Several years ago all the rage in business books was Sun Tzu’s “The Art of Warfare." Many read the 18 chapters of the book, but few actually delved into a thorough analysis, or, more appropriately, knew how to begin an analysis.

Let’s talk about several methodologies.

In 1979 Michael E. Porter of the Harvard Business School developed a framework for the industry analysis and business strategy development called the “The Five Forces”:

1. The threat of substitute products or services
2. The threat of the entry of new competitors
3. The intensity of competitive rivalry
4. The bargaining power of customers (buyers)
5. The bargaining power of suppliers

Now, let’s dive into some detail. You manufacture a variety of products that compete with other companies. Let’s pretend that you are an end mill manufacturer.

You make carbide end mills as a primary product and you have an offering of carbide burrs. Is the "burrs" product group going to be competitive?

If you are using a distribution channel, the distributors are going to take the path of least resistance no matter what you do.  You may have a distributor owner telling you “We like you and we want to promote ALL of your products” but in reality, when an inside salesperson gets an order from a customer with A, C, D, E, F and G burrs on his purchase order it’s just easier to place that order with ONE vendor instead of two (and split the order) regardless of what the boss says.

So you’ll have some decisions to make:
Do you expand the offering so it is more complete?  
​Do you just keep the offering where it is at right now?
Are you willing to accept the fact that you will lose some orders within your channel if you don't expand?

At the outset you might not know.  But, that’s not important.  What’s important is that you MAKE A PLAN.  Then take the plan to the field.  See what feedback you get and ADJUST TO MEET THE MARKET NEEDS.

There are two very good concepts you should understand in your planning process.  OODA Loops and PDCA.  I’ll take a minute and explain the basics:

OODA
Observe, Orient, Decide, Act is a concept originally applied to the combat operations process, often at the strategic level in military operations. It is now also often applied to understand commercial operations and learning processes. The concept was developed by USAF  Colonel John Boyd.  In the fast paced world of business competition it’s a good idea to understand how fighter pilots are trained.

Boyd developed the OODA loop concept to explain how to direct one’s energies to defeat an adversary and survive. Boyd emphasized that “the loop” is actually a set of interacting loops that are to be kept in continuous operation during combat. He also indicated that the phase of the battle has an important bearing on the ideal allocation of one’s energies.  Basicially it comes down to this:
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When the enemy aircraft comes into radar contact, more direct information about the speed, size, and maneuverability, of the enemy plane becomes available; unfolding circumstances take priority over radio chatter. A first decision is made based on the available information so far: the pilot decides to “get into the sun” above his opponent, and acts by applying control inputs to climb. Back to observation: is the attacker reacting to the change of altitude? Then to orient: is the enemy reacting characteristically, or perhaps acting like a noncombatant? Is his plane exhibiting better-than-expected performance?

PDCA
Plan, Do, Check, Act is an iterative four-step problem-solving process typically used in business process improvement. It is also known as the Deming cycle

• PLAN – Establish the objectives and processes necessary to deliver results in accordance with the expected output. By making the expected output the focus, it differs from other techniques in that the completeness and accuracy of the specification is also part of the improvement.
• DO – Implement the new processes. Often on a small scale if possible.
• CHECK – Measure the new processes and compare the results against the expected results to ascertain any differences.
• ACT – Analyze the differences to determine their cause. Each will be part of either one or more of the P-D-C-A steps. Determine where to apply changes that will include improvement. When a pass through these four steps does not result in the need to improve, refine the scope to which PDCA is applied until there is a plan that involves improvement.

Once again, the most important point in all of this is ADAPTION.

Now put on your thinking cap for a minute. Let’s pretend that you make burrs as a ‘convenience’ to some customers.  You’ve discovered that you’ve really been able to cut down your production cost.  So much so that you make a very healthy margin on the ones you do sell.

You have a competitor who started off making burrs.  It’s their core competency.  It’s where they got where they are and NOW they are is starting to make end mills: your core competency. What do you do?
Use the loops: Do the ACT part!

