Artisanal Manufacturing and Marketing

One day in April of 2008, I was having lunch in a transit lounge in the Singapore airport. A news story on the TV over the bar showed me the Jerome (AZ) Grand Hotel and a number of visiting politicos. By April of 2008, Senator McCain was the presumptive Republican candidate for President. McCain has a property near Jerome. The politicos were VP candidate – wannabes visiting with the Senator.

Seeing little Jerome on TV news a half a world away strikes me as a strange story. But there a lot of strange stories in Jerome. One of those is about a Jerome shop that has become a global artisanal marketing focal point. That story is worth retelling here.

… C.H.


Artisanal Manufacturing and the Power of Stories

Were it not for a mesquite tree, Jerome would be readily visible from my bedroom window. The town of Jerome clings to the steep slopes of Cleopatra Mountain, a mile high – about half way between the Verde River and the mountain’s summit. As the 19th century turned into the 20th, in the twilight of the Wild West, rich copper mines made Jerome one of the largest settlements in Arizona Territory. Ores dwindled until the mines closed in 1953. Today, Jerome is home to about 450 souls, largely artisans and artists. A modest but growing tourist trade keeps them occupied.

Today, Jerome provides a rather remarkable story for artisanal manufacturers – a story about stories. Among the shops, restaurants and such that clutch the mountainside, two ladies run the largest kaleidoscope store in the world. It is fair to say that Nellie Bly (the store’s name) is the focal point of the kaleidoscope world.

Being a curious fellow, I wondered how a retail shop in an off-the-beaten-path tourist town had become central to a niche market like kaleidoscopes. So I drove up the mountain and asked. Mary Wills, one of Nellie Bly’s owners, said that she didn’t know. But she did kindly make time to show me around her busy shop and to chat with me for a while. I drew my own conclusions.

The Stories

Mary Wills and Sally Dryer, her partner, do not make kaleidoscopes. Their shop does provide an interface linking those who make kaleidoscopes with the collectors and retail customers who buy them. I think that the necessary network of contacts came to be largely by word of mouth, likely aided by several stories that serve to “break the ice” and promote pass-it-along conversations. Here are a few of such stories:

> Kaleidoscopes: Most of us remember kaleidoscopes as toys – paperboard tubes that display pretty geometric patterns. The kaleidoscopes that Nellie Bly sells are certainly not toys. Rather, they are artistic or artisanal creations. The juxtaposition of the familiar toy kaleidoscopes with their unfamiliar Nellie Bly counterparts fuels conversation.

Nellie Bly> Nellie Bly – Take 1: Mary Wills is a Nellie Bly fan. Nellie Bly was the pen name of an intrepid woman reporter with Joseph Pulitzer’s New York World who achieved considerable celebrity in the later decades of the 19th century. She visited northern Arizona in 1890 as part of her around the world race against time. (She beat Jules Verne’s fictional Around the World in 80 Days record by about 6 days). Her celebrity in the mining community resulted in her name being associated with several Jerome mining claims. This remarkable woman spurred conversation in 19th century. She still does.

> Lucy van Pelt: Mary’s partner Sally Dryer has her own story. As a child, she was the voice of crabby Lucy van Pelt in a number of Peanuts animated TV specials. Everybody remembers Lucy, Charley Brown and the Great Pumpkin. Again, a story to talk about and to pass along. Throw in the kaleidoscopes.

> Belgian Jennie: Nellie Bly – the store – is built on the foundation of an earlier structure that burned in the late 1800’s. That building housed one of Belgian Jennie’s Jerome establishments. Belgian Jennie was easily the most prominent Madame in the Arizona mining camps. She was also generally regarded as the wealthiest woman in Arizona at the time of her murder in 1905. Yet again, a remarkable character to talk about, then by-the-way into discussion about kaleidoscopes.

Nellie Bly – Take 2

Stories offer one means to open doors toward building relationship with prospective customers and with prospective suppliers. Once a door is opened, however it is opened, it is still necessary to build lasting relationships that generate repeat and referral business. Nellie Bly — the store – helps do this in several ways. For example, customers are actually encouraged to touch, hence experience, the kaleidoscopes, even though many are priced in the hundreds or thousands of dollars. Take a minute to check out what Trip Advisor has to say about the store:  http://www.tripadvisor.com/Attraction_Review-g31253-d5209037-Reviews-Nellie_Bly_Kaleidoscopes-Jerome_Arizona.html

Relationships with suppliers are fostered by an annual weekend of kaleidoscope workshops, experience sharing and social events. Sally and Mary, the owners, also take deep personal interest, especially in those who make the kaleidoscopes. Its about relationships.

