The custom residential electronics industry is unique is so many ways, yet it has one thing in common with any other industry. Namely, every business on the planet, at least those that intend to be around long, must engage its employees to deliver a repeatable and pleasing result to its clients.
Such a simple fact belies the complexity of actually achieving it, of course. Much has been published in our industry regarding every aspect of that statement except for the concept of repeatability. For some reason, most of us have relegated this axiom to the back burner, which most certainly is a mistake.
We are in the custom electronics business, but the concept of delivering a repeatable result still applies. As it is used here, the word repeatable does not mean that each delivered system is exactly the same as the last one. Nor does it mean that the people doing the job follow the same steps on every job. And, it does not mean that the product or projects are the same. Instead, the term repeatable is used here to mean that the result is repeatable.
From the very top on down, the result of all of the efforts within a company must be repeatedly excellent. Investors in the company must be able to rely upon solid financial performance, which means it must be repeatable. Company managers must assure that systems are designed to deliver repeatable performance and benefit. The service technicians must be able to rely upon their systems being serviceable on a repeated basis. The controller needs to rely upon repeatable incoming cash flow from happy clients. The list can go on and on, but the point is simple. Make the desired results repeatable.
The concept of repeatability may be difficult to envision for our industry, but it seems to naturally apply to the world of manufacturing. After all, they are in the business of not only delivering the result in a repeatable fashion, but they also do the same things and produce the same products over and over again. They are good at repeating things.
It isnt just what one builds that establishes repeatability, though; it is what one tries to deliver. We all try to deliver solutions that please customers, and we all want to repeat that on every single job. Repeatability applies to our business, although in some different ways, just as it does to any other business.
I contend that we have more in common with the manufacturing community than one might first suppose, and that many of the principles they apply are directly applicable to our industry as well. We have a lot to learn from our friends in manufacturing.
One advantage enjoyed by manufacturers is the extent to which they can control their own business environment. You might even think that its a huge difference that sets them apart from us in the custom install business. It is easy to see that the manufacturing workplace itself is under much closer control than ours, what with our employees driving all over town to the various houses and projects. But it would be wrong to say that we cant control a much larger portion of our business environment than we presently do. We just have to think about it differently. We need to think about it like a world-class manufacturer does.
It used to be that manufacturers didnt control much of their environment at all. They were at the mercy of raw material quality, suppliers, difficult employees and supply channels that were in the game strictly for themselves.
Manufacturers, world-class manufacturers especially, have learned critical lessons over the past few decades about how to gain control over their environment, and they have made incredible progress. To date, however, our industry only has tapped into a few of these lessons. Then there was a time when manufacturing survived exactly what is happening to our industry right now. In almost every manufacturing sector, new products saw quick and rapid success, followed by increased commoditization, margin shrinkage, and the resulting profit squeeze. Difficult times visited those players that couldnt figure out what to do. This is pretty familiar to anyone who has been in our industry for just a few years. To make matters even worse, there have been a huge number of companies entering the custom electronics business in the past few years. The barriers to entry are dropping, and it is becoming easier to make the more established companies look expensive, sluggish or, even worse, arrogant. It is the natural order of things. Its going to happen to us, and we need to get prepared for it.
Of the lessons that manufacturers have to teach us, there is one more important than the rest. Companies that become more competitive before they are forced to are more likely to prevail than the rest. The finest embodiment of this starts with the realization that prices of competitive products are set by the market, not by selling companies. This is an epiphany for even the best of companies, and once they finally realize the wisdom of this statement, then the opportunity for improving profitability presented itself very clearly. If the market sets the price of my service, this implies that I cannot reasonably expect to charge my clients more for the same services that are supplied by others. But, if I can produce those services for less cost, and still sell at the market price, then I pocket the profit improvement.
So, the best companies obviously continue to sell the differentiation of their products and services as long as they can. But as this becomes more and more difficult, then these companies have their competitive strategy already in place. If they have to sell at the same price, then they are going to make sure that they manufacture at lower cost. They improve their competitiveness while they still have time to do so, or before their situation becomes critical. And they do it while they still have some money to invest in improvements.
This article simply sets the stage for applying lessons that can be learned from the manufacturing world. Hopefully, it presents a strong case that there is knowledge that can be gained from manufacturers that will help us improve our businesses. Assuming that goal has been accomplished, then the next four articles will be of interest. They focus on improving our competitiveness now, before we have to, by using some non-intuitive lessons from the world of manufacturing. The next article is called, It All Needs to Flow, followed by, The Evils of Inventory, The Waste of the Pack Rat and the Change Control Conundrum.
Let this introductory article leave you with the thought that we are, in fact, production companies. We design and build things that provide value. We produce systems to please our clients, even though each one may be unique. We want to be assured of this quality result for each and every one of our products even if we produce only one of each. We want to know that the desired result is repeatable. Thats exactly what manufacturing is all about, too.
Kendall Robins ([email protected]) has run a range of companies, including an overseas joint venture start-up, an established high-explosives manufacturer and two CEDIA-type firms.