Management (because of the centrality of constant brand communications) and the Consumer (given the enormous rise of wide-ranging personal data and so user information).

Moving to what is today broadly termed Brand Management, usually encompassing Marketing Communications, it has been the case that any wholly new or much improved product has become increasingly reliant upon a powerful public relations message. To enable what is effectively 'perceptional marketing'. This obviously first achieved via newspaper adverts and urban signage in Victorian times, and thereafter most powerfully from the 1920s onward, this 'below the line' effory married with an ever broadening array of 'above the line' exercises through the expansion of media formats (cinema, radio, TV, internet).

From the 1950s onward, the need to better measure the “market impact” of each format type, to gauge “bang for buck”, saw a survey-based approach emerge. This accompanied with an aligned effort toward 'script-based salesmanship', which deployed elements such as subtle 'trigger messages' to psychologically soften the defences of potential customers who had already been prompted by media advertising to visit the showroom. Fifty years on from that coupling of 'screen and dream', the arrival of the internet effectively transformed the distinction that is “the line” into an immersive entity unto itself, requiring new perceptions and approaches. So the survey exercise has over the course of a century moved from have developed from an advertiser's obsession with newspaper circulation numbers, through TV viewership figures onto today's obsession with the digital 'data mining' of consumers and public at large.

Previously, without yet the ability to 'read the market' via demographics, psycho-graphics and targeted individuals, that portion of Marketing which latterly became known as Brand Management had historically been about not about chasing the customer at all, instead drawing him and her in. toward by the attractiveness of a brand's innate personality – latterly known as 'brand values'. These essentially parallel to those of the customer in the early days, but increasingly aspirational through the years. Though a far cry from the 'Mad Men' of 1960s Madison Avenue, in a similar vein of studied solutions from first principles, various US and UK academics had begun to set-up their own far more modest consulting units. To better promote the cohesiveness, strength and social impact of the often all too divergent and so disparate conglomerate, or multi-aspect, corporate personality. Whilst logo-types had long been the recognisable face to a firm, they themselves had become 'messy', 'lost' or simply 'old'. So a far more formalised and insightful approach toward was created that sought to better orchestrate and increase overall influence of the corporate identity.

[NB This new understanding of 'semiotics' was actually much boosted by sociological propaganda work undertaken during WW2. Afterword further explored and enhanced by the required public signage design used for massive new infrastructure projects across road, rail and airports].

This formalisation of all things visually related to the corporation then better pyschologically connected the firm to the user/customer, employee and public (environments, uniforms, literature, advertising etc). By the 1980s the discipline was termed Brand Management. (Although itself actually originating as a sub-element of the all encompassing 1970-80s better unified design exercises held under the broad remit of Corporate Design Management; before typically becoming a sub-function of Marketing, as that function took an ever more prominent role).

Marketing within the Automotive Sector -

Although the historical success of specific auto-companies arose from a very necessary broad mix of commercial ingredients emanating from financial strength, reduced overheads, the power of vertical integration, new era production efficiencies, and of course good product formulae, from a marketing stand-point, it has inevitably also been vital to offer a well attuned vehicle to the market in a timely manner with strong marketing launch message.

During periods of economic constraint, product affordability, fitness for function and simple direct campaigns have demonstrated themselves as the right contextual approach. This exemplified by the success of the 1960 Ford Falcon and the 2010 Dacia Duster; and their initial 'no-nonsense' messages.

Whilst in times of economic expansion, the heat of segment competition demands innovation for identifiable differentiation (ie speed, comfort, safety, ease of operation etc) aswell as a very different tack regards the launch advertising campaign. A good example here the manner in which 1990s European hatchbacks, as the mainstream, had grown from functional boxes in the 1970s toward aspirational purchases. The best example being the Renault Clio, in the UK promoted by associating the car within a small cast of characters led by 'Nicole and Papa'. The female targeted audience bought Clio to partly feel 'Parisianne chic'.