For Smaller Manufacturers

For many smaller manufacturers, artisanal or otherwise, accessing markets and building sales is the primary constraint to sustainability, let alone growth. Smaller manufacturers face a big world and well heeled competition. Getting the word out in a cost – effective manner is tough, but not impossible. Stories like Nellie Bly’s offer one inexpensive approach that some businesses may find useful.

Quick BS check: Suppose that you are one of the four million plus people who visit Sedona AZ this year. Now that you have heard the stories, would you be more likely to take a short side trip to Jerome? If you did, would you be more likely to visit Nellie Bly? If you did, would you be more likely to buy a kaleidoscope as a gift or for yourself?

Chuck - SedonaThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome.

Whither Sustainability?

Sustainability

Sustainability, as that term applies to manufacturing, owes its origin to Limits to Growth, [1] which was published in 1972. Limits to Growth describes a systems 3P Graphicanalysis of trends in the earth’s population, industrialization, pollution, food production and resource depletion, with projections into the future. In essence, Limits to Growth emphasized that humanity’s increasing demands for economic development are overwhelming the natural world, and that industry is the primary agent for doing so. So begins the quest for sustainable economic growth and for the technology and practices that enables economic development without destroying the natural world upon which all of us rely.

Mission Zero

In 1994, some customers were asking Interface Corporation, a manufacturer of carpet tiles, about Interface’s vision regarding the environment. Ray Anderson, founder and CEO of Interface Corporation, recognized that the usual response – that Interface was in full compliance with all applicable environmental laws – just wasn’t good enough. His response was to redirect his billion dollar company toward a goal of zero environmental impact.

“I wanted Interface, a company so oil intensive that you could think of it as an extension of the petrochemical industry, to be the first enterprise in history to be truly sustainable – to shut down its smokestacks, close off its effluent pipes, to do no harm to the environment, and to take nothing from the earth not easily renewed by the earth.” [2]

Moreover, Ray Anderson proposed to accomplish this by the year 2020, and to make a profit while doing so. Consequently, Interface established a system of yearly milestone objectives toward Anderson’s vision. Today, 20 – odd years later, Interface remains roughly on course.

Climate Take Back

However, the recent global financial crisis severely impacted the construction industry, Interface’s primary market. In 2011, Ray Anderson passed away. As a result of hard economic times and the loss of their visionary leader and founder, Interface lost some of their some of its edge. The direction continued, but the audaciousness faded.

Now, Interface is renewing its initiative by redefining what Sustainability means in industry. Interface’s new mission — Climate Take Back – builds on and goes beyond Mission Zero’s “do no harm” initiatives: Climate Take Back is proactive. Climate Take Back includes four bold commitments:

>> To bring carbon home and reverse climate change – That is, to remove carbon compounds already present in the atmosphere.

>> To create supply chains that benefit all life – That is, to insist on proactivity from entire supply chains.

>> To make factories that are like forests – That is, to create manufacturing processes and entire factories that mimic nature.

>> To transform dispersed materials into products and goodness – That is, to recover and reuse widely dispersed refuse materials on a global scale.

On 6 June 2016, Joel Makower of GreenBiz published an insightful article on Interface’s new initiatives. It is well worth reading for anyone interested in both manufacturing and sustainability, and well worth careful study for those who want to make a difference.

Here is the link:

https://www.greenbiz.com/article/inside-interfaces-bold-new-mission-achieve-climate-take-back

For Smaller Manufacturers

Interface has long been a champion of, and roll model for, Sustainability in manufacturing. The switch from “do no harm” to “make the world a better place” significantly raises the bar. Beyond that, Interface’s actions and corresponding results dramatically demonstrate the power of visionary leadership.

Chuck - Red RocksThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington

(Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.


[1] Donella (“Dana”) Meadows, et al, Limits to Growth, Signet Books (1972)

[2] To learn more about Ray Anderson and Interface, Ray’s book is a good read:

Ray C. Anderson, Confessions of a Radical Industrialist, St. Martins Press (2009)

The Next Killer App – Part 2

“Killer App”?