One possibility is that you offer a low price volume promo to your distributors in certain markets to get them promoting your burrs.  Target THEIR core competency!  Go after them where is hurts. Go after them in their strongest market.  BUT, make it a feint: While they are busy trying to keep marketshare, you can expand your business in your core markets.

Don’t be afraid of any of the processes listed.  I’ve heard manufacturers say “I’m just a small company, that stuff is for big companies”  My response is generally along the lines of “How do you think those companies got to be big companies?”
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Finally, take a look at some other process’ that are out there.  If you can use an already created template to do the reviews and analysis then grab them and utilize them.  The Hoshin Strategic Planning process is a good starting point.

The Evolution of a Field Sales Force
Business starts with a product or idea, someone goes out and sells something to someone near them. More customers are found and more is sold, typically, from the manufacturer directly to the end-user.
At some point the manufacturer of the product comes to their first crux point: One of two courses must be chosen:
1. Develop a Direct Sales Force
2. Develop a Sales Channel Strategy

Within these choices there can be any number of hybrid strategies:

• A direct sales force that calls directly on end-users.
• A direct sales force that calls on industrial distributors and sells through them.
• A direct sales force that calls on “bigger” end-users directly and sells through a distribution channel.
• An independent manufacturer’s agent network that does any of the above already listed.
• Direct sales to industrial distributors.
• The list can go on based upon individual companies and territories.

Generally, there are exceptions to every rule or SOP and, when pressed, all manufacturers will admit to “grandfathered” exceptions.

RULE #1: EVERYTHING in your forecasting should be about developing MARKETSHARE. 

Let’s jump back into some big picture stuff.

The reason for this is so that you can adequately gage performance in key market areas. If you gage how your territories are performing based only upon sales volume you will not know who is performing up to par and who is not performing.

If one market has a total market potential of $100M and another has only $4M and both territories are generating the exact same sales volume the territories are not equal. But how do you determine where the markets area? How big are they? How should you separate your territories?

I’m sure you’ve heard "Don't try to eat the whole elephant" but instead taking it one bite at a time. But where to start? Where is the target market for your products?

Operations Planning Model
Think about it: If someone is planning something where lives are at stake they are probably going a lot deeper than any marketing campaign you can envision. If you want a ready-made template for planning your marketing Campaign then take a look at The Campaign Planning Handbook from the US Army War College
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One of the first things at the tactical level that the military asks is “What is the terrain?” They pull out a map.

Under the standards, the county (or counties) in which at least 50 percent of the population resides within urban areas of 10,000 or more population, or that contain at least 5,000 people residing within a single urban area of 10,000 or more population, is identified as a “central county” (counties). Additional “outlying counties” are included in the CBSA if they meet specified requirements of commuting to or from the central counties. Counties or equivalent entities form the geographic “building blocks” for metropolitan and micropolitan statistical areas throughout the United States and Puerto Rico.

If specified criteria are met, a metropolitan statistical area containing a single core with a population of 2.5 million or more may be subdivided to form smaller groupings of counties referred to as “metropolitan divisions.”
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As of 2000, there are 362 metropolitan statistical areas and 560 micropolitan statistical areas in the United States. In addition, there are 8 metropolitan statistical areas and 5 micropolitan statistical areas. You can find a much more detailed map from this US Census Bureau link that you can print out

"Standards for Defining Metropolitan and Micropolitan Statistical Areas; Notice." Office of Management and Budget. Federal Register. 27 December 2000.
U.S. Bureau of the Census. "Metropolitan and Micropolitan Statistical Area Definitions." 19 January 2006. Available from http://www.census.gov/population/www/estimates/metrodef.html. Retrieved on 17 April 2006.

Core-Based Statistical Area
A CBSA is one or more counties with an urbanized cluster of at least 10,000 people. The area as a whole is defined by the interaction between the core and the outlying areas. This interaction, measured by commuting, means that at least 25 percent of people in outlying areas are working in the core. The CBSA is a generic definition of MICROs and MSAs, the difference being core population size.

