Theory of Constraints Handbook - James Cox Iii [375]
INJ. 1: Increase Customer Perception of Value that Competitors Have Difficulty Copying
The company implements modifications to current product/service offerings that substantially increase the customer perception of value for a sizeable market. This injection uses the concepts of the Mafia Offer. To create such an offer, you must really understand the customers and how they will benefit significantly from changes in:
Options
Packaging
Service level
Guarantees
Response or lead times
Removal of industry standard annoyances, such as freight charges, minimum order quantities, etc.
Don’t make such an offer based on lower price. Price is the easiest attribute for any competitor to quickly copy. You should look at rooted industry policies first, before changing the physical product itself.
The result of implementing this injection is a significant advantage in a sizeable market. In addition, the marketing department must create marketing awareness/presentations that reposition their products with higher value to the market. The salespeople must learn how to sell value effectively. The operations people must have processes in place to manage significant increases in demand. These successes help to build the confidence of all of these functional areas in the strategy, a desirable condition before implementing injection 2.
INJ. 2: Implement Practical Segmentation
A market is considered segmented when the prices and quantities sold in that market segment have no impact on the prices and quantities sold in any other segment. Such segmentation gives you the opportunity to address the needs of different groups of customers in a unique way, with the same base product or service. For example, a manufacturer of expensive shoes enters the mass-market segment for less expensive shoes. A maker of original truck parts segments by entering the aftermarket for replacement parts. A distributor of advanced products in the wireless communications industry uses their knowledge to distribute basic consumer goods.
The result of the implementation of this injection is that the company is operating in several market segments in which it has a competitive edge. The company elects not to take 100 percent of any market segment that is not very lucrative. A company that owns 100 percent of a market segment has much less flexibility to improve. Being in a monopoly situation implies certain responsibilities. If you decide to get out of that segment, and you don’t leave your customers with an alternative, those customers will hate your organization for a long time. Don’t put a lot of energy into taking 100 percent of a market unless it’s hugely beneficial. Conserve your resources for where they will do the most good.
The company is careful to enter only into new products that require almost the same resources (people) as it already has. A company that can shift its resources at will, easily, between different markets and opportunities is a company that has excellent flexibility. Such flexibility gives the company the ability to meet the necessary condition of employment security and satisfaction in a way that makes more money for the company. The key point to remember when implementing this strategic injection is that it’s people, not machines, about which we are talking. A person who is a great manager of engineering airplane components, for example, also can manage many other engineering environments.
Because of implementing this injection, the company succeeds in segmenting its markets, not its resources, with flexibility to shift resources at will.
In choosing its overall collection of market segments, the company looks for segments where the probability of many segments experiencing economic downturns simultaneously is very small. When combined with injections 1, 3, and 4, this one provides the company with the insulation it needs