“Killer App” is a computer industry term. It refers to the software that creates the value that makes people buy the hardware – lots of hardware. In this post, I use “killer app” rather loosely, to mean a whole genre of software that breathes life into new hardware platforms.

The Next Killer App – Part 1 reprised the idea of an electro – mechanical continuum in equipment design. As design emphasis moves past electric to electronic, software becomes increasingly important, such that the equipment increasingly becomes a means by which the software creates value. That’s why I think that the next killer app will be will be electric automobiles, and the value that sells them will lie in safety, convenience, comfort, efficiency and entertainment.

 Electric Vehicles: Why?

The global vehicle industry has been evolving rather slowly since about the year 1900. The rate of evolution has accelerated in the last few decades, such that today’s vehicles powered by internal combustion engines are remarkable machines by almost any measure. Today, however, there is a convergence of technical and social factors that make electric vehicles much more desirable – so much so that electric vehicles may well become our vehicles of choice over the next few decades. Here are a few of those “technical and social factors”:

>> There are persistent concerns with importing and burning huge quantities of petroleum every year. These concerns include a pernicious deficit in America’s international balance of trade figures and accumulating levels of atmospheric pollutants from combustion.

>> Highway safety figures have improved significantly over the years, even while the number of miles driven has increased. Still, 32,675 people died in vehicle accidents on American roads in 2014. Compare that to commercial airline figures, which are consistently near zero, never mind travelling 500+ miles an hour, six miles straight up.

1903 Studebaker Electric

Thomas Edison in 1903 Studebaker Electric Automobile

>> Battery and electric drive technology has improved dramatically, especially over the last decade or so, vastly improving an idea – electric automobiles – that is as old as the automobile industry itself. (Mrs. Henry Ford is said to have owned an electric car).

Fifty years ago, a newspaper ad for a used car might read something like “1956 Dodge 4 door sedan, 48,000 miles, excellent condition, R&H” The “R&H” meant radio and heater, which were extra cost options. Since then, add automatic transmissions, air conditioning, power steering, seat belts, fuel injection, stereo entertainment systems, GPS and more. The long term trend in the features that people want badly enough to pay for is clear enough.

Tesla Leads a Revolution

Tesla Motors, of course, is current leader in electric vehicles. Their cars define the current state of the art. But Tesla isn’t just about spiffy new cars. Tesla has stated that their intention is to lead a revolution – a revolution in how we think about transportation. Tesla recognizes that it needs to create an electric vehicle industry for electric vehicles to become more than a side show in the very large global vehicle circus.[1]  To that end, Tesla opened its considerable cache of patents, license and royalty free, to any firm that seriously attempts to build electric vehicles.

Tesla Model SFurther, Tesla hasn’t shied from confronting the external barriers to the general acceptability of electric vehicles. For example, Tesla continues to construct what is already an impressive number of electric vehicle recharging locations in the U.S. and elsewhere. Also, in July of this year, Tesla will hold the Grand Opening of a huge gigafactory which will produce the vast number of lithium ion batteries that Tesla expects to require (on the hurry-up).

The Business Model Continuum

The 360,000+ orders Tesla booked in a few weeks for their new Model 3 confirmed that demand for vehicles like Tesla’s does indeed exist. That’s good, because over a dozen serious prospective mass market electric vehicle manufacturers have already emerged globally. At least initially, there appears to be a continuum in the approaches these firms take toward electric vehicles. On one extreme, some existing global vehicle manufacturers seem to regard electric vehicles as a line extension, as hybrid vehicles are. I call this the Detroit view, although Nissan may prove to be the best example. Toward the other extreme, Tesla represents what I call the San Jose view, where the vehicle is viewed as a conduit for technology that provides new value in transportation.

Here are some examples:

>> Faraday Future has broken ground for a $1 billion manufacturing facility near Las Vegas where “we are eager to start production of the vehicles of the future that will embrace the increasingly intrinsic relationship between technology and mobility.” Like Tesla, Faraday Future is headquartered in Silicon Valley (physically and in mindset). Their initial products are expected to be high performance premium vehicles. Any firm that invests a billion dollars in a grass roots manufacturing facility is worth taking seriously. The firm is reported to be closely linked to the Chinese equivalent of Net Flix.[2]

>> There have been strong rumors of a coming electric vehicle from Apple (yes, that Apple). Apple has spent about $5 billion in additional R&D from 2013 to 2015, which, along with a $1 billion investment in a Chinese ride sharing service, suggests that Apple has a strong interest in shared mobility, expressed through shared, rather than owned vehicles. Driverless vehicles might well provide a new vessel for Apple software functionality, as Apple’s iPhone provides a vessel for personal communications software technology. It is interesting that Apple does not manufacture iPhones, or anything else that I know of. It is reasonable to suppose that an Apple car will be designed by Apple but built by somebody else.