Micropolitan Statistical Areas
A MICRO is simply a small CBSA, i.e., a county or counties with an urbanized core of 10,000 but fewer than 50,000 in population. Outlying areas included are, again, defined by commuting patterns. As of November 2004, according to the Census Bureau, there were 575 MICROs in the U.S. and five in Puerto Rico.

Metropolitan Statistical Areas
An MSA has an urbanized core of minimally 50,000 population and includes outlying areas determined by commuting measures. In 2004, the U.S. had 361 MSAs and Puerto Rico eight.

In a previous article we talked about Why Brand Introduction Fail.  This articles digs a bit deeper in the the Customer Support question.

Introspection: Customer Support Questions

• Is your field support and customer support team trained and up-to-speed on all of the products?
• Can they technically support the product line?
• Can they cross-over competitive information?
• Do the support people Do you hear them saying “I don’t know the answer to that” and end the conversation with or do they say “I don’t know the answer let me find out and call you back in 10 minutes”  Do they end the call with "Are your happy with my your level of service today?”
• Are they responsive?
• Are they proactive?
• Do you have a Standard Operating Procedure on quote turnaround ( 2 hours, 24 hours, 2 weeks)? 

​Inside Customer Service and Support can take on many variations. I've listed a few for you to ponder. ​

Customer Service IS the Problem 
​It once took me 6 months trying to figure out why we weren't getting more orders and why were where having order delays. The end-users loved the product, the outside sales people loved product, the owners of the distributors loved the product.

​It wasn't until I found out that the inside sales people placing & expediting the orders HATED dealing with the customer sales people at the manufacturer's order desk.  We had a flat tire where the rubber met the road.  

It only takes one component to fail for the system to break down.

Fearful Customer Service Problem 
Their is some internal political issue with a POLICY of the manufacturer that is so out of the norm that you can't even understand what is demotivating everyone.

Here's an example: At the end of a quarter every call made for an guarantied test trial application is responded with "I'm not sure if that's a good test."  Even in cases where the promo video that the company produced for the sales people has almost the exact application featured! Finally, after much prompting you find out why:

• "The accountants are really tightening up on trial applications/test tools"
• "My boss is really riding me on any testing right now"
• "I've gone over my trunk stock budget" 
• "We didn't anticipate the great response to the product so we're trying to control sales"

Don't create a promotion if you can't get the support of all of your internal departments.  

The New COST CENTER Problem 
​Sometimes, as companies grow or get sold there are new people who very well versed accounting and legal. If they don't fully grasp what has made the company successful they can wreak havoc at the sales generation end of the business.

In most cases, it's good business, stuff the company should have been doing all along, but in others, it's policies and procedures that just create roadblocks to doing business.

I was sent this video back in 2006 by a very astute owner of a manufacturer.

You're contemplating a new product launch and you're digging into where you think you might be able to sell your product.  At some point, you are going to want to determine what size company your are targeting.  This post should provide you with some food for thought.

To understand the above Pie Chart you're going to need to spend just a few minutes looking.  That Pink area on the right with the bar graph depicts only those companies in the pie chart with greater than 100 employees.

That is in the entire US machine shop market.

As you can see, the bulk of the business is in small business.  Machine Shops with under 20 employees.  Granted, it's great to get the really big machine shops to convert to your products and implement it throughout their facilities, but the smaller companies are going to require much much more work to get to them.

If you decide that you want to target the smaller machines shops there's both good news and bad news:

The Good
Smaller Shops can make decisions quicker.
The owner is generally the decision maker and not far removed from the production floor.  
Payment is generally quicker.  Larger shops tend to be slower pay than small shops that value the importance of maintaining credit.

The Bad
You will have to make many more calls and learn to establish credibility and rapport.
You can't hide any minor errors or omissions.  Each of your products that are purchased are going to be needed and quality is going to be expected.