As consumer needs, wants and desires changed over time, so the science of recreating the product, and introducing an improved service dimension, became necessarily more intelligent. Since ever improving general vehicle standards are rarely regressional, that set during the last stages of an economic boom effectively setting a near benchmark expectation even going into a new recession.

Seen time after time in the past, recessions were not the prosperous hunting ground in new western markets for those lesser developed, then new entrant players. The likes of (old) Skoda, Lada, Zastava from Eastern Europe thought they could take advantage of low cost functionality until they realised there existed a basic expectation. And even Daewoo's better cars, shipped from then low-cost S.Korea and a unique high impact “no haggle” marketing stance - together supposedly giving a strong business case – was relatively short-lived.

Obviously, the car has long become a highly multi-faceted solutions provider, something that includes inherent status at whatever level, the ideology of providing only basic transportation for the masses having disappeared over sixty years ago. Even those most basic offerings require a defined attraction. Best exemplified by the highly characterful original 1993 Renault Twingo.

Product Marketing -

Innovation :
Today it is recognised that the car has become a mobile extension of the ego, personal values and lifestyle needs. The technical content of even a mainstream C-segment Vauxhall now spanning much from a retractable bumper-integrated bicycle rack to an info-tainment centre connected to the brand's 'Onstar' assistance service. Marketing even the mainstream has become a complex activity given the heights of complexity now built into the vehicle.

And of course the digital era, with the need to wholly integrate the vehicle into that network, has brought ever greater “connectivity rewards” for drivers and passengers alike.

[NB the depth of the steeped marketing age we live in is seen with the use of such phrases, corporate speak absorbed into everyday parlance, themselves very disingenuous given that the apparent “reward” does not meet the usual definition].

Associated examples of a present 'Marketing Push' illustrated within the accompanying graphic are that of the Apple Car Play and Google's Android-Auto. Both very soon to be effectively expected at a base level by the new car buyer, if not already, the proliferation of Apple and Android operating systems the societal standard today, with what was not so long ago the 'plug and play' adage now overtaken by the invisible ability to communicate between vehicle and smart-phone. (Adaption devices available for the current car parc of older vehicles, also a major product trend at present, so as to update their functionality). The former used to connect any Apple device to the display section of the vehicle dashboard, so allowing seamless 'on the move' streaming. The latter is the ability to connect any device using an Android operating systems to the 'head unit' of the vehicle, likewise to deploy the general functionality of the smart-phone or tablet via in-car touch-display.

[NB For safety, Google provides only primary functions and apps to limit visual distraction].
[NB It has been a perennial headache for auto-makers that IT systems new product development spans have been very much shorter than the NPD time-frame for a vehicle; causing a mismatch of what would ideally be parallel life-cycles. So the standardisation of Apple and Android as almost defacto norms has assisted massively with the engineering integration needs of auto-makers].

Successful commerce, since the earliest days of motoring, has been born from the application of strong macro and micro business acumen; specifically the alignment of internal capabilities to external challenges and opportunities. Those who are able to adeptly meet meet this challenge and seize or create opportunities then obviously gain brand recognition; especially so when devising something radical or disruptive; as per the Ford Model T or the Apple iPod.

Brand Marketing -

Co-Branding :
Also illustrated herein are the Brand Marketing efforts of just a few players, namely Ford, FIAT, GM and Ferrari.

The idea of co-branding has long been deployed, whereby two firms view the combination of their two respective nameplates as mutually rewarding, providing associative 'rub-off' for each other. For many years in the 1990s Ford had a relationship with the outdoor leisure clothing company Eddie Bauer, and used that moniker on its premium variant of the Explorer SUV. Likewise PSA deployed the Lacoste crocodile on special edition 205 models in the mid 1980s and again for a Citroen concept car in 2010. More recently FIAT has had an agreement with the luxury goods house Gucci for a limited edition series of the 500 city car.