>> There was a recent ad in the Phoenix newspaper for a Manager for Google’s driverless car operations in the Phoenix area. Google’s cute driverless vehicles are being widely road tested (more than 1.5 million self driving miles to date).[3] Google has been working on self driving cars since 2009, so now has a lot of experience with the necessary software. It seems likely that Google will partner with established automakers to provide self driving technology, rather than building their own vehicles.

>> The June 2016 issue of Fast Company magazine lists Mark Fields as #13 in its ranking of the 100 most creative people in business in 2016. Mark Fields is the President and CEO of Ford. Fast Company is not the sort of publication that normally associates “creative” with Detroit executives. The brief Fast Company listing notes that Ford has been conducting extensive road testing on driverless vehicles. Fields is quoting as wanting driverless technology for mass market vehicles that is “true to (Ford’s) brand”.

Incidentally, Ford recently announced a coming electric version of the mid-sized Ford Fusion model, featuring a 200 mile range. Sounds like a line extension to me. So, maybe Ford is still closer to Detroit than to Silicon Valley.

For Smaller Manufacturers

The automotive industry is obviously in a state of transition, perhaps disruptive transition. A lot of new competition is coming on several fronts. In situations like this, existing supplier relations are at risk. Bad, if you are an incumbent supplier. Not so bad if you have been on the outside, looking in. Better yet, there is room for new faces and new ideas as the distance between Detroit and Silicon Valley diminishes.

Chuck - VancouverThoughtful comments and experience reports are always appreciated.

 

…  Chuck Harrington

(Chuck@JeraSustainableDevelopment.com)

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly. 


[1] How big is that “very large global vehicle circus”? Statista reports over 72 million vehicles sold in 2015, while projecting 100 million for 2020! http://www.statista.com/statistics/200002/international-car-sales-since-1990/

[2] For more on Faraday Future, see www.ff.com

[3] Google offers a video on its driverless prototypes at: https://www.google.com/selfdrivingcar/

 

 

Toward Proactive Management – Part 1

Ceaseless Waves of Change

Doing business in the 21st century entails coping with relentless waves of change. Much of this change will be at the most fundamental level. To survive, let alone to thrive, requires a proactive mindset on the part of management. It is essential to identify the primary underlying change drivers affecting your business, and to establish management processes to proactively adapt to the corresponding changes.

Four Change DriversAs a convenience, this blog groups change drivers as Globalization, Sustainability, Technology and Demographics & Trends. These four groupings not exclusive – many changes your business may face will be driven by combinations of these. For example, many of the changes constituting Globalization depend on changes in Technology.

We’re Not in the 20th Century Anymore Toto, a post to this blog from a year ago, provides an introduction to these change drivers as they apply to your business:


We’re Not in the 20th Century Anymore, Toto  (From 1 May 2015)

An Emerging View of Manufacturing in the 21st Century

The Industrial Age in America – a time in which the mass production of goods provided the economic focus of the country – declined during the final decades of the 20th century and swooned as the 21st century began. This isn’t a cyclic matter: 20th century manufacturing isn’t going to come back. Instead, the end of the Industrial Age in America is part of a transformation that is as sweeping as the Industrial Revolution was, when industry replaced agriculture as this nation’s economic focus.

Keep in mind that, in 1870, 70% – 80% of America’s working population was employed in agriculture. As of 2008, less than 2% was directly employed in agriculture. [1] Never the less, America’s farms today produce much more than ever before. America will continue to manufacture tangible products – lots of them. The way that America manufactures those products will change as dramatically as farming has changed.

“… right now we are going through a once-in-a-century transformation in business that is throwing out all of the existing rules.” [2]

This transformation is powered by a confluence of potent change agents, which might be loosely grouped as Globalization, Sustainability, Technology and Demographics & Trends. These four, individually and in combination, provide insights as to the rapidly expanding context within which even quite small manufacturers must operate. Technology provides the means for transformation.