,Is there trust in your business relationships?  Trust is that "gut feeling" stuff. It comes out in the one-on-one conversations.

Ask yourself: Is something being held back? Are direct answers given? Do you give them? Do you get them?

In the Agents and Distributors minds they are constantly re-evaluating each conversation and each slight policy change. 

• "Is the manufacturer asking lots of questions because they want to sell directly to my customer?
• "Am I being eliminated?"
• "Do they want to move the business to a competing distributor?"

Is the manufacturer "throwing their weight around" and not really acknowledging that the distributor runs their own business?
​Does the agent or manufacturer call the end-user directly.... and not tell the distributor or independent rep? Do they visit end-users on their own? Is there communication when they do?

The most successful brands are built on a foundation of trust and loyalty. Each party knows where the other stands. You can actually watch the relationships grow.

In the early phases it may be that the distributor or the agent calls up the manufacturer and asks for something... The reprimanding parent response is "You know we can't do that! We can do xxxx." To which the smiling reply is "I know, but I had to ask."

Later, as the relationship evolves, when the distributor or agent calls up they say "Hey, we just promised this program and that promo with this product, I know I need you to approve it but I already quoted it while you where on vacation" and the response "Great Job, what else ya need?" 

Perhaps, more than any other part of the business relationship, TRUST IS THE MOST IMPORTANT. 

Whose Customer is is anyway?
Many times manufacturers who use the industrial supply chain become confused as to who their actual customer is.  The customer is the one who writes you the check.  If you are selling directly to the end user of your product then that end-user is the customer.  If you are using a wholesale supply sales channel, the person writing you the check is YOUR customer and the end-user they are supplying your products to is THEIR customer.  

The "Agent" or "Regional Manager" 
An agent or territory salesperson has a relationship with his customer: The distributor channel. It's where they live, It's where they put food on their table. Most of the smart independent agents, and even the factory guys, realize that the relationship is the most important aspect of their livelihood.

Agents realize that Management comes and goes, manufacturers change gears, different managers come on-board with their own ideas and their own relationships, but the one consistent thing is their customers and that trust they have built up.   Although you as the manufacturer may be writing the regional manager the check, they realize that that check is being generated from the relationships they have in the territory.  If the regional manger has put down roots.  Has a house, has a Family, has kids in school, They have "gone native."  They are going to be more loyal to the territory than to you. It's good to remember that in all of your conversations with them.

The Distributor 
Distributors are even more protective of their turf. They have their territory marked and that IS how they perceive it. It's THEIRS.   When a distributor brings someone into their customer it is akin to bringing your first date to meet your parents. You are coming into THEIR home, you are being extended the relationship that they enjoy. When a manufacturer tells them "That's MY customer not yours" they are pretty offended and, like a dog, they'll probably come back and bite you. They own the relationship. 

Pittsburgh is rapidly becoming a hub of innovation and is attracting international business. This discussion on August 2 2012, took a look at several opportunities & introduced several resources that entrepreneurs can utilize to grow their business internationally from the Western Pennsylvania area.

Presented by: Jessica Lee’s Entrepreneurial Thrusdays 
Co-host Bernard T Martin, www.rpmconsultants.us/President, Rapid Production Marketing 

Thomas Buell, Jr., APR, Director of Marketing
Global Pittsburgh
Improving the region’s global competitiveness by creating long-term relationships connecting the Greater Pittsburgh community with international leaders and influencers.

Brian Tamburro, Senior Director for Strategic Initiatives,
CED Faculty & Staff : Carnegie Mellon University’s Heinz College
Center for Economic Development Carnegie Mellon Heinz College.
CED affiliated faculty and staff serve as advisors and administrators for CED system synthesis projects. The knowledge, experience, and interests of the faculty reflect the Heinz College’s interdisciplinary approach to policy analysis. Individuals have engaged policy and management questions in economic development and its related domains from a variety of disciplinary vantage points, with a variety of tools, in a variety of roles including researcher, practitioner, and policymaker
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Steven Murray, Senior International Trade Specialist
U.S. Commercial Service 
The U.S. Commercial Service in Pittsburgh is your first stop on the road to exporting success. With over 30 years of experience assisting Western and Central Pennsylvania exporters, our trade specialists provide you with the knowledge and support you need to start or expand your export markets.