Brand Extension :
Having built-up ever increasing (automotive) brand equity over successive decades, and arguably saturated low cost 'near field' propositions such as merchandising (see following), there was always more to value to be extracted from new avenues given the grown strong loyalties of emotional familiarity. 

That desire to expand beyond conventional realms and apply the brand logo and values into unfamiliar but plausible new arenas was always so. What became known as 'brand extension' projects has seen a plethora of new ventures, two of the most notable being the desire to influence families and the next generation by way of the excitement of theme-parks. In its bid to recapture its domestic standing GM helped to develop and sponsor various theme-park rides in the USA, its most recent effort with Disney within the hyper-real 'Cars' land. In contrast whilst under FIAT's control, it was decided that Ferrari ought to create a branded indoor entertainment centre in Abu Dhabi, UAE. This was created as a multi-dimensional experience ranging from conventional thrill rides to those that replicate the factory tour back in homeland Maranello. Italy; created with a broad demographic in mind so as to draw locals time and again, aswell as single visits from Asian and African international tourists.

Consumer Marketing -

Merchandising :
Having historically seen the additional momentum of brand management, it was only a matter of time before the Customer him and herself would become a focus for attention. Perhaps the first focus came with recognition of the loyalty shown by members of the public in motorsports. To gain income and strengthen tribal spirit, the earliest use of the 'applied logo' was obviously wiithin clothing (caps, shirts etc) when such items had true cache given their proximity to the teams in the pit lanes of NASCAR, Grand Prix. By the 1970s era of sponsorship, and growth of rallying, there was now a co-conspiratorial syndicated interest in leveraging the fans as walking advertising boards, the likes of Ford-Rothmans or FIAT-Alitalia viewed as “cool” given the jet-set lifestyles and destinations of auto-sports.

However, it was not until the mid 1980s, and the next chapter in understanding and influencing consumer psychology became apparent, both relative to ongoing aspirational, and returned counter-culture, trends.

At its heart consumerism has always been the outward display of 'social codification'. Whether that be to maintain social standing by the wealthy, consciously deploying non-aspirational behaviour, or far more typically using purchasing power of whatever degree to infer social betterment. That aspirational consumerism relies upon a raft of identities created by the melding of social reference and media influence. Herein the 'Veblanistic' observation about the importance of leisure-time and leisure activities as a powerful social distinction iplays an ever ingrained part. Ranging from the overtones of “old money's”country pursuits, newer 'clubby' pursuits (golf and sailing) to a broad growing interest in professional level sports fashions. A prime example has been Aston-Martin's sponsership of polo so as to become emblazened across the front of Hackett polo shirts for global sale to the aspirant set.

Such exercises are obvious to a firm's management as a way to elevate the brand's standing, but given the grown complexity and the need to ensure high cost project success, especially regards new vehicle programmes and the need to understand the customer, companies resorted ever greater dependence upon external consultants, themselves pseudo-academic social observers and interpretors.

Nonetheless even with innate knowledge of various emerging groups and demographic and psychographic shifts, it was recognised that the personal proximity of general merchandising still had sway. And with it continued use of clothing as advertising.

Most notable in the 2000s however has been recognition of the need to create 'early years' brand awareness amongst tomorrow's customers, even if they be possibly twenty years down the line.
Such incursion into ever more different consumer sectors typically operate as joint venture with a firm already leading or at least well entrenched in the targeted product or service sector.

Given the historical proximity of cars and toys – with yesteryear names such as Matchbox, Dinky and Corgi – and the massive growth of hobbyist models – Airfix to Automodello - it has been little wonder that various automotive brands have extended into this arena. Hence closer ties between Scalextrix and auto-firms to ensure correctness given foibles of the past, and the massive popularity of to educational toys such as co-branded Lego kits for BMW, Mercedes, Ferrari and others. Most recent the gaming world with ever more virtually-real video games, from Gran Tourismo to Grand Theft Auto etc.

To follow is review of the Design function, with examples of how this activity has been deployed as a 'value-added' driver.