A few thoughts on the globalized context within 21st century manufacturers must operate:

>> Competition – Competitors and potential competitors exist worldwide, with more coming every day. So do suppliers and potential suppliers. Likewise, customers and potential customers. And these competitors / suppliers / customers are quickly becoming increasingly sophisticated in all aspects of globalized business.

>> Population – Since the advent of truly viable birth control, birth rates have dropped significantly, especially in economically developed nations. As a result, populations are aging. At the same time, the participation on women in all aspects of commerce has increased dramatically. Per capita GDP is increasing, notably in developing countries, resulting in more global middle class buying power.

>> Commerce is global / Politics are local – While competition is global, governments everywhere have incentive to favor their own. Issues including jobs, access to resources, taxation, entitlements and property rights continue to be contentious.

>> Financial System – The global financial system, as it exists today, is a hodge-podge of remnants from the Bretton Woods accords, socialist notions from the soviet era as well as from western nations, fiat (rather than hard) currencies, instantaneous globalized trading in currencies and financial derivatives, not to mention a diverse array of banking institutions. All of this is hardly a recipe for international financial stability.

Some thoughts on 21st century manufacturing operations:

Atomic physicist Niels Bohr once said that “prediction is very difficult, especially about the future”.  Actually, it’s the being correct part that is difficult. The following are extrapolations from American manufacturing’s current situation. We’ll all see what actually happens as the 21st century unfolds.

>> Products: To beg the obvious, labor related costs in economically developed countries are much higher than in less developed countries. To be globally competitive, products manufactured in developed countries will require significantly greater intangible aspects, as opposed to the simply tangible. Above all, products need be clearly differentiable.

>> Emphasis on Return on Capital Employed (RoCE): Manufacturing is capital intensive, especially concerning fixed assets, when compared to other modes of enterprise. Accordingly, financial viability depends on sustainable RoCE, taken across the business cycle, rather than on profits per se. This change in point of view fosters longer term thinking in many respects. Organizational structure and financing are not least of these.

>> The Electro-Mechanical Spectrum: A recent essay [3] discussed a trend in machinery from the mechanical to the electronic. The Tesla automobile serves as a familiar example. Unmanned space vehicles offer another. The more electronic machines offer obvious advantages, including reliability and Moore’s Law initial costs. Perhaps the most important advantage is that electronic machines have a significant software component. For this reason, machines can be improved, or even retasked, through software changes. Such machines can actually improve over time, rather than just depreciate.

>> Innovation: There is nothing static about the future. 21st century manufacturers must consistently offer differentiable products that please customers while generating satisfactory returns. This requires continuous and systematic innovation in products, operating processes and, especially, business models. A prior essay looks at all three of these modes of innovation. [4]

There is a lot more to manufacturing in the 21st century than a single essay can even hint at. The changes involved in this “once-in-a-century transformation” are of almost seismic magnitude. And change will beget more change, even more rapidly. Stand by — subsequent posts to this blog will focus individually on each of the four change drivers.


Chuck - Red RocksThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington

(Chuck@JeraSustainableDevelopment.com)

P.S: Contact me when your organization is serious about pursuing Sustainability … CH

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.


 

[1] Figures from Wikipedia, http://en.wikipedia.org/wiki/Agriculture_in_the_United_States

[2] Tien Tzuo, CEO of Zuora, quoted in Fortune magazine. http://fortune.com/2015/04/27/tien-tzuo-starting-your-own-business/. Zuora is a start-up business that is pioneering subscription based business models. For more on Zuora, see www.Zuora.com.

[3] http://jerasustainabledevelopment.com/2014/11/15/the-electro-mechanical-spectrum/

[4] http://jerasustainabledevelopment.com/2014/11/29/three-modes-of-innovation/

 

 

Pricing and Perception

On Value and Profitability, the post before this one, discussed value creation and capturing value. Pricing for Sustainability, a post from a year and a half ago, adds to that by emphasizing the importance of pricing in the creation (and capture) of value.  – C.H.

Pricing for Sustainability – from 8 November 2014

Frequent readers of the blog know that I like Adam Werbach’s definition: “…being a sustainable business means thriving in perpetuity[1]. Further, my idea of thriving is to reliably generate a return on capital employed that exceeds the cost of that capital taken across the business cycle, without exploiting anyone or anything.