I was sent an invitation to connect with someone who’s newsletter I have been receiving for many years.  I found the information very informative and helpful in many cases.  However, when I talked to him about his locked down connections he told me “I don’t want my competitors to see who I know”  I explained that

• A. I wasn’t a competitor,
• B. Perhaps he should be connected to his competitors if he is that unsure of his customer relationships and
• C. It’s difficult for me to trust people who don’t seem to trust anyone else, as I find that the people most paranoid about trust are almost always the most untrustworthy people I meet.

Remember, you don't have to connect with everyone.  Just because you've been friends with them in-person, that doesn't mean that they are just as friendly on-line.

Twitter adoption rates appear to vary between various segments within the B2B categories, but if the GENERAL industrial sector is an indicator of adoption, then it is outpacing the general population’s adoption much more quickly than other sectors.

Way back on March 21, 2011 Twitter celebrated it’s 5th birthday: “200 million users and 1 billion tweets per week”. Had it hit the mainstream audience and what was the adoption rate in the industrial sector? In November 2010 Pew Internet & American Life Project surveyed more than 2,200 US adult web users and asked, “Do you use Twitter?” Their findings:  8% of all respondents said yes.  But quite a lot has changed since those days.
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However, it’s important within the context of what adoption rates really mean.  So let’s first explore that first and then review some of the historical data now that their is actually some historical data available.

At the same time that GlobalSpec was doing their niche surveys regarding industrial adoption, Pew continued to complete their more general adoption rate studies for Twitter as well. To review:

• 2010: 8% of Americans us Twitter
• 2011: 13% of online adults use the status update service
• 2012:: As of February 2012, some 15% of online adults use Twitter

At first glance this would seem to indicate that the industrial sector is adopting Twitter at a much more advanced rate than the general population: That may not be the case within certain vertical markets. First, there are some some obvious caveats with the last chart:

• Comparison between different population studies is always prone to error and we need to acknowledge that.
• Within the Industrial sector there are business “silos” (vertical markets) that include, not only the entire supply chain, but also the end user base of customers. The “industrial population” data from GobalSpec does not contain ‘refined data’ for these individual vertical silos.

This was  a special report I created for the 2010 International Manufacturing Technology Show exhibitors.  ​I'm reposting it here for the 2012 IMTS Show exhibitors.

If you are selling through a distribution channel then the DISTRIBUTORs are the FIRST customer who’s needs you should meet. I’ve seen many manufacturer’s who have great products, great catalogs, and yet they can’t figure out why they are not selling more.  Somewhere there is a hurdle.  

Sometimes the hurdle is in the last place you might expect because you don’t see it every day or feels it’s effects personally.
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You’ve paid for the catalog, you’ve paid for the marketing, you’ve found a good distributor, you had a great sales meeting and the outside salespeople are excited to go show their customers your product.

What happens next?
The end-user customer asks for a quote. Now that goes directly to the inside people at the distributor. They now have to create a quote, and when they do it,  they don’t want to have to enter the same information over and over again. If one customer wants something “just like my buddy Joe got at his place” they have to standardize.

Here’s a couple of cases where the manufacturer slipped up:

Distributors work with many many manufacturers and are very familiar with how jobs are “routed” through a facility. So when a distributor talks to a vendor and the vendor says “If you want it in black just add a “B” to the part number at the end. If you want it in Gray – just add a “G” There is no charge extra for that either, just add a “G” to the end. That’s what our guy use on the floor”

Aside from the above discussion about how computers would understand a “-G” vs. a “.g” there is a larger perception problem in play here. What may seem like a rather simple way to designate what color you want actually raises a big red flag for the distributor. They know that the way one person writes a “G” could look like a “B” to another person.

