Documents

Ecolab case study

noreply@blogger.com (eCreativa Media) — Mon, 25 Aug 2008 17:06:00 +0000

If you are looking for a great company that has transformed itself from being in a lousy business to something that excites investors and customers alike, go no further than look at Ecolab.

Competitive analysis of Birthday planning websites

noreply@blogger.com (eCreativa Media) — Fri, 15 Aug 2008 19:55:00 +0000

There a few websites that are trying to do something similar to our proposed business. The difference is that the existing websites only offer directories of services, they are visually unappealing and the websites do not offer a pleasant experience to the users.

I reviewed the first 10 pages of Google and Yahoo and I found the following websites to be our potential competitors:

Note: By directories I mean: providers’ directories: entertainers, food, venues, party supplies, etc.

1- http://www.birthdaypartyideas.com/

This is a content website that offers party ideas. They also have a directory of providers.

2- http://www.birthdayexpress.com/

This website has a shop and offers content about parties.

3- http://www.party411.com/guides.html

This website has content and offers advertising.

4- http://thepartyworks.com/

It is a shop and has content. The ideas contributed by users offer simple, cheap party ideas.

5- http://www.kidsparties.com/

This is a directory of services for kids’ parties. Directory by state and category.

6- http://www.partydirectory.com/

This is a party directory for all types of parties. It does not seem to be an active website

7- http://www.partypop.com/planning/Birthday/

It offers complete directories for all types of parties. It also has some rudimentary interactive tools for budgets and offers ecards and boards.

8- http://www.kidspartyfun.com

It offers directories by state. It is a fun site; a mom created it.

9- http://www.kidsevents.com/

This is a local Fairfield county, CT and Westchester county NY directory. These counties are two of the richest counties in the country next to Beverly Hills and Nassau and a couple of others. They offer directories and other kids’ activities. It is one of the best-designed websites and the co-founders look like very smart people. They do not pop-up in search engines with the regular terms. We found them with very different terms, which are usually not used by people searching. I had a hard time finding them. These guys have the juice to become strong competitors, if they can scale the model nationally.

You may visit their advertising page to get an idea of their services.

http://www.kidsevents.com/advertising/index.cfm

10- http://www.expressbirthdayplanning.com/

This is the closest competitor to our plan. It offers directories of services related to the birthday party. Party directories by state.

They charge the providers for the listings and have many packages.

Sample of their charges:

Step One: Pick a Service

BASIC LISTING :

Select 1 category for your listing plus coverage in up to 3 area codes - $49.95/yr.

ENHANCED LISTING:

Select 1 category for your listing plus coverage in 6 area codes - $79.95/yr.

WEB PAGES OPTIONS are:

ONE WEB PAGE link including 2 photos and 1 title/logo plus text - $95.95*

THREE WEB PAGE links including 8 photos, 4 titles/logos/graphics - $275.00*

* One time fee. Customer must supply all text, graphics and photos.

An Express Birthday Planning representative will contact you within 24 hours of

your purchase to arrange transfer of all elements by mail or email.

MUST HAVE BASIC OR ENHANCED LISTING TO ORDER.

Step Three: Create Your Own Web Site & URL

Instead of our Web Pages residing on our server, we will set up your own domain name and upload your files to your own URL. You will have your very own registered domain name that you can use to refer people to on your business card, news letter and stationary. I.E. http://www.YOURNAME.com. A $30 domain registration fee will be applied if it hasn't been already registered. PLEASE NOTE: We can transfer the Web Pages created in STEP TWO to your own virtual domain, or you can create your own from scratch.

"Express Birthday Party Planning" currently offers 3 hosting options: CLICK HERE to view more information about our hosting plans.

Must have a Basic or Enhanced Listing to order.

Starter - $14.95/mth, 10 megs disk space, 1000 megs data transfer, 5 emails

Power - $19.95/mth, 75 megs disk space, 6000 megs data transfer, 40 emails

E-$$$ - $29.95/mth, 125 megs disk space, 9000 megs data transfer, 60 emails

Similar business models

The knot and the wedding-channel

Both are best in class in wedding and related events planning. They have been in business sine late 90s and have deep pockets.

The knot has extended to all types of media including TV and magazines.

The Wedding channel is the largest in number of visitors and users. It is a wonderful website, very well designed, provides a very pleasant user experience, and is easy to navigate. They work with wedding publications to advertise and attract target visitors.

They offer to providers:

Banners

Direct marketing (ezines)

Local listings

To the users they offer free:

Wedding planning

Articles and very good interactive tools such as:

1- Planning check lists.

This includes list of activities and times (schedule)

2- Wedding Website

You can:

Share your engagement story

Communicate event details and provide maps

Give out-of-town guests travel and lodging information

Display all of your registry information in an etiquette-appropriate way

You also receive:

A choice of designs, including flash animation

A FREE custom web address, good for 2 years

A guest book manager that lets you delete posts

24-hour access for you and your guests

3- Save the date

It's fun and easy to do!

Choose your wording

Select your favorite design

Then, send to everyone you're inviting to the wedding.

4- Guest list manager

Enter guest names once, and we help you:

Total your invitations and RSVPs

Print lists of names for envelope and place card calligraphy

Record table assignments and menu selections

Track gifts and thank-you cards

5- Scrapbook

In order to start your own Scrapbook, you need a FREE WeddingChannel.com membership.

The best way to save all your favorite ideas!

Your Scrapbook makes it easy to organize your favorite photos, add comments to each, and even email them to friends. Plus, your FREE membership gives you unlimited access to all WeddingChannel.com's easy-to-use planning tools.

6- Budget Calculator

To use our Budget Calculator, you need a FREE WeddingChannel.com membership.

Tell us your budget amount and we:

Suggest how much to spend on the gown, flowers, cake and more, based on national averages

Track deposits and balances

Help keep your budget balanced with at-a-glance totals

Reveal insider budget tips to help you save!

They also offer a huge catalog of gowns, party places, etc. That is how they make their money.

They have gift registry services.

They work with some shops that let the clients access the registries (all the articles) from the wedding channel website

Rates for local directories:

Local listings rates:

Premier Listing

$75.00 per month ($900.00 per year)

A web page custom-designed for your business (we take care of all the technical details).

A complete description of your services, along with pricing information

A company logo

A Photo Album of your work (up to ten photos)

A map and driving directions to your front door

A pop up window for special offers or coupons (can be updated monthly)

Geo-targeted banner ads - $30.00 per month

Promote your business with banners that appear in entire region of your Premier Listing

Top tier - $62.50 per month

2- Spa-addicts.com

This is not an ideal model, but perhaps some of their ideas can be part of our offering.

This is how their regular listing works:

National Spa Directory

You can choose from Bronze, Silver or Gold Directory Listings. (Platinum Directory Listings are reserved for Red Hot Special advertisers only.) Prices range from $8.25 - $18.25 per month, plus you receive FREE EXTRA SPACE to offer a spa-addicts EXCLUSIVE special of your choice (encouraged but not required). There is a one-time $50 setup fee for each listing.

Bronze. $99 per year. $199 destination spa

Silver. $169 per year. $269 destination spa

Gold. $219 per year. $ 319 destination spa

Party planning website business

noreply@blogger.com (eCreativa Media) — Fri, 15 Aug 2008 19:44:00 +0000

I previously published birthday party portal business plan and a birthday party portal web design framework. Here is a powerpoint slide presentation with a business plan for a party planning online business.

Birthday party portal website design

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:36:00 +0000

If you read the birthday party portal business plan, this article will help you figure out how to design the website.

Item 1: Interactive tools

This section may include:

Party budget

Polls

Quizzes

Send this page to a friend

Bookmark

Item 2: Listings

Listing of party venues and service providers

Database could be searchable by area code or zip code and by category

Item 3: Create you web page

Registered users can create their own mini-site. This will include the possibility to have a scrapbook

Item 4: Access to forums and boards

Item 5: Party manager

It may have:

Guest list

Save budget

Book services

Cards, e-cards

Store favorite providers (shortlist)

Store favorite articles

Item 6: Gift registry

Wish list of gifts

The guest may register as guest to access to access this list or have a cookie session from an email link. Once a gift has been selected, it will be deleted from the gift list.

Providers’ pages

A provider can select if registered or not.

If not registered, the provider can either select to browse the listings, information on registration fees and benefits and request more information. He or she can also register and pay.

If the potential party provider decides to register, he or she will select a plan.

Silver: listing and booking only

Gold: the above plus one page website to promote services. The providers can make their own website or order our services, plus this provider will appear in a more relevant place on listing than the silver status providers.

Platinum. Gold plus more visibility, perhaps some banners or something similar

Partners: These are big companies such as ToysRUs. We will pursue their partnerships and have special arrangements to offer their services.

If registered the provider can access his own panel control:

Access the booking system

Post messages

Order more advertising

Offer specials, make changes to his/her services or prices etc.

Look at their sales, invoice, payments, etc..

Back end

Databases:

Users

Providers

Guests

Interactive tools

Budget system

Quizzes

Polls

Boards/forums

Website creation

Rating providers system

Rating site features system

Directories

Providers

Services

Scheduling system for providers

Accounting

Send monthly invoices to providers

Charge credit cards for services

Pay providers

Data mining

Collect information on: how the site is used, most used features, how much money spent, what kinds of services/products ordered, zip code, age of kids, and others.

Brithday party portal business plan

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:33:00 +0000

I was bouncing this idea off a couple of investors. Essentially, it is a portal where parents can find everything they need for planning and managing a birthday party for their child. Here are the main components.

Features

· Hosts all the local party themed activity providers (E.g. Paint-A-Party)

· Advertisements or lists – Tents, helium tanks, Toys-R-Us, Toys shops.

· Birthday registry

· Evite/Snailvite

o Real time guest list

· Thank you cards

o Form to enter gifts received from guest

· Catering services – Cakes, food etc.

· Entertainers (e.g. clowns, magician)

· Decorations

o Themes

· Hall rentals

· We can design and host a website for these services – Portal to create their own website

· Photo gallery of the party

· Services to create goody bags

· Props (e.g. Moonwalk)

· Birthday parties at museum, aquarium

· Create a community by e-zine, articles etc.

· Discussion boards

· Services for service provider (E.g. Scheduling)

· Coupon generation

· E-mail, Snail mail generation

Revenue

· Revenue from website designs for party hosting companies

· Advertisements

· Commission for lead generation

Different party ideas:

· Birthday parties

· Graduation parties

· All farewell parties

· Christmas parties

· Baby shower

Branding in the packaging industry

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:27:00 +0000

Packaging buyers tend to stick with branded products because they’re familiar with them and they know what they are getting. Generally, most successful packaging suppliers follow a strategy based on building brands.

What comes to your mind when you think of Bubble Wrap, Tyvek, and Valeron? These are all well recognized brand names in the packaging industry that are known not for what they are made out of but for what they do. Their suppliers — Sealed Air Corp., DuPont and Valeron Strength Films (formerly Van Leer Flexibles), respectively — could completely change the underlying material of construction, but their users will continue to buy these as long as they perform the functions that the brand is associated with.

Despite this, it continues to amaze me that the number of well recognized brands in the packaging industry is still so small. Our industry has been so focused on product attributes, manufacturing capabilities and materials of construction that we have failed to build brands.

The traditional approach to marketing in our industry has been rather product-centric. The basic assumption has been that if your product is superior to competitive offerings, customers will simply rush to buy it. Secondly, it has been generally believed that the customer is technical-competent enough to disregard the marketing message and evaluate the product strictly on its attributes and performance.

Thirdly, customers have been successful in commoditizing packaging materials so that they can negotiate better prices, and suppliers have fallen into this trap by introducing products that are practically indistinguishable from competitive products (or, in other words, customers do not always like brands because they are reluctant to pay premium pricing).

But why do companies continue to buy branded products despite the availability of cheaper/better alternatives? The answer is relatively simple: because they are guaranteed a definite level of performance on a consistent basis.

Developing brand equity
To develop brand equity, packaging suppliers must consider a number of factors regarding their product(s):

Performance: While the basic concepts of brand equity in the packaging industry are the same as those for consumer products, there are a few subtle differences. While heavy advertising with creative commercials may lead to building a consumer brand, this is not enough in our industry. Remember, the customers of these products are knowledgeable enough to still evaluate a product on its merits. Thus, you have to make sure that your product is as good as other competitive products.

Innovation: Product innovation is extremely critical to buyers of packaging materials. As companies struggle with either increasing shelf-appeal or reducing damage during shipping, they look to their packaging supplier for innovative solutions. Make sure that your product development does not become stagnant. Instead, as customers’ needs change, your product must continue to operate at the cutting edge.

Addressing product problems: There are innumerable examples of how companies can destroy years of brand equity simply by poor handling of product problems. The only time when product problems do not affect brand equity is when management reacts responsibly by immediately addressing the issue. My simple recommendation is to address a product problem immediately rather than denying it or blaming others.

Features and benefits: Suppliers of high-tech products get so enamored with the properties of their products that they fail to fully advertise what the product does for the customer. While charts and tables are needed, make sure that you connect the features with the benefits. Thus, the advertising message has to strongly emphasize how the product will add value to the user.

Co-branding: Consider a co-branding campaign with your key customers. Perhaps a clearly visible logo on a bag of potato chips with the message “Packaged in [name of packaging product].” While a company like Intel can successfully market an extremely high-tech product to an average consumer, packaging companies do not establish a similar connection with the consumers when packaging might very well be the reason they buy the product.

Look at products as brands: The most important approach to building a brand is to completely redefine the way you internally look at your products. If you think of yourself merely as a supplier of products that have certain attributes similar or better than other products in the marketplace, your customers will perceive these in the same manner and will compare them accordingly. If you think of yourself as a seller of brands that make your customers’ brands even stronger, your customers will start setting your products apart from competitive products.

Impact of brand equity on profitability
There is no hard evidence at this time that developing brand equity alone will necessarily result in higher profitability. However, my limited research shows that most successful packaging companies follow a strategy based on building brands. It is increasingly important to do so at this time when emergence of e-marketplaces is based on essentially eliminating product differentiation.

I can clearly visualize a future in which a product will either be a brand or a commodity. The former will demand premium pricing while the latter will be traded on an online exchange like any other commodity. Where do you want your products to be?

Impact of margin compression on the packaging industry

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:25:00 +0000

As access to pricing information becomes more readily available to packaging material buyers, suppliers will need to rethink some of their strategies and embrace business models that are based on much more than price alone.

The packaging industry remains one of the few privileged industries since customization is still widely popular. Manufacturers of both industrial and consumer goods may have almost indistinguishable products, but they still make their best efforts to use unique packaging.

The obvious advantage to packaging material manufacturers is that, despite the underlying raw materials being essentially commodities, they can still differentiate their products and obtain premium pricing. This differentiation has been the major driver for pricing patterns, and consequently, margins.

Information access
The second dimension of pricing is not talked about openly very often. The price that a supplier quotes for its products is also largely dictated by the amount of information that its customer can access about competitive products, number of suppliers, supply situation and pricing levels. Over the next few years, this will likely change dramatically. The business environment will see radical changes and competition will intensify as efficient access to information will be more widely available.

Whether buyers purchase a million pounds or a thousand pounds, they will have almost equal access to information. Pricing will become increasingly transparent in contrast to traditional practice in which price was top-secret. Buyers already find it easier and cheaper to obtain comprehensive information about a supplier, its products, inventory levels and its pricing relative to every one of its competitors. As a result, suppliers will find that the power they derived from information gaps in the past will disappear, to the point that pricing will no longer be their prerogative.

In fact, low price will no longer be a privilege available to large-volume customers but will be a prerequisite for being a player in the broader marketplace. Once the first low-cost supplier publishes its prices, the competitors will have to follow, and prices will stabilize at a point that will be set by the most efficient manufacturer.

The third dimension to margin compression is the emergence of online marketplaces that are based on maximizing purchasing efficiencies through encouraging real-time price-based competition among suppliers and making the purchasing process more efficient by use of information technology. Such marketplaces have only a limited role to play in the packaging industry at this time but will very soon become fairly dominant.

Strategies to meet these challenges
In this new business environment, several new businesses will emerge, and small companies will be able to thrive by serving niches. Manufacturers of consumer goods and other specialized products will continue to work closely with their packaging suppliers to create unique, proprietary package designs.

Improvements in information flow will still drive packaging industry growth, but there will be market share shifts as those companies that embrace business models for the new market realities will emerge as the winners while the laggards will struggle trying to compete on price alone.

In this environment, companies will have to do a lot more than just managing their costs and embracing sophisticated customer relationship management programs. Here are some ways that companies can succeed going forward:

Follow the 80/20 rule. If 80% of your business comes from 20% of your customers — which is true for most small and medium sized packaging companies — then make sure that you do everything possible to hold on to these customers. Give them the most competitive price, and control them through eliminating any layer that may exist between you and them.

Research has indicated that despite commoditization, it is possible to create a brand identity in the packaging industry. A brand makes it harder for customers to price-shop the product. If you have a new product, try to brand it from day one.

Product differentiation and customized solutions for your key customers will not only make them recognize the value of having you as a supplier but it also makes it harder for them to switch by increasing the cost of switching.

Sharing knowledge can be critical in developing customer loyalty and increasing retention. As customers increasingly rely on their suppliers for technical support, sharing market and technology-related information will be instrumental in building long-term relationships.

Put programs and systems in place that will enable maximum purchasing efficiencies in your organization as well.

All packaging companies have unique market and technology situations, but the impact of margin compression will be most pronounced on suppliers of such products as corrugated boxes, wood-based packages and basic substrates like films and paper. Now is a good time to rethink your pricing and customer relationship strategies.

How to build a community of your customers?

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:23:00 +0000

If your company is to be the best it can possibly be, a smart approach is to tap into resources outside of your organization. A “community” allows you access to the best and brightest people — whether they work for you or for someone else. In the near future, as companies increasingly focus only on their strengths and outsource everything else, they’ll have mostly partners and very few competitors.

The fact that you are reading this article is clear evidence of your recognition of the power of a community. I am continually amazed by how much can be done with only a little once you build a community.

If you are a member of a community and contribute even occasionally, you probably know very well that more gets done there than in your office. The added advantages are that one doesn’t have to wait 12 months before the next annual meeting, nor is there any limitation on where the participants live and at what time of the day they contribute.

The power of community
Imagine what can happen if a company can exploit the power of a community. One reason why companies fail to come up with world-class approaches is that their current mindset does not allow them to tap into resources outside of their organizations. If a company could build a community of all the right people — regardless of their affiliations — to achieve a specific goal, it will not only be possible to achieve that goal faster but also do it profitably.

I make this recommendation for one simple reason: no company is as good by itself as it is by partnering with others. A community allows you to get the best and the brightest people whether they work for you or for someone else. At the same time, the knowledge that you collect is also shared with other community members and benefits everyone.

Of course, like any other community, members like to be rewarded for their contribution. If businesses build communities, rewards can come through recognition, financial benefits or any other reward that the members desire. I may even recommend developing proprietary technologies through a community approach; in this case membership would have to be restricted to strategic partners, and more formal structure would have to be implemented.

Information flow
There are a couple of other reasons why I suggest a community approach to doing business today. In the old economy, the word “customer” had a narrow meaning — someone who used your product/service and paid for it. The flow of information and goods was so slow that companies had no choice but to control as many transactions in the value chain as they needed to be able meet their market commitments. This made them categorize other industry participants as either customers, suppliers or competitors.

In the new economy, the distinction between buyers/sellers, manufacturers/consumers, and partners/competitors is disappearing. This is because information flows so fast that it is not only possible to quickly identify potential suppliers and partners but also to look at their inventory levels in real-time and manage production/supply schedules accordingly.

In the near future, I can see that enterprises will be focusing only on what they do best and outsourcing everything else. Thus, a company will have mostly partners and very few competitors.

Building a community
To build a community, a packaging company has to do three things like any other community:

• First, develop a vision for the community. For instance, the foremost goal for a commercial enterprise is to have high revenue and net income, but it could be something different — for instance, to develop a solution to a long-unsolved problem.

• The second step is to bring together the right members to the community. This is needed in order to have the necessary skill base.

• The final step is to facilitate seamless communication among the community members. Since the members may interact mostly virtually and may not know each other very well, the initial roadblocks should not discourage the members.

Packaging companies are better off than companies in many other industries in the sense that once the product is sold, the design and testing professionals on both sides continue to collaborate on a regular basis. On the down side, however, other than these individuals and an occasional courtesy call from the sales representative, there is not a lot of interaction on a corporate basis to address larger issues.

Such relationships with its customers should be exploited by a packaging company since, otherwise, the value of knowledge that is developed regularly within and outside the enterprise is not being fully exploited.

How to use great content for marketing?

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:21:00 +0000

Packaging buyers are becoming increasing comfortable with using the Internet as a tool to find information prior to making a purchasing decision. Companies who provide effective content and interactivity on their site will grab the most eyeballs and, hence, maximize profits.

The Internet has fundamentally changed the manner in which we obtain information and the amount of information that can be accessed. Remember the days when someone in your organization was able to obtain your competitor’s price list or data sheets or organization chart? It would go into a file marked ‘confidential competitor information.’ Now, you can get the same information within seconds. In fact, companies are beginning to compete with each other in how much information they provide on their websites. It is no longer surprising to see customer lists, examples of applications, detailed product literature and an employee directory.

What’s missing?
The Web is essentially the easiest way for a company to connect with the world and turn visitors into customers by creating a pleasant experience. But the packaging industry has yet to take full advantage of all that the Web has to offer. For example:

In an effort to create an online presence, yet with an unavailability of internal web design professionals, companies have essentially taken their brochures and put them on the Web. It is disappointing to see sites that are not updated regularly, sometimes for months.
Another powerful feature of the Internet is its interactive capability. While a company might need to spend enormous resources to speak over the telephone to 100 customers to find out their experience with a new feature on the company’s latest equipment, a poll on the ‘customers-only’ section of the company’s website will provide such feedback at almost no cost.
The Internet also allows companies to inexpensively answer questions from visitors by providing links to appropriate individuals or, in the case of a large organization, have a customer service rep available either to answer questions through a chat session or by calling back the visitor.

I have yet to see all of these features in a single website in the packaging industry. (I would like to know if there are such sites since I have not visited every single one.)

Providing effective content
As the comfort level with the Internet increases, customers are increasingly using it as a tool to find information prior to making a purchasing decision. The analogy that comes to my mind is that of a trade show. I see trade shows as having a three-dimensional role in business: inform, interact and market. Companies go to a trade show to demonstrate their products (inform), have discussions with potential customers (interact) and differentiate themselves from their competitors (market).

This is exactly what needs to be duplicated on the Internet. You should think about providing such powerful content that visitors feel that they can find out practically anything about the product. This will result in a higher comfort level and, as a result, higher sales. An informed customer is more likely to buy. Customers want to learn about existing applications, benefits to current users and how it compares to competitive products.

I believe you should provide a comparative chart so that customers do not need to go to many different sites to develop one on their own. It would be even better if such comparisons were provided by an independent agency to make sure that they create an impression of being unbiased. This will help users make faster and better decisions and develop a sense of trust in you. Remember that customers in the new economy are armed with information, and you cannot mislead them.

Make it interactive
The second feature that you need to include is interactivity. For example, make interactive product data available so that customers can plug in their specific information and see the product performance. If you have product pictures, make sure it is possible to see them from all possible angles by being able to rotate them.

As purchasing and technical managers use the Internet increasingly as a tool to collect information, packaging companies have to start exploiting it is a powerful marketing tool. A website that looks like a brochure gets treated like one — to be seen only when absolutely necessary and just thrown away otherwise.

Packaging products present a great opportunity to be demonstrated on the Internet, and those who exploit this faster than others are more likely to grab a larger share of the eyeballs and, thus, potential profits.

Knowledge exchange with virtual customers

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:19:00 +0000

E-commerce is not only about reducing cost and automating transactions; it is also about using it as a channel to exchange better and larger amounts of knowledge with business partners.

If I were to say that competition in the packaging industry has been based all along primarily on knowledge, most of you will agree but only after some thought.

Some of the recent hype about “knowledge management” may give an impression that it is something new. In the packaging industry, we have been doing it all along without necessarily using a very formal name and process.

Even while selling a basic package, a successful salesperson typically talks less about the actual package and more about how it will protect the product, provide aesthetics and reduce cost. This salesperson will also probably bring along a technical professional who can help the customer’s manufacturing group implement all of the above.

This sales team has not only used knowledge to sell the product, it has actually sold knowledge and got paid for it (through stronger customer relationship).

Catalog approach
At the other end of the spectrum in the packaging industry are suppliers who sell using a catalog approach — standard products, service, price, terms of contract and limited or no knowledge to share. With the recent trend to provide e-commerce capabilities, packaging companies need to be extremely careful in not becoming catalog type suppliers. This is especially true when products are sold through an e-marketplace.

Participation in an e-marketplace is almost a must for most companies, but it may also result in erosion of product value and eventually commoditization, which is a serious problem if your products are not inherently commodities. Thus, suppliers of value-added packaging materials have to make sure that the bond with their customers that has been built on sharing of knowledge does not weaken as more business is conducted electronically.

Sharing the knowledge
Suppliers of value-added packaging materials typically dedicate considerable resources to working together with their customers designing customized packages. In fact, most companies end up offering these services for free as a means to strengthen customer relationships and boost sales. Apart from helping customers design better packages and, of course, allowing them to use their materials, this relationship also works as a means of sharing knowledge since suppliers pick up intelligence from the marketplace, get exposed to competitive technologies and better understand unmet and emerging needs.

E-commerce presents opportunities for reducing cost of selling and reaching a wider pool of customers. The downside is that companies are so focused on selling that their sites are turning into electronic catalogs. The e-marketplaces are even worse since their value proposition is based on product standardization and thus encouraging price-based competition.

E-commerce is not only about reducing cost and automating transactions; it is also about using it as a channel to exchange better and larger amounts of knowledge with business partners. As companies employ the latest tools for knowledge management within the enterprise, the program has to be designed to include business partners in the loop as well so that this knowledge can be shared with them and used to strengthen virtual bonds.

Recommendations for an e-commerce strategy
An e-marketplace would work fine for those products that are manufactured by more than one supplier and have attained some degree of standardization in the industry. Fortunately, in the packaging industry, there are not too many of them. Customers continue to demand high degree of customization even if it is in printing of the package. Thus, companies have to segment their customers into essentially two groups.

The first group comprises those customers that seek standardized products with minimal technical support. Suppliers should steer these customers to an e-marketplace if they participate in one, or the supplier should have its own e-commerce site for them.

The second group of customers demands customized designs, technical support and even a dedicated team to assist them. Suppliers have to take special care of these customers because these will not only be the supplier’s most profitable customers, but they are more likely to reward the supplier with additional business as they simplify their supply chain and start treating the supplier as a provider of turnkey packaging solutions. The supplier will need to build a private network for them that will provide a virtual space for collaboration on product and service development and gather intelligence on markets, products and technologies not only about the supplier itself but also the whole industry.

The basis of competition in the future will be predominantly knowledge, and as packaging suppliers’ customers increasingly use it as a competitive weapon, suppliers need to do the same.

How to partner with your competitors?

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:17:00 +0000

What’s true in life is even truer in business: Isolation does not allow free exchange of information among industry peers and, thus, limits opportunities for developing new ideas or building on existing solutions. Sharing of information builds trust and allows companies to exploit information for the overall good of the industry.

We are all familiar with the expression, “No man is an island,” which, of course, implies the need to be involved in other peoples’ lives and to have them involved in ours. The same could be said about businesses — “No company is an island.”

Yet, a vast majority of packaging companies have a tendency to embrace an “island mentality” primarily because they are able to partner with a select group of large customers, and thus, don’t need to pursue additional clientele. This is further compounded by a tendency among their customers to discourage the packaging suppliers from working with competitors.

Thus, large packaging companies align themselves with their key customers, forming some kind of a loose keiretsu, while small- and medium-sized companies have to constantly work hard to access new customers. This situation also limits the ability of small- and medium-sized companies’ exposure to the latest developments in technology.

Relationships – handle with care
There is another reason why I am emphasizing the importance of moving out of the cocoons that packaging companies have lived in for decades: the increasingly fragile nature of relationships in today’s ever-changing environment.

Several packaging industry executives have indicated to me that their customers who had done business with them for years, and even decades, have suddenly decided to try a reverse-auction process. The message is clear — the relationship lasts as long as it has a positive impact on the customer’s profits. The moment customers figure out ways and means to improve their profitability using an alternate source, there is no incentive for them to continue their relationship with you even if you have memorized the names of all the kids of the purchasing manager.

Isolation may retard innovation
What is true in life is even truer in business: Isolation does not allow free exchange of information among industry peers and, thus, limits opportunities for developing new ideas or building on existing solutions. I am aware of several packaging companies that are so paranoid about their proprietary information that they do not allow their employees to speak to their peers in the industry.

I am not trying to argue that proprietary information be compromised, but sharing of information beyond that should be unrestricted. I continue to believe that despite availability of every single page of document ever published on the Internet, there is no substitute for personally interacting with your peers and sharing information informally. We all know that, for the most part, we do not write down every single idea and thought that we have in our mind, but we might definitely share it during a conversation.

Bridging the islands
The reason I talk about bridging the islands, as opposed to building a continent, is that while companies need to guard their proprietary information, they have to cooperate in developing a better packaging community. As we are already seeing in the automotive industry, large packaging companies need to take similar initiatives and start thinking about sharing information more freely. The technology available today also makes it possible to manage what specific kind of information is shared with which specific outside entities — customers, suppliers, distributors, banks and even competitors — so it is possible to control the flow of information.

Apart from encouraging innovation, free-flowing information allows other, more tangible benefits. For instance, as we all know, more information enables faster and, in most cases, better decisions. When companies build extranets with their key partners, they can also facilitate smoother transactions, reduce manual intervention, minimize paperwork and, as a result, improve the bottom line.

The dangers ahead
Your customers are under as much pressure to improve their profits as you are — and they’ll do virtually anything to achieve it. Accordingly, you have to make sure that you’re able to provide your customers with what they want before they find someone else to do it, probably cheaper and better than you.

Sharing of information builds trust, encourages even more sharing, and allows companies to exploit information for the overall good of the industry. There is no reason for you to hold on to information that may be more productively used by your partners. Companies that fail to take advantages of technology that can help build bridges, may find themselves isolated from their peers, and that can be disastrous.

Transforming your organization in times of rapid change

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:15:00 +0000

If you’re a packaging company frustrated with trying to “get your arms around” e-business solutions, you’re not alone. There are, however, some simple strategies that both packaging companies and e-business solutions providers can implement to successfully engage in business online.

As e-business solutions continue to emerge, the pace at which packaging companies are embracing them has been slow. These companies have been frustrated with not being able to identify the right solution for their needs.

My discussions with executives of both e-business solutions providers and packaging companies lead me to believe that some dedicated work needs to be done by both parties before they can better appreciate and complement each other.

A large proportion of packaging companies is seriously committed to exploiting online opportunities. By now, the benefits and strategic considerations are apparent to almost all decision-makers. However, actually making this transition is not easy, especially when these companies do not have the liberty of suspending their operations and dedicating themselves exclusively to making the transformation to online business.

The dilemma
Packaging executives still must meet their regular business goals and, eventually, the expectations of their investors. (It is not hard to imagine the scenario in boardrooms as evidenced by Arthur M. Stupay’s article). The situation is further complicated by the fact that by the time you get your arms around one solution, half a dozen competitors are already talking about a new, better solution.

Providers of e-business solutions, meanwhile, have to recognize that the packaging industry has traditionally been very customer-centric. Most customers rely on their packaging supplier for quality products and entrust them with proprietary information. Packaging companies reciprocate by serving these customers extremely well. Such intimate customer relationships and a relatively stable scenario make it even unnecessary in many cases to actively seek new customers.

Additionally, the pressure to reduce costs is also relatively less due to high costs of switching packaging suppliers. Understandably, these are hard issues to grasp for dot-com companies, who typically start with a clean sheet of paper, have employees that are generally more receptive to change and are under tremendous pressure to increase their revenue in a short span of time.

What should packaging companies do?
The four major issues that I see packaging companies facing are:

• Which functions or set of customers should we shift online?
• Which will deliver the most value to our customers and investors?
• How do we prioritize so that we do not exhaust our resources?
• How fast should we move to keep up with technology but not spend exorbitant amounts of money?

These issues are not easy to address because they have to be balanced with corporate financial goals and limited availability of resources. Here are some guidelines to consider:

1) No business succeeds without best-in-class operations. Building the coolest e-business infrastructure is not going to be effective unless it is backed up by solid operations.

2) E-business has to be seamlessly integrated into the overall scheme. Without a proper integration of these processes into the hardware of a corporation, it will only result in more e-chaos, as some of the early adapters saw.

3) If you do not understand e-business fully, do not try to do it yourself. It is new, complex, and changes faster than anything that we are used to in the packaging industry. In the existing setup of most companies, it is hard to develop the necessary skills and speed. Therefore, I always emphasize that companies should seriously consider outsourcing this function and focusing their attention instead on managing change from a strategy standpoint.

What should e-business solutions providers do?
After looking at the solution providers to the packaging industry, it is clear that only a few of them have had an initial packaging-industry focus. A vast majority of them have served other industries and have not invested sufficient time into better understanding the unique needs of our industry.

While these companies may very well believe they have a solution for every problem of the packaging industry based on the success they may have had in other industries, individual packaging companies may not experience any of those problems for reasons cited above. I would accordingly encourage these providers to respect the dynamics of the packaging industry, better understand its priorities and offer a solution that addresses its problems.

The packaging industry has certain unique issues, and ours is not as homogeneous an industry as the term “packaging industry” may lead some to believe.

Future of manufacturing in the packaging industry

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:12:00 +0000

As e-commerce changes the underlying economics of business, is the old business model — based on scale — under serious threat?

In my consulting work, some of the packaging companies that I like to track are AEP Industries; Avery Dennison; Ball; Bemis; Crown, Cork & Seal; Owens-Illinois and Sealed Air. These companies supply a wide variety of packaging materials, and looking at them I can get a fairly good indication of the overall industry trends.

However, by looking at their performance in the past 52 weeks, I am disappointed. Other than AEP Industries and Bemis, the rest have not been profitable investments.

Market share as a driver
What concerns me is that when the economy is so good, the packaging sector continues to perform rather disappointingly. What would happen if the economy slows down? My discussions indicate that only the top management in the packaging industry is concerned about the performance of the stock; the middle-level management is still driven by market share.

I am surprised to see that companies continue to add infrastructure to produce more and eventually gain market share. I am a firm believer of profitability over market share, but most middle-level executives do not seem to believe in that because nine times out of 10 their compensation is determined by sales and not earnings, and rarely the stock price.

I am starting to believe that the old business model based on scale is under serious threat. E-commerce is changing the underlying economics of business. In the past, large infrastructure resulted in high market share, which eventually meant excellent cash flow and future growth. This is no longer the case. Vertical integration (as traditionally understood) is starting to become a meaningless business model because it is now possible to outsource practically everything that someone else can do “better, cheaper or faster.”

Traditionally, companies relied on leveraging their infrastructure to bring down the cost of manufacturing to either drive down the overall market price or to increase their margins. Now this is no longer the prerogative of companies with the biggest infrastructure. A small organization can put together a virtual team of providers where each focuses on what it does best — be it manufacturing, technology, product development or marketing. This is a serious threat to a typical company that tries to do everything, since margins on its core competence can be eroded by inefficiencies in everything else that it does.

Is manufacturing no longer attractive?
As I said in one of my previous columns, if you are not the absolute best at manufacturing a product, stop manufacturing it and focus on what you do best. On the other hand, if you are the best, focus on maintaining that position. Somebody in the future will definitely figure out a way to beat you, and you should be prepared to react immediately.

What about those companies that already have a large base of assets? My recommendation is this: retain what you do best and get rid of the rest. I know this is a rather radical recommendation, but the alternative is even worse. I make this recommendation based on my past experiences.

I lived in Japan from 1992 to 1997. During this period, I saw a revolution taking place there. The bubble had essentially burst, and signs of recession were setting in. During the bubble economy, the wages had reached such high levels that the cost of manufacturing went through the roof. However, during the recession when demand dropped, such high cost of manufacturing made the Japanese uncompetitive in the market.

The Japanese companies reacted fast and started cutting down their Japanese manufacturing base. They established plants in several parts of the world and kept only the value-added operations in Japan. Japanese companies realized that they should focus on what they do best, that is, product design and marketing. Manufacturing could be accomplished by building skill set and infrastructure overseas.

As a final thought, do what General Electric does. Every couple of years, it reinvents itself. The company looks hard at what it needs to do to thrive till the next opportunity to reinvent arises.

The hard reality of business is that while you may invest enormous resources in developing internal capabilities and strengths, sometimes the environment changes faster than you can anticipate. This is exactly what is happening now. Don’t try to beat the marketplace. Instead, adapt your business model to the marketplace.

Preparing for a boom during a slowdown

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:11:00 +0000

When business slows down, as it has in recent months, it is not unusual to lose track of what is really important and instead focus on what is more immediate. For instance, as customers of packaging companies pack and ship fewer products, the immediate response in the packaging industry is to cut back on a wide variety of investments and reduce costs. While we have not yet heard any major layoffs in the packaging industry on a scale that some of the larger companies have announced, I suspect that some companies are already doing this on a smaller scale. Similarly, I am also aware that several companies are scaling back on R&D and new product development.

While most of us recognize the potential long-term hazards of cutting down on research and development, I think the way we are structured, these are inevitable. However, there are certain things that a slowdown should allow us to do. I might even say that a brief slowdown is healthy for an economy as well as an enterprise. During a rapidly growing economy, we are all forced to keep up with demand for our products and services, have to make investments for productivity enhancements, and need to compromise on quality of resources that we employ to meet short-term commitments. I am sure a lot of you would agree that we are essentially forced to cut corners, which is not the way winners generally work.

Why a slowdown may be good
It provides us an excellent opportunity to fix what we think is not best-in-class. Resources that are now freed up to some extent can be utilized to improve our processes. There is no better time to test the efficacy of your systems than in a fast-changing business environment. I have been told by several industry executives that they have learned a lot about the limitations of their processes in recent years. This is, then, a perfect opportunity to use that new knowledge to eliminate the bugs from the system.

Similarly, I am aware of hundreds of companies that had to hire employees who were not the most suitable for the jobs that they were hired for. Many of these new employees struggled in their new jobs and, while some were able to pick up speed, others are still having a hard time. This may be a good time to train these employees. So before you decide to get rid of these employees, think hard about the staff you might need in case the economy picks up steam again.

The final area that we can all work on is new product development. When the economy was going through the roof, what customers wanted was packaging that would get their products from point A to B. It really didn’t matter how the design looked and how much protection it provided – speed to supply current products was more important. On the other hand, as economy improves, it will do so only gradually. The implication of a U- or V-shaped comeback is that customers will be more selective. Thus, product differentiation and quality will be absolutely critical. The current slowdown might well provide a perfect opportunity to approve all those dollars that your R&D group has been asking for years. It will payoff real soon.

What are the short-term risks?
It would be appropriate to disclose the short-term risks inherent in this strategy. Almost all public companies are struggling right now to meet their revenue and earnings expectations. The way our economy is currently set up, no matter what happens next year, you still have to meet your expectations for this quarter. This means that a lot of companies are not at liberty to undertake the steps that I am recommending. However, if you can in any way allocate funds for these projects today, do it. It will be a productive and judicious use of your resources.

Managing key accounts

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:04:00 +0000

I am often asked to advise sales and marketing executives about their challenges in managing key accounts. While it is critical for a business to have several key accounts to provide stability to the business, it is also important that the key accounts be monitored carefully to ensure that these accounts continue to be profitable at the same time. It is quite common to see in our industry that key accounts end up demanding more than a fair share of their supplier’s resources.

Most executives have to constantly struggle with finding an effective key account management strategy since losing even one of these accounts can have a devastating impact on the company. On the other hand, having account-specific teams is costly, and in most cases, it is hard to cut down on resources committed to key customers.

'Key account value analysis’
This is one tool that I recommend that companies use at least once every quarter. In businesses with small size orders, the tool can be used monthly. For each key account, the following metrics should be captured accurately:

Total sales

Percentage profits (over sales)

Growth rate of sales in existing product line

Value of new products/services

Order size distribution and average

Price comparison with other customers in the same category

In the subsequent paragraphs, I will discuss how this data can be helpful in resource allocation and sales/marketing strategy formulation.

What does it mean?
There are numerous advantages of working with key accounts. Most large companies have excellent R&D resources and are generally more active in new product introductions. As packaging materials suppliers, some of these pressures from customers mean a lot of opportunities for innovation in developing the right package. However, the thing to remember is that the key driver at these customers is not the profitability of the packaging supplier but their own efforts to come up with the cheapest package that can result in a successful launch of their product.

In an analysis that I conducted, the findings are very interesting. A typical key account does provide stable cash flow to a packaging company and this is exactly why suppliers stick to their key accounts. What I concluded, however, is that key customers are more likely to overuse resources of current supplier for awarding additional/new business because of the relationships.

That is why it is important to at least track key account performance by assessing the value of each account to the enterprise. I am not suggesting that a large account be dropped for generating less value. Instead, this analysis should help an executive answer some of the following questions:

Which of these key accounts are profitable?

Is growth rate at key accounts higher/lower than other accounts?

What kinds of business opportunities have emerged from key accounts – several small orders, few large orders, a mix of both?

Is the price offered to key accounts justified in terms of revenue/profits/new business generated?

How much resources need to be dedicated to which account to maximize value to the enterprise?

Using the analysis for strategy formulation
I typically recommend that companies follow a dual strategy for managing their customers – one for key accounts and another one for all others. A value analysis of key accounts will clearly indicate to a company the role these customers play – Are these profitable customers that need to be pampered or are these just large customers that provide good cash flow but the growth will still have to come from other accounts?

Such data will enable executives in serving better those customers that have the highest growth potential and thus create value for their company. There is a fine line here. It is an undisputed fact that finding new customers is always more expensive than retaining the existing ones. In most cases, existing customers switch not because of price but due to problems in receiving the right kind of attention. However, a company that is looking for growth has to make sufficient resources available to pursue customers with highest growth potential.

How to identify key accounts

Tactics for key account management

Key account management strategies

How to develop a key account management strategy

Key account management for small and medium sized companies

Key account management for MNC

Customer segmentation

Refine key account management program

Key account management framework

Customer relationship management

How to differentiate your business?

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:02:00 +0000

I have received several emails recently pointing my attention to some extremely important things to consider before you digitize your business. The number one item that almost everyone has pointed out as absolutely critical in any business process, and even more so in e-business, is differentiation. The reason I’m dedicating this column to differentiation is the fact that the speed at which companies have had to or are implementing e-business programs has sometimes resulted in a difficult situation. Specifically, in some cases, putting an ‘e’ in business has become more important than paying attention to what we have always considered as the core element of doing business, i.e. differentiating yourself from your competitors.

In our industry, we have not prided ourselves on exploiting IT. We are still an industry obsessed with materials and engineering and have come up with some great solutions for our customers. Of course, some IT tools like design software or communication channels have helped us in doing our jobs faster and better, but these tools have not been the drivers of innovations. What that means is that as an industry, our IT resources are rather weak. We have changed only when we had to.

This impacts us in two ways. By not having strong, internal IT resources, we have been slow to embrace technological changes. Secondly, we are forced to rely on outside agencies to help us with some of these programs. While I am a strong advocate of outsourcing, effectively managing your IT provider is still your responsibility. A provider can only know so much about your business and, while this company may have only good intentions for your business, it may still end up providing you with a solution that is no different than what they sold to half a dozen of your competitors.

The solutions providers have another interest in selling you a standard product. If you do not know enough and also do not want to select a customized product, the only way that you can be served is by using an off-the-shelf product that requires minimum tweaking. The outcome is that, while your packaging products may be significantly superior to your competitors, your website is unable to convey that message.

Why is differentiation crucial even in e-business?
So far the pressure on us has been to develop an online platform to conduct business. However, very soon everyone will be there, and the issue will no longer be if you have an online channel, but how effective it is in highlighting the differences and advantages that you have over everyone else. If that is not clearly apparent, the dot com mantra that ‘your competitor is only few clicks away’ is actually true.

As I have indicated in my previous columns, with the elimination of business inefficiencies through better information management, commercial friction will largely disappear, further squeezing our margins. As a result, retaining customers will be predicated on how much value we can create for our customers and what differentiates us from our competitors. Thus, the basic rules related to differentiation from competitors still apply.

Suggested road map
While e-business may be a new channel, the principle of competitive advantage remains essentially the same. You still have to differentiate yourself from your competitors, no matter what. If not, your customers will simply select the supplier with the lowest price every time they have to make a selection.

While developing an online strategy, make sure that you have your strategy managers on the team. If you do not have good internal IT people who understand your business inside and out, get some help from industry experts who understand the packaging business as well as IT. Putting together a team with such diverse backgrounds will enable you to work more effectively with your e-business provider so that you will be able to develop an online presence that duplicates your offline strengths.

Exploiting the Internet to generate revenue

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 21:00:00 +0000

I am often asked by packaging industry executives how they can exploit the Internet as a source of revenue generation because, when they present a case for integrating Internet in their business process, this is the first question that is asked of them. There is no simple answer to this question because it depends on such factors as type of business/products/customers that a company has, typical order size, degree of customization required, and nature of relationships with customers.

Since most companies in the packaging industry have not made e-commerce a significant part of their business activities yet, it is difficult to say what the potential savings can be and how much of their business can be moved online. There is still too little information available to us. However, there is some learning to be had from companies in other industries that have taken a more aggressive approach to making the Internet a tool to find new customers, improve customer relationships, and reduce the cost of transactions.

Some of the companies in other industries that have realized huge savings by exploiting the Internet in their core business are Cisco Systems, Oracle, General Electric, and Dana Corporation. Some of these companies actually do a lot more customization than we do in the packaging industry. Most of them also have long-term relationships with their customers and have to regularly worry about proprietary information. Thus, these companies have quite a few similarities with us.

Why not the packaging industry?
The key question that packaging industry executives should ask is, “If other industries like ours can take this approach, then what is stopping us from doing it?” My discussions so far lead me to believe that the delay in implementing these initiatives is being caused by both packaging industry executives and providers of IT solutions. For instance, one of the areas with potential for cost reduction is package design and taking it to manufacturing. With the number of teams and steps involved in the process, some of which may not be in the same physical location, the Internet provides a perfect opportunity to move these functions online so that different participants in the process can work remotely.

The problem is that packaging industry has a process in place for doing this today, and there is resistance to change it, as there is for any change. The problem gets compounded by the fact that there is no simple IT solution available today for us to do it. Until the day such solutions become as simple as entering your user ID and password to access the design system, companies will not be receptive to investing thousands of dollars in developing proprietary systems.

Why do some companies still think it is wise to make huge investments and develop proprietary systems? In my opinion, this has been prompted by three considerations: these companies recognize that inefficiencies in business processes can be minimized by use of new tools; secondly, they believe in using information technology as a competitive weapon; and finally, they want to keep pace with the changes in business environment.

While I have talked about these issues in my previous columns, let me reemphasize why proactively driving inefficiencies out of the business processes should be every executive’s priority. For centuries our economic system was built on making profits simply because somebody else could not find information fast enough – for instance, information on who the suppliers are, what prices are they willing to offer, does someone have excess inventory to unload, and how soon is it possible to get a large enough number of suppliers to compete for a piece of business to receive a lower price? The rate at which information flows today (and this is just the beginning) has made it so much easier to get these tasks done within a matter of hours at practically no cost.

Our goal of using the net should not be limited to revenue generation. It should actually encompass higher sales, lower costs, and better relationships (which eventually translate into higher sales and lower costs).

How to deal with the marketplace changes?

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 20:57:00 +0000

In recent weeks I have received emails and phone calls from packaging industry executives who are concerned about the future. While the industry has been branded as “laggard,” “slow to change” and other not-so-flattering descriptions by analysts in recent months, several industry executives have started to embrace new business models.

However, as these executives start to implement these new business models, they are already seeing these models failing at some of the early adopter companies. The recent demise of several business models that only a year or so ago were hailed as revolutionary is enough reason to cause serious doubts. To many senior-level executives in the packaging industry, this only means even more confusion regarding future steps.

I will try to address some of these concerns in a two-part article. In this article, I will try to put the recent events of the so-called “new economy” in perspective, and then next week I will analyze what it means to the packaging industry and what are some of the things that industry executives could do to meet these challenges.

Turbulence is permanent
During the past several months, mankind has witnessed changes that had not been seen so far. Certainly, the inventions of fire or the wheel and eventually electricity/automobile/telephone caused similar changes in the way humanity lived or how commerce was conducted, but a major difference is the timeframe. It took thousands of years before we could fully exploit the power of fire or the wheel. It took us decades to perfect the automobile or the telephone. But in the current environment we are starting to see revolutionary changes within weeks or, at the most, months. And it is not just the Internet — it also includes the changes in communication technology, relationships between companies, number of new products and their short lives — the list is long. If something does not change at similar speed, it appears that it is not worth talking about.

No wonder this is causing so much turbulence in our lives. Starting from the business world and the stock market, to how we are expected to perform our jobs, we are being exposed to changes at a rate that our generation is not accustomed to. Additionally, businesses today are structured in a manner in which they find it hard to respond to constantly changing market forces. Companies and executives that were organized and conditioned to develop multi-year plans and goals now realize that within months they have to revise their plans and rewrite their goals because new companies have emerged out of seemingly nowhere and have rewritten the rules of the game in their competitive space.

The reaction of the stock markets has been exactly similar. The degree of change has been so rapid that old rules no longer apply and new rules are not accepted yet by everybody. The result has been lots of confusion, nervousness and lack of direction.

Not too long ago, we saw some new rules emerge that made it more important, for instance, to attract eyeballs or create brand awareness or increase the number of transactions, but those rules are no longer valid. It appears that the wider base of investors did not feel comfortable with the new rules of the game and the stock market is now trying to figure out rules that would be fairer in evaluating new economy companies but still satisfy the basic principles of economics.

Impact on the packaging industry
Change of this magnitude has adversely impacted the packaging industry, too. While the stock market has severely battered several packaging companies, the demands on the industry to meet the needs of customers in the new economy has posed new challenges:

• The designs are different, and they change more frequently.
• Time pressures are intense.
• Supply chains are more complex.
• Competition is increasingly global.
• Most importantly, the future is so uncertain.

When packaging industry executives see companies with world-class, best practices struggling to meet market expectations, they do not see many successful models that they can follow for their own businesses. I will be addressing these issues next week based on my study of companies that are taking mature approaches to managing change.

Customer facing organization

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 20:55:00 +0000

Recently I have been talking to a lot of packaging companies that either have no independent web presence at all or are in the process of improving it to better connect with their customers. To my surprise, I have also been speaking to several e-business solutions providers, who are now starting to think about the packaging industry in less generic terms. Some of the questions that they all ask me are:

• How much information should be communicated through the Internet?
• How can we duplicate the personal relationships over the Internet now that we have customers that are no longer within our standard geographic territory?
• What is the most effective strategy to manage the conflict in communicating with customers through personal interaction and the Internet?

Amount of information to be shared
As part of an unscientific survey that I conducted with a few executives, I presented the following two scenarios to them:

Scenario 1: Company A has a website that provides comprehensive information related to the company, its products, customer testimonials and all the other standard information that you typically see.

Scenario 2: Company B has the standard information but has also gone several steps ahead by including details on problems with products encountered in certain cases, limitations on product use and, most interestingly, a detailed comparative evaluation of their products with their competitors.

Among the individuals that I talked to, the overwhelming majority wanted to conduct business with Company B. Some of the reasons cited were:

• A website that appears to be direct and straightforward develops a sense of trust.
• Warning about potential problems and highlighting limitations right away is helpful in making better decisions and preventing problems from happening.
• Comparative assessment with competitive products is time-saving and makes them trust Company B for future purchases.
• Company B is not only selling products but is also imparting knowledge. As one executive put it, “I will do business with Company B indefinitely because I can trust them to always act in my best interest.”

Managing long-distance relationships
As we all know, whichever type, long-distance relationships are difficult. The only comforting factor is that current technology can make these less painful. If we analyze the basis of business relationships, it is not because someone is better than others at memorizing your children’s names; it is because of the sense of trust that develops by someone always doing what is good for your business.

While it would be hard to duplicate the relationships that are developed in person, it is still possible to duplicate a lot of other things. For instance, it doesn’t take long for you to acknowledge and help a customer who walks into your office in person. Why then does it take companies days or weeks to respond to e-mails?

As long as companies can duplicate the fundamental principle of a business relationship — “acting in the best interest of the other party” — it really does not matter if you cannot shake each other’s hands.

Managing channel conflict
It is not surprising that some of your privileged customers will be upset that information that they received, either on an exclusive basis or at least ahead of others in the past, is now available to everyone at the same time. Several companies are quite upset that it is now so easy for even their small competitors to find out about new technologies so easily.

There are two simple ways to handle this. Since some of these developments are still new and people are trying to adjust to the new realities of business, it will take some time before we all get used to the ease of accessing information. If you want to be a risk-taker, just go ahead and do it and some time very soon everyone will have gotten used to it. However, if you do not want to upset your traditional customers, it is not hard to control what information is available to whom by using the various security tools that are now available.

Packaging converters business model

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 20:54:00 +0000

The majority of packaging converters do not appear to be prepared to make the transition to e-commerce. This jump will require a reengineering of business processes.

I tend to look at the packaging industry as a combination of three value blocks. We start with the raw material manufacturers, then we have the packaging companies or converters (who convert raw materials into cans, bottles, bags, etc.), and finally there are the end-users. There are others in the value chain such as distributors, designers, equipment manufacturers and packagers, but their role is not strategic to the value chain and can be safely grouped elsewhere for the purpose of this discussion.

In looking at some of the recent developments, I have concluded that the strategic control of the value chain has shifted to the converters. They seem to be capturing the highest value in the chain. The raw material manufacturers typically serve more than one industry, and packaging happens to be one of them. Accordingly, their business model is driven by volume rather than capturing higher value. The end-users treat packaging as a “necessary evil” and tend to focus on minimizing its cost (except for such cases as cosmetics packaging). That leaves the converters to capture the highest value.

This dynamics of the packaging industry value chain is also reflected in the manner each of the value blocks has embraced e-business models. The raw materials suppliers have been very active in integrating e-business models since the efficiencies on both buy and sell side are simply enormous. This is also reflected in the emergence of exchanges and consortia. The end-users, on the other hand, have been focusing primarily on the buy side in their e-business initiatives.

Penetration of e-business in packaging industry
An interesting finding from my recent research work is that, partly as a cost-cutting initiative and partly due to the pressure from their suppliers, converters are embracing e-commerce in purchasing raw materials since the savings are clearly visible. However, the converters have been relatively slow to integrate e-business in their core business process.

During the past two years, while the raw material suppliers and the end-users have invested millions of dollars in e-business tools, about 50% of the converters are yet to have even professional websites (ones that provide sufficient information that enables visitors to make a business decision). Moreover, I am not aware of many converters that have fully e-commerce-enabled websites, though I understand that approximately 10% of them do provide varying degrees of ordering capabilities from their websites. This leads me to believe that due to their complacency — which arises probably out of wanting to capture the highest value in the chain — the converters are relatively slow in exploiting the newly available tools.

On the other hand, my discussions with executives at end-users lead me to believe that they are starting to require their suppliers to enable their information technology (IT) infrastructure to be compatible with their systems to ensure machine-to-machine connectivity and to make almost all functions of their relationship accessible by electronic means. The end-users are driving this as part of their buy-side logistics initiatives. This means that very soon the converters will have to upgrade their IT systems to conduct business with their major customers.

It is clear that a vast majority of converters are unprepared at this time to make that transition. While the technology part can be easily outsourced to an IT firm, the bigger challenge is going to come from reengineering of business processes. Take, for instance, customer needs assessment. When selling is done in person, there is a whole lot going on other than selling. You come to know about your customer’s concerns, future plans and unmet needs. E-business systems, including customer relationship management (CRM) programs, provide excellent data on customer behavior, but you still have to use other means to uncover hidden needs and better understand future plans.

Suggestions for packaging companies
If you are carefully observing the market trends, you must have noticed how customer relationships are changing. While a packaging supplier’s priorities still have to be centered around making it easier and less expensive for its customers to do business with them, the company will need to uncover its customer’s “hidden needs” so that it can fulfill those needs before its competition does.

Since selling will be executed through electronic means, a supplier has to retrain its sales force to become “customer relationship representatives,” whose sole responsibility will be to prepare their company’s business for the future needs of its customers.

Empowering customers in the packaging industry

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 20:52:00 +0000

Let me talk about a typical end-user of packaging materials — a food company, we’ll call it Company X, that uses bottles, cans and films for packaging its range of products.

Company X purchases packaging materials from several manufacturers and distributors. It employs an army of purchasing agents to accomplish this mammoth task, and this is not always seamless. Some of the jobs that the purchasing folks perform are requisitioning, research, qualification, receiving quotes, writing purchase orders, tracking supplier performance, certifying, negotiating and even fire-fighting (when goods do not show up as promised).

Good news, bad news
Well, here is some good news and some bad news. The good news is that a lot of these painful tasks can now be automated, transferred to other agencies, outsourced to the suppliers or eliminated altogether. The bad news is that our friends in the purchasing department would need to learn new skills. The Internet has empowered the department of purchasing at Company X to the point that not only can it eliminate some of the aforementioned inefficient business processes, but it can also start integrating its supply chains.

The fragmented base of the packaging materials suppliers has created these inefficiencies in the value chain that can potentially be eliminated. Despite the critical role of packaging in shipping and presentation to the customers, end-users still treat it as an item on which value is captured by its supplier and not by them. While this perception may not be so widely prevalent among the medical and pharmaceutical companies, such thinking is very typical among other users of packaging materials since they operate on extremely tight limits for their packaging costs.

From our research at Kline & Company, economics is forcing Company X and its peers to manufacture the absolute minimum number of core products and outsource everything else. This is making their supply chains not only extremely complex but also a key driver of profitability, especially for such companies as X, which use a wide variety of packaging materials.

Suggestions for sellers
For sellers of packaging materials, especially undifferentiated products, the emerging e-procurement systems present new challenges. The need for your products is not going away, but you will have to become smarter about doing business. You will have to keep pace with your customers and also stay ahead of your competitors in incorporating these new processes in your business model. Here are a few suggestions:

While transactions will be automated in the near future, certain supply chain management tasks can never be automated. Your customers will still value your input on how they can reduce “their” costs using “your” products.

These market developments will naturally result in consolidation at the converter level. In the meantime, you should start thinking about partnering with other suppliers to your customers to collaborate on raising your customer’s supply chain efficiencies.

Conduct a manufacturing cost assessment for your products, and if you think that you are not among the top five lowest cost producers in the industry think seriously about either reengineering (if that can lower your costs) or discontinue manufacturing and start outsourcing that product.

Suggestions for buyers
If you are a buyer of packaging materials, your traditional responsibility to procure materials in a cost-effective manner is about to disappear. Your role is about to change dramatically and here are suggestions to prepare yourself:

Develop a short-list of those suppliers that meet your standards for being part of your supply chain. Very soon you will be responsible for not only purchasing but also for driving profitability of your enterprise through effective supply chain management.

While you might still play golf with your suppliers, your purchasing decisions will largely be facilitated by decision support tools that would consider a larger number of variables from across the whole enterprise. Your role will, thus, become more strategic and less operational.

Your day-to-day responsibility will be more analytical and cross-functional. You will have to think about “what needs to be procured at the targeted profitability” rather than specifications and price. A vast majority of these decisions will probably not require your intervention, and you will have to step in only to determine which supplier can fulfill your needs in terms of functionality required and targeted contribution to profitability of your enterprise.

Online business rules

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 20:50:00 +0000

While talking to industry executives during recent weeks, I have been shocked by the radical change in attitude insofar as the digitization of their business is concerned. Only a couple of months ago, I would hear complaints about how they were experiencing threats to their core business from online competitors and executives wanted to formulate strategies to protect their business. Now what I hear is “I told you so” attitude. While some of the remarks that industry executives make these days are arrogant, there are others who have just settled down in their comfort zone by rationalizing their fears – The Internet is only a fad, it is already starting to show signs of failure, and the threats to my business are over.

Nothing could be farther from the truth. As Michael Dell puts it, if bad business models are implemented online, they do not become good businesses; they just become bad online businesses. Like all other bad businesses, these too will go out of business, eventually.

For the packaging industry, the fundamental issues are not if some dot-com companies are going out of business these days or if some online companies are struggling to conduct sufficient number of transactions to remain profitable. The foremost considerations are still related to the basics of doing business – whether a new business process is going to enable a company get more business, serve customers better, and reduce the cost of doing business. While there are several classic examples of how companies are successfully exploiting the web, my favorite company is General Electric. It has taken an ambitious, but simple, approach – do everything over the Internet if it can be done more cost effectively. Now is that too complex for anyone to understand?

Advantages of the Web
In a survey by Cyber Dialogue regarding the advantages of being present on the World Wide Web, more than 40% of the companies responded that they were able to improve customer service, expand business territory, and keep up with the competition. More than 30% of the companies increased sales leads and lowered marketing costs at the same time. More than 20% of the companies reported that they increased both online and offline sales. In another survey conducted by Verizon/Super-Pages.com and Gallup has found that 55% of the websites have either broken even or paid for itself in increased business.

That is why I keep emphasizing to my friends in the industry that we have consistently seen pricing pressures only increase over the years and life is not going to get any better than this. In fact my discussions with industry participants lead me to believe that we will only see these pressures become more intense as the global economy slows down and international trade becomes easier.

What can you do now?
So while you can watch some of the excitement in the dot-com world as it unfolds, here are few things to do to in the meantime. By the way, this is also a good time to execute some of these projects as the providers are experiencing slower growth and you can hire some of the best firms at much lower prices:

Reevaluate your business strategy to figure out what part of the business can be moved to the web.

Taking your business on the web is not necessarily about e-commerce. In fact, a vast majority of packaging companies will possibly never need to engage in
e-commerce. However, they will definitely need to provide support services and disseminate information. So take small steps now and be prepared to take big steps as the situation warrants.

Hire an outside firm to give you a jumpstart. It may be possible to do the site maintenance work in-house but you should use professional help in the beginning.

Stay on top of things. We are living in a world that business environment can change within weeks. So tell your management that they need to be flexible about pursuing a net strategy

Internet commerce for a packaging company

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 20:48:00 +0000

A recent study reveals that the packaging industry need not be discouraged by misleading indicators that predict the doom of the “new economy” but instead should continue to focus on being prepared for the long term.

When I speak to packaging industry executives at companies of all sizes these days, I am surprised by the degree of confusion that is widely prevalent. I can appreciate their anxiety — there are signs that the economy may be slowing down (though a recession appears unlikely), the competitive dynamics have completely changed and new business models are emerging (and failing, in some cases).

Since April, the stock market has further complicated the picture by sending several misleading messages to all of us. The media, which needs spicy stories all the time, has been delighted with the bloodbath on Wall Street. The same magazines and journals that were talking about nothing else but “dot com” companies and how they will change everything, are now similarly making a big deal about how it is all over.

No wonder, we just don’t know what road to take and what lies ahead. The risks appear to be so high that many of us in our professional roles are afraid of committing to anything for fear of being proven wrong within weeks.

Focus on long term
As a consultant, I try to be as objective as possible and help my clients take a longer-term and strategic perspective rather than be carried away by hype or discouraged by roadblocks. While everyone seems to be having fun at the expense of failed “dot com” companies or how stock prices of some have crashed, the reality is vastly different insofar as the strategic issues are concerned.

I have been regularly addressing in depth the fundamental issues underlying the new economy in my previous articles, but this time I want to share some eye-opening findings from a recently released study by The University of Texas’ Center for Research in Electronic Commerce. These findings should be able to convince all of us that we, in the packaging industry, need not be discouraged by misleading indicators and instead continue to focus on preparing ourselves for the long term.

Some of the findings from the fourth bi-annual Internet Indicators study that I think are relevant for us in the packaging industry are as follows:

The productivity gains at Internet Economy companies are significantly higher. During the six-month period studied, an estimated 11.5% increase was observed.

Internet-related revenue is growing three times as fast as corporate revenue as a whole for Internet Economy companies.

While “dot com” companies have often been the face of the Internet economy, they make up only approximately 10% of the revenue generated. The remaining 90% of the revenue comes from companies that are exploiting the power of the Internet.

What does it mean for us?
These findings clearly show that real and significant business improvements are possible if we can adapt the tools to meet our specific needs. For instance, those packaging companies that have embraced online tools for collaborating on package designs with their customers and colleagues are already seeing major improvements in productivity. Several executives have confirmed to me that merely having a website has helped their company increase the number of good leads, reduce the cost of marketing communications, and, above all, their potential customers can evaluate and consider their products right away without having to wait for catalogs to arrive in the mail.

We all know that companies with bad business models eventually die whether they have a “dot com” in their name or not. On the other hand, we should learn from the mistakes that these failed companies made and then develop a business model that is better suited to our business, fits our corporate philosophy and can be implemented at a speed that meets the needs of our customers.

What drives growth within an enterprise is innovation, that is, coming up with breakthrough ideas and implementing them before anyone else does. General Electric, which believes in reinventing itself every couple of years and completely changing its business models (to the point of destroying its own business models, developed and perfected by it over the years), should be our role model. While the future is as unpredictable as always, it still makes sense to learn from industry leaders.

Large packaging suppliers should help small suppliers become e-businesses

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 20:46:00 +0000

The advantages of connectivity, e-commerce and exploiting other tools for more effectively purchasing products or reducing supply chain inefficiencies are clearer to small businesses than to larger ones. The reason is simple: small packaging suppliers, in many cases, compete with some of the largest companies but do not have the same bargaining power when it comes to purchasing raw materials or being able to force suppliers to expedite a delivery when absolutely necessary. If they can do anything to get that extra penny out of their costs, they are in a more competitive position.

The major problem facing small suppliers in our industry, however, is the lack of availability of suitable products that enable them to do that. As e-marketplaces are trying to build their businesses, their focus is on increasing the number of transactions. Since large companies typically conduct more business transactions, there is a greater tendency to design products for them and to pursue their participation more aggressively. To many in the packaging industry, this means that the game has not changed a whole lot. Wasn’t the Internet supposed to be the greatest equalizer?

Issues before small- and medium-sized suppliers
While discussing the unmet buy-side needs of this highly diverse and fragmented group of packaging companies, I came up with the following themes that were consistent across the industry:

Need for relatively simple system requirements for e-commerce. They simply do not have the resources to build a new IT department and then be forced to update their systems every quarter because of revisions and upgrades.

Flexibility with regards to minimum requirements to participation — for instance, the number of transactions or the value of business conducted in a given period.

Less stringent requirements for approval to be included. Small suppliers generally need more cash-flow and credit help.

An equally important, but not as critical in the industry yet, is enabling these suppliers to sell online and to streamline their back-end processes. Most estimates put the number of small businesses at this stage at just 10%. This does not appear to be a serious problem right away since customers in our industry continue to buy through traditional channels and the point at which they will no longer do business with a company that is not integrated into their system is about 12 to 18 months away. (This period can shrink somewhat as the slowdown in the economy puts increasingly higher pressure to cut costs.)

Recommended roadmap
The turmoil in the business world is not likely to subside any time soon as we see slower growth in the economy, higher competition from global suppliers and, consequently, pressure to reduce costs. Some of the tools available today already enable small businesses to take advantage of purchasing over the Internet (though I am told that only about a quarter of the companies use the Internet to procure even office supplies, airline tickets and other similar products that every company should be doing today). While it may be difficult to procure specialized raw materials for small-volume buyers right now, they can definitely start with other products. This will not only reduce cost but also make the company’s executives more web-savvy and hopefully speed up the implementation in other areas.

The second solution that I am proposing may appear to be less practical right away but I would like to generate an industry debate on this issue. The larger packaging companies are already making or are planning to make significant investments into their IT infrastructure to address the realities of business today. Since the new economy thrives on partnerships and alliances, the larger companies should allow smaller companies to take advantage of their bargaining power, IT infrastructure and memberships of e-marketplaces. This will be a win-win situation for everyone because once the IT infrastructure has been set up, the marginal cost of an additional transaction approaches zero.

I am convinced that we can still compete in a healthy environment while enabling everyone to grow.

New purchasing models for the packaging industry

noreply@blogger.com (eCreativa Media) — Thu, 14 Aug 2008 20:44:00 +0000

With downward price auctions becoming a reality, suppliers can’t simply sit back and hope that this trend will go away. Instead, they have to seriously start redesigning their business processes to meet these new marketplace realities.

During recent weeks, I have received several e-mails from packaging industry executives who have expressed concerns about the emergence of “downward price” auctions, in which suppliers continue to lower their prices until the auction is closed. As one B2B e-marketplace describes it, “Buyers watch as prices fall in real-time, before their very eyes.”

Most of these executives I’ve heard from work for companies that have traditionally differentiated themselves by providing value-added service(s), just-in-time (JIT) delivery, warehousing, next-day deliveries, special runs, design and testing. Naturally they are extremely disappointed as their key customers who have had long-term relationships with them suddenly tell them they expect to see them on a B2B e-marketplace for all future business deals.

New realities
Their disappointment is not surprising to me since we all have been made to believe that if you served your customers in the best possible manner, you would be rewarded with their business for a long time and there would be no incentive for customers to switch their suppliers. Looking at some recent developments, however, it seems there is little that can be done about it since the Internet has made possible a new paradigm.

While we have always heard the expression “Customer is king,” now is the first time that we can truly say it has become a reality. The reason this is so painful to us is that it is not a result of mistreating our customers. No, the customers have made this happen, and we were simply not prepared for it.

Customer segmentation
Since downward price auctions are now a reality, there is no point in hoping that this is going to go away. Instead, we have to seriously start redesigning our business processes to meet these new marketplace realities.

The first thing that companies need to do is to re-segment their customer base. The situation will, of course, be unique for each company, but customers can essentially be split into the following three groups:

• Connoisseurs - These are the ones committed to using only the best materials in their products. Of course, they would like to pay the lowest price but not at the cost of compromising product quality. The goal should be to keep the connoisseurs you already have and try to find more of them. The best channel to serve them is through direct sales.

• Realists - These are those customers that understand what they need to do in order to succeed in the marketplace. They supply products that barely meet the needs of their customers, and as such, they seek exactly what they need at the most competitive price. These customers are most likely to embrace the e-marketplace-type models. You have to recognize the needs of this group and serve them accordingly.

• Penny-pinchers - These are the least desirable group of customers for any supplier. They are driven by price only, and quality is the last thing on their mind. Try to get rid of them as soon as possible or serve them only through a low-cost-to-serve channel like an online ordering system.

The 20-60 rule
The final goal should be to have at least 20% connoisseurs and 60% realists. Whether you like it or not, you will always have some penny-pinchers. The secret to success lies in identifying what each customer cluster values and then serving it through the most cost-effective channel.

If you have no connoisseurs in your customer base, it is probably a good time to rethink your business practices and completely eliminate value-added components from your product portfolio. Another alternative is to spin-off the value-added services group as a separate unit and sell these only to those customers who want these on a “pay-as-you-use” basis.

The popularity of downward price auctions has been boosted by pricing pressures that are the norm today in almost all end-use segments of the packaging industry. Accordingly, there is a trend to treat products as undifferentiated commodities and thus ideal for purchasing through an auction. In my assessment, this is a trend that is not going away. Therefore, rather than denying it or continuing to believe that you are not a supplier of commodity products, my recommendation is to move fast and change as the market realities change.

At the end of the day, you have to provide what your customers want, and there is no way a company can survive without recognizing this simple truth.