For smaller businesses, particularly smaller manufacturing businesses, one of the keys to consistent profitability lies in retaining a measure of control over prices. A “measure of control” means offering products that some sufficiently large segment of the market will buy at prices that provide your firm with a sufficient degree of profitability.

In the past, manufacturing managers were conditioned to think of pricing as a function of manufacturing costs – price your product at x% over cost and hope for enough volume. Or, price your product where your competitors price theirs, and hope for enough margin and enough volume. There are several problems with these familiar approaches:

>> Product – Purchasers buy some collection of tangibles, intangibles and perceptions. Tangibles include the goods, the packaging, the documentation and so on. Intangibles include service levels, price, delivery, terms of payment, warranty and more. Perceptions are biases, judgments and expectations, often based on comparisons, rational or otherwise. Purchasers buy the lot – not just the goods, not just the price.

Oat Squares>> Cost – Manufacturers are accustomed to calculating the average unit cost of their products – at least the tangible aspects of their product. However, costs vary from day to day and from manufacturer to manufacturers due to a myriad of factors. Smaller manufacturers know that large manufacturers enjoy higher labor productivities than they do, buy at higher volumes — hence lower prices — than they do, and have better and cheaper access to capital than they do. Smaller manufacturers in developed countries also know that manufacturers abroad – large or small – can produce tangible goods at very low costs. Speaking generally, smaller manufacturers are poorly positioned to be the low cost producer, except in tightly defined market niches.

>> Customers – There is no Customers’ Union, where all prospective customers think alike. There is, literally, a world of prospective customers. Your firm is free to choose to pursue – and tailor your product offerings for — those that you are well positioned to serve.

Business Models

Your firm’s Business Model relates your firm’s products to its customers and potential customers. In essence, a business model consists of a Value Proposition and an Operating Model. The Value Proposition consists of that collection of tangible and intangible features and benefits intended to induce a defined set of prospective customers to perceive your firm’s offering as preferable to (or, offering better value than) competitive offerings. The Operating Model consists of that set of processes, policies, practices and procedures that allow you to deliver the value offered, while generating a satisfactory profit by doing so. Previous posts to this blog discuss the Value Proposition [2] and the Operating Model [3] in more detail.

Business Model Innovation

Markets and the forces that drive markets continuously change in today’s globalized economy. Successful Business Models can be disrupted, and likely will be, sooner or later. New opportunities arise and new potential customers emerge. Where a Business Model is disrupted such that it no longer generates a satisfactory profit, it needs to be reinvented. Where new opportunities arise, suitable Business Models need to be created in order to seize those opportunities. An earlier post to this blog elaborates on Business Model innovation [4], as does an informative Harvard Business Review article by innovation guru Clayton Christensen, et al [5].

For Smaller Manufacturers

Price is one component of a Value Proposition intended to induce a defined set of prospective customers to choose your firm’s products, while providing your firm with an adequate profit. It is important to recognize the many aspects of a well formulated Value Proposition, especially the intangible aspects. The perceptions aspects of the Value Proposition are intentions on the part of the producer, to be conveyed through the Operating Model. Of course, the customer (or potential customer) will form his or her own perceptions. The success of the Business Model may well depend on how well the intended perceptions are conveyed.

Chuck - VancouverThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

P.S: Contact me when your organization is serious about confronting the realities of 21st century manufacturing … CH

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.


[1] Adam Werbach, Strategy for Sustainability, Harvard Business Press, page 9.

[2] http://jerasustainabledevelopment.com/2013/08/22/greening-your-business-model-part-1-value-proposition/

[3] http://jerasustainabledevelopment.com/2013/08/29/greening-your-business-model-part-two-operating-model/

[4] http://jerasustainabledevelopment.com/2014/04/02/on-transcience-and-innovation/

[5] Johnson, Mark, Clayton Christensen and Henning Kagermann, Reinventing Your Business Model, Harvard Business Review, December 2008. Reprint R0812C, available for download at: http://hbr.org/search/R0812C/0?refinement=4294841677

 

A Marketing Fable Retold

This post is about a small, almost 150 year old manufacturing company whose primary product has become a global icon. It makes the point that innovative ideas don’t necessarily require an R&D department. This marketing fable is retold from last year because it is one of my favorites.   C.H.


I like marketing stories, be they true or otherwise. One of my favorites is about the McIlhenny Company, a family owned business on Avery Island, Louisiana. Avery Island is a salt dome in the deep bayou country, a few miles from New Iberia. The company manufactures Tabasco sauce, as they have since 1868.

Tabasco 1Management of the McIlhenny Company is now in its seventh generation. This fable starts with a generation change. Once upon a Friday afternoon, the elder leader was retiring and the staff was gathered for reminiscences, speeches and such. In due course, the new manager spoke. He lauded the elder, as one would expect. Then he challenged the staff. The challenge was to find ways to double the sales of Tabasco sauce within one year. He asked everyone to think of ways to do this by the following Friday.

On the following Friday, the staff met again. There were many really good suggestions, such as product line extensions, neck ties and aprons with the Tabasco logo, recipe books for bartenders, and on and on. The new manager expressed sincere appreciation for these ideas, and said that many would be tried. “But”, he said, “that’s not how we will double the sales of Tabasco sauce within one year”. “We’re going to make the hole in the bottle bigger!” [1]


How true is the fable? Don’t know. Doesn’t matter. What matters with a fable is the moral. And the moral of this fable is that imaginative marketing can do absolute wonders for an apparently local product made by a little family company in a place that’s way past where the sidewalk ends.

Tabasco sauce is a global phenomenon, sold in 132 countries. I can’t imagine an American supermarket that doesn’t carry Tabasco sauce. There are a number of line extensions — a milder version in a green bottle, a barbeque version and several more. The company leverages its brand by licensing its name and logo on a remarkably diverse collection of apparel and gift items. The company’s website even has an on-line store, in case you can’t wait. [2]

Doubling the Sales of Your Sauce?

There are only so many ways to rapidly and substantially increase your top line. Some of them are listed here. Listed this way, they all sound obvious. The problem is usually how, exactly, to proceed in your particular situation. The secret to that sauce is imagination.

>> Find more customers.

>> Sell more of your existing products to your existing customers.

>> Raise your prices. [3]

>> Export — The world is flat now. Tabasco sauce is sold in 132 countries. Why not your products? [4]

>> Add new products to your line — This includes line extensions, new lines or even new business areas.

>> Add intangibles to your offerings — Intangibles like service agreements, applications consulting, financing and so on.

>> Improve your products in ways that matter to customers.

>> Improve your service levels in ways that matter to customers.

>> Co-market with other organizations — Intel Inside?

>> Develop a sales oriented on-line presence.

>> Leverage your brand with collateral products.

>> Build personal relationships. Then continually strengthen them.

>> Next Friday, ask your staff for more ideas.

What About Sustainability?

Those familiar with this blog know that I like Adam Werbach’s idea: “being a Sustainable business means thriving in perpetuity”. [5]  The McIlhenny Company is approaching its 150th anniversary — not a bad start toward perpetuity. The company also has a more familiar sort of Sustainability plan, which other firms may find informative.[6]

Chuck - California Coast 2Thoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

P.S: Contact me when your organization is ready to pursue Sustainability … CH

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.


[1] For those who aren’t familiar with Tabasco sauce, the sauce is made from hot peppers dispersed in vinegar. It must be dispensed slowly by sprinkling on food, lest the sauce overpower the food. It takes a lot of shaking to get a little bit of Tabasco sauce out of the bottle.

[2] The company’s website is worth visiting for background on a nearly 150 years old family owned manufacturing company, as well as for a wealth of marketing ideas. www.tabasco.com

[3] If you really can’t raise your prices even when you need to, your business design may need attention. See Creating and Capturing Value, this blog, http://jerasustainabledevelopment.com/2014/06/25/creating-and-capturing-value/

[4] There is a lot of assistance available for smaller manufacturing firms that want to export. See Sell More in 2014 – Export, http://jerasustainabledevelopment.com/2013/10/10/sell-more-in-2014-export/

[5] Adam Werbach, Strategy for Sustainability, Harvard Business Press (2009), page 9.

[6] For more on the McIlhenny Company’s plan, see: http://www.tabasco.com/mcilhenny-company/sustainability/

Artisanal Manufacturing and the Power of Stories

Jerome, AZ

Were it not for a mesquite tree, Jerome would be readily visible from my bedroom window. The town of Jerome clings to the steep slopes of Cleopatra Mountain, a mile high – about half way between the Verde River and the mountain’s summit. As the 19th century turned into the 20th, in the twilight of the Wild West, rich copper mines made Jerome one of the largest settlements in Arizona Territory. Ores dwindled until the mines closed in 1953. Today, Jerome is home to about 450 souls, largely artisans and artists. A modest but growing tourist trade keeps them occupied.

Today, Jerome provides a rather remarkable story for artisanal manufacturers – a story about stories. Among the shops, restaurants and such that clutch the mountainside, two ladies run the largest kaleidoscope store in the world. It is fair to say that Nellie Bly (the store’s name) is the focal point of the kaleidoscope world.

Being a curious fellow, I wondered how a retail shop in an off-the-beaten-path tourist town had become central to a niche market like kaleidoscopes. So I drove up the mountain and asked. Mary Wills, one of Nellie Bly’s owners, said that she didn’t know. But she did kindly make time to show me around her busy shop and to chat with me for a while. I drew my own conclusions.

The Stories

Mary Wills and Sally Dryer, her partner, do not make kaleidoscopes. Their shop does provide an interface linking those who make kaleidoscopes with the collectors and retail customers who buy them. I think that the necessary network of contacts came to be largely by word of mouth, likely aided by several stories that serve to “break the ice” and promote pass-it-along conversations. Here are a few of such stories:

> Kaleidoscopes: Most of us remember kaleidoscopes as toys – paperboard tubes that display pretty geometric patterns. The kaleidoscopes that Nellie Bly sells are certainly not toys. Rather, they are artistic or artisanal creations. The juxtaposition of the familiar toy kaleidoscopes with their unfamiliar Nellie Bly counterparts fuels conversation.

Nellie Bly> Nellie Bly – Take 1: Mary Wills is a Nellie Bly fan. Nellie Bly was the pen name of an intrepid woman reporter with Joseph Pulitzer’s New York World who achieved considerable celebrity in the later decades of the 19th century. She visited northern Arizona in 1890 as part of her around the world race against time. (She beat Jules Verne’s fictional Around the World in 80 Days record by about 6 days). Her celebrity in the mining community resulted in her name being associated with several Jerome mining claims. This remarkable woman spurred conversation in 19th century. She still does.

> Lucy van Pelt: Mary’s partner Sally Dryer has her own story. As a child, she was the voice of crabby Lucy van Pelt in a number of Peanuts animated TV specials. Everybody remembers Lucy, Charley Brown and the Great Pumpkin. Again, a story to talk about and to pass along. Throw in the kaleidoscopes.

> Belgian Jennie: Nellie Bly – the store – is built on the foundation of an earlier structure that burned in the late 1800’s. That building housed one of Belgian Jennie’s Jerome establishments. Belgian Jennie was easily the most prominent Madame in the Arizona mining camps. She was also generally regarded as the wealthiest woman in Arizona at the time of her murder in 1905. Yet again, a remarkable character to talk about, then by-the-way into discussion about kaleidoscopes.

Nellie Bly – Take 2

Stories offer one means to open doors toward building relationship with prospective customers and with prospective suppliers. Once a door is opened, however it is opened, it is still necessary to build lasting relationships that generate repeat and referral business. Nellie Bly — the store – helps do this in several ways. For example, customers are actually encouraged to touch, hence experience, the kaleidoscopes, even though many are priced in the hundreds or thousands of dollars. Take a minute to check out what Trip Advisor has to say about the store:  http://www.tripadvisor.com/Attraction_Review-g31253-d5209037-Reviews-Nellie_Bly_Kaleidoscopes-Jerome_Arizona.html

Relationships with suppliers are fostered by an annual weekend of kaleidoscope workshops, experience sharing and social events. Sally and Mary, the owners, also take deep personal interest, especially in those who make the kaleidoscopes. Its about relationships.

For Smaller Manufacturers

For many smaller manufacturers, artisanal or otherwise, accessing markets and building sales is the primary constraint to sustainability, let alone growth. Smaller manufacturers face a big world and well heeled competition. Getting the word out in a cost – effective manner is tough, but not impossible. Stories like Nellie Bly’s offer one inexpensive approach that some businesses may find useful.

Quick BS check: Suppose that you are one of the four million plus people who visit Sedona AZ this year. Now that you have heard the stories, would you be more likely to take a short side trip to Jerome? If you did, would you be more likely to visit Nellie Bly? If you did, would you be more likely to buy a kaleidoscope as a gift or for yourself?

Chuck - Mt. HumphriesThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

P.S: Contact me when your organization is serious about pursuing Sustainability … CH

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.