Even if the “guys on the floor” know enough to ask someone to double check, distributors know how important accurate information on the floor of a plant is to efficient delivers. It’s the real basis of “lean” “SPC” “ISO” etc. Again, what the manufacturer perceives as a “simple easy to use, ‘just add a letter’ system” what the distributor hears is

​“Our shop routing process is a real mess so this vendor is probably going to be late or mess up an order at some point. I’ve got to keep an eye on them”

For further Reading check out: The Future of Industrial Classification: UNSPSC

“We’ve been doing it this way for years and no one else has complained”  If I’ve heard that once I heard it a thousand times.  Maybe, they stopped complaining years ago and maybe, just maybe, your never even heard the complaint.  Let’s look at some dollar and cents.

If someone at an end user keys in an order and faxes it to a distributor, that distributor keys in the order and faxes it into the manufacturer.  The manufacturer keys it into their system.  The product ships and a hard copy of the invoice is sent to the distributor who must key in some more information,  then the manufacturer sends out a printed copy of the invoices to their agents.  The agents then key in the sales again.  

That’s an awful lot of repetitive keystrokes folks.  

​It’s pretty easy to see why moving to electronic databases and communication is happening and is going to move to a standard.

Details Details
But there is ONE error in the picture. Can you see what it is?  To be honest, you would probably not even catch the error.  Take a look at the FORMULA in the highlighted cell.  It’s a formula and not text.  The pricing columns all have dollar signs in them.  That’s a nice thing to do if people are going to read it but the computer has to import it.

There have been cases where distributors said “Wow this is a great file and ready to import!”  but then the import went south with strange errors.  It wasn’t the dollar signs,  it was the rounding.  There was multiple column pricing for quantity breaks.  

Everything was a formula and when it was converted to text it had numbers that where out 6 decimal places. Because the formula’s where all based upon one cell as a baseline, the rounding errors got bigger and bigger and when the import happened the pricing was up to .27 cents off on certain items.  That can add up if they standard package quanity is 144 pieces. Why did it happen? Because when the import was done it only imported the first two decimal places.

Once you’ve completed your spreadsheet save all of the fields as TEXT and this problem will go away.

Details Details and more Details
Some other things to consider: What software system do your distributors use to run THEIR BUSINESS?  It’s a good idea to ask.  You may have field length issues when importing.  

​If you have a Description 1 field that is 100 characters long but the field in the software only permits 43 characters, with the rest being parsed, that information IS NOT going to be in the database.  If you have one critical dimension at the end of the description and upon import an entire group of items is parsed all of the part numbers will be different but the descriptions will all be the same.

“Well, we can’t make 100’s of special prices list for EVERY distributor” you say.  You don’t have to.  Just find out what the software is at your key distributors and accommodate them.

“Again, no one has really complained about this before so we don’t think it’s a big issue”

When do you update price lists? When you introduce a new product or have a price increase. Right?

Now, what does a good outside sales force do when there is a change?  They have a sales meeting with the distributors to review the new products (and new catalog) and get the distributor salespeople pumped up to go out and sell.  In many cases this is happening as soon as the new price list is put out… in some cases your sales force is brining it with them.

Is the IT person in the room for the meeting?  Generally the answer is no.  Does your outside sales force commonly work with the IT people at a distributor?  Do they even know who does it if you ask them?  Generally, the answer is no.  When the IT person gets the file, if they discover it’s going to take some time to clean up it gets put on the backburner, especially if their primary responsibility is accounting or other back office work.
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So what happens in the field? Your salespeople go out, make calls with the distributor salespeople and get some orders.  They place the orders.  The price list isn’t updated so they spend the next couple of days fielding questions, dealing with distributor inside salespeople and your customer service people.  They aren’t selling.  You’re losing money and you’re getting a “difficult” to deal with reputation.