In the exploitation sub-theme, the goal is to market and sell the actual developed product, eventually scaling from a small user base to the fully envisioned user population. This activity usually consists of a variety of tasks:
- Supply chain activities
- Product lifecycle management
Each of these tasks will briefly be explained in the remainder of this section.
SUPPLY CHAIN ACTIVITIES
“Supply chain management is the streamlining of a business' supply-side activities to maximize customer value and to gain a competitive advantage in the marketplace. Supply chain management (SCM) represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible. Supply chains cover everything from production, to product development, to the information systems needed to direct these undertakings. (..) Typically, SCM will attempt to centrally control or link the production, shipment and distribution of a product. (Investopedia).
Many supply chain management models exist, and most of the time the decision on which model to employ depends on the specific situation of the organization. A basic supply chain system is the result of an effort to integrate the following logistics (Basu, 2009):
• Inbound logistics
• Manufacturing logistics
• Supply logistics
• Distribution logistics
• After sales logistics
While several ‘supply chain revolutions’ can be identified, three of them are at the root of the past developments in the supply chain industry. The first revolution in supply chain management occurred around 1920, and is often referred to as ‘the Ford supply chain’. The Ford Motor Company had managed to build a tightly integrated value chain. They controlled everything, from the mining up until the delivery of the finished car to the customer, which took only 81 hours in total. However, as the famous saying goes, Ford would offer any colour, as long as it was black: the whole chain was highly efficient, but inflexible. Customers were more and more asking for a wider product variety, and for this supply chains needed to be more flexible. This was the start of the second revolution, which took place during the sixties. The Toyota Motor Company decided to take only the final assembly and manufacturing of key components in-house, while using key suppliers for the delivery of the bulk of components. These suppliers were part of the ‘keiretsu’ system, a set of companies with interlocking business relationships and shareholdings. As these key suppliers were located close to Toyota’s assembly plants, set-up times were reduced significantly: the first steps towards a lean production system were taken. A problem related to the ‘keiretsu’ system came to the surface when Toyota tried to set up assembly plants in different parts of the world. The suppliers had to be taken with them, which proved highly costly. A very tight relationship with suppliers could also lead to suppliers with much power and thus a liability. This led to the third revolution, labelled the ‘Dell supply chain’, which took place between 1995 and 2000. Dell leveraged information technology to provide their customers with the option to customize their computers. Dell assembled to order, and maintained medium term relationships with their suppliers to remain flexible in the selection of suppliers. (Shah, 2009)
These three major revolutions have mainly been fuelled by an increasing dynamism in the global market, and describe a trend towards more agile supply chain management (often referred to as supply chain management 2.0). Supply chain management is still evolving, and it is to be expected to see a further evolution to highly agile competency networks.
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Another important exploitation step is the actual production of the invention. A proof-of-concept will already have been developed during the elaboration phase, however this will likely not be ready for the end-user market yet. The proof-of-concept is merely a test product to prove that the required functionality has been developed and is feasible to exploit. However, this POC will not have been nicely designed, nor will it necessarily have been developed with user friendliness in mind (unless this was an explicit requirement of the POC). Moreover, the POC has been produced as a one-time effort, and no thought-out production process has been put in place yet. The production step will thus consist of at least the following steps:
• Further design/development of the product
• Reach out to suppliers for the necessary resources
• Instalment of the production process (how, where)
• Decide on service offerings around the product
As global manufacturers are aiming to provide more sophisticated solutions than their smaller rivals in pursuit of high-margin growth, they are building closer relationships with customers. In order to achieve this, it can be seen that manufacturers are positioning their facilities closer to end-markets. An evolution from off-shoring towards near-shoring can be seen, as it is believed that the latter is highly effective at improving agility, lead times, risk management, information flow and total cost. (KPMG, 2012).
Besides the choice between off-shoring and near-shoring, the production process model itself needs to be defined. Roughly said, two types of production processes exist (Kumar):
• Made-to-stock production process: products are produced and placed in stock before the product is sold.
• Made-to-order production process: products are only produced after an order has been received. No stock is maintained.
The made-to-order production model fits in the evolution towards far-going product customization: customers want to be able to define their own unique product. However, as the made-to-order model is often very difficult and expensive to maintain, many organizations are moving towards a third type of production process: the assemble-to-order process. In this model, the company produces standard modules (before an order is received), which can then be assembled together to a unique combination after the order has been received.
Production processes can also be categorized as either a continuous production system or a intermitted production system. Continuous production systems (e.g. mass production) have little or no flexibility to produce varieties of the same product, whereas intermitted production systems (e.g. batch type production processes) can be adapted to produce another, similar product. (Kumar)
Distribution can be defined as “The manner in which goods move from the manufacturer to the outlet where the consumer purchases them; in some marketplaces, it is a very complex channel, including distributors, wholesaler, jobbers and brokers.” (Entrepreneur).
Several distribution models exist, and the choice between them often depends on various factors relating to your product: some products need to be kept in the refrigerator, while others can be stored in open space. Whilst this section will not go into too much detail in describing all existing distribution models, it is an important aspect to consider during the exploitation phase. A trend, especially in B2C markets, can be seen towards increasing supply chain velocity, mainly in consumer markets (Permenter, 2012). Direct distribution models selling directly to the customer, such as employed by Dell, are often seen as favourable over more traditional distribution models including distributors. However, not all markets will benefit from this approach. Direct selling often requires market knowledge and an organization solely focused on producing will have to go through a steep learning curve before arriving at an adequate maturity level which allows it to distribute directly to the customer.
Some products sell themselves, but most products need a marketing mechanism to persuade consumers. One definition of marketing is the following: “Marketing involves activities aimed at getting a client to buy and sell a product or service. It includes advertising, selling and delivering products to people.” (Harrington, 2014). Whereas in the early days the strategy of marketing was based on the assumption of infinite resources and zero environmental impact, this has radically changed in the last decades. Companies must balance more carefully their growth goals with the need to pursue sustainability. Increased attention will particularly be paid to employing demarketing and social marketing thinking to meet new challenges. (Kotler, 2011). It is clear that several trends in the marketing area can be identified, however the basis of marketing which was laid in the 60’s is still true. Marketing includes the coordination of the 4 P’s of marketing (McCarthy, 1960):
• Product: What product or service are you going to sell?
• Price: How much are you going to charge for your product?
• Place: Where are you going to sell your product?
• Promotion: How are you going to promote your product?
However, many marketing specialists see the 4 P’s as too product-oriented, and are replacing the P’s by 4 C’s, which are more customer-oriented (University of Maryland):
• Product becomes Customer needs and wants
• Price becomes Cost to the user
• Place becomes Convenience
• Promotion becomes Communication
Marketing is essentially a question about how to bring the right product at the right cost in a convenient way to the customer, and adequately communicating these three properties to the customer. It is hard to excel at all four C’s (or P’s for that matter). Apple Inc. Company is one of the few companies who have achieved this. Their iPods and iPhones were products that provided the customer with what he or she was really searching for. The high prices for Apple products are based on the value the customer places in the product, rather than the actual cost for the company. Apple only sells the iPhone through selected sales points, which only adds to the hype. At the same time, they make sure every customer is able to conveniently purchase their product. Finally, Apple’s marketing strategy is a well thought-out piece of art, which was primarily based on word of mouth communication and secretive events (keynotes). (Academia.edu)
To summarize, marketing is important in order to develop a demand for the product. This is particularly important in the PACS space, as many people see security more as a right than as a product that needs to be purchased.
To quote Harvard Business School’s retired professor of marketing Theodore C. Levitt, “selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product. It is not concerned with the values that the exchange is all about. And it does not, as marketing invariably does, view the entire business process as consisting of a tightly integrated effort to discover, create, arouse and satisfy customer needs.” (Levitt).
Many sales methodologies exist, to support organizations in achieving a high sales performance. A sales methodology is “the how of selling as a skill set” (Sales Benchmark Index, 2012). Without a sales methodology, salespeople will be confused about the steps they should take to sell the product. While many sales methodologies exist, the following is a brief overview of 6 popular sales methodologies (Snider).
- SPIN selling: SPIN is an acronym for the four types of questions salespeople should ask their clients: Situation, Problem, Implication, and Need-Payoff. Situational questions aim to provide an understanding of the prospect’s current understanding, whereas Problem questions try to discover the core issue the prospect is having. Implication questions trigger the prospect to think about the consequences in case the problem persists, and the Need-Payoff questions prompt the prospect to think about how the situation would be in case the problem would be resolved.
- Conceptual selling: Founders Robert Miller and Stephen Heiman felt it was more important to firstly understand a consumer needs, before trying to sell a product (Miller & Heiman). Customers buy a concept which solves a problem they are having, rather than a particular product. The goal is to engage into a talk with the customer, revealing his or her current issues with smart questions. The ultimate goal is always to end with a win-win situation, by selling a product that solves the customer’s issues.
- SNAP selling: SNAP is an acronym that encompasses four directives for sellers: keep it Simple, be iNvaluable, always Align, and raise Priorities.
- Challenger sale: Matthew Dixon and Brent Adamson started the challenger sale methodology by stating that every B2B salesperson fits into one of five personas: relationship builders, hard workers, lone wolves, reactive problem solvers, and challengers. They argue (and back it up with research) that the challengers represent 40% of the top-performing sales reps. They then clarify what makes a challenger effective at selling.
- Sandler sales: Rather than the seller convincing the buyer to buy, the buyer is almost convincing the seller to sell in this methodology. The main reasoning behind this is that a seller should not invest to many resources if it is not sure that the buyer will eventually buy.
- CustomerCentric selling: This methodology encourages sellers to put up the role of a ‘consultant’, rather than a seller. The seller should thus help the customer in solving a problem or achieving a goal, and must truly believe that this will be achieved by the product that is being sold.
After-sales is the provision of services, support and spare parts after marking an initial sale (Wikipedia). It is generally accepted that it is important to adopt a good after-sales service management to adequately serve the customer. An after-sales service management system can take several forms and many best-practices, such as the use of a single point of contact (SPOC), exist. Being able to quickly deliver a product, an adequate CRM system, feedback from the customer, etc. are important parts of an after-sales service management system. (Choudhary, 2011).
PRODUCT LIFECYCLE MANAGEMENT
“Product lifecycle management (PLM) is a strategic business approach that applies a consistent set of business solutions in support of the collaborative creation, management, dissemination, and use of product definition information across the extended enterprise, and spanning from product concept to end of life-integrating people, processes, business systems, and information. PLM forms the product information backbone for a company and its extended enterprise.” (CimData, 2002). Product lifecycle management thus encompasses several different phases, from ideation to the end-of-life of a product. A large part of the PLM has thus been described in detail in the previous sections; however it is important to see that the following stages exist in the product lifecycle (Wikipedia):
Whereas the development phase has been explained in detail in the previous sections (ideation & elaboration), the introduction, growth, maturity, and decline phases are part of the exploitation stage. A PLM process should be put in place to follow a product throughout these different stages, so as to be able to take the right courses of action, depending on the stage the product currently is in.
The exploitation subtheme is a challenging theme, containing several activities which culminate into a whole that is complicated to manage. The IPACSO framework aims to provide the reader with a generic course of action regarding the exploitation stage, but does not strive to equip the reader with a fully detailed grasp on all actions that need to be taken in this phase. IPACSO’s main purpose is to assist an organization in its innovations, rather than in its exploitation of these innovations. However, IPACSO recognizes that an exploitation stage is an inevitable outcome and might even be the main purpose of innovation processes, which is why this brief section introduced the reader to an overview of actions that are required during exploitation.
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