Deliver Faster

by breeve 24. April 2012 15:23

Benjamin Graham in his book Intelligent Investor advocates an approach to investing called value investing—buying stocks below their intrinsic value. No one internalized Graham’s value strategy better than Warren Buffet. Buffet knows the returns come not from buying the undervalued stock but rather what happens when the market realizes its true value.

Just as Buffet’s dedication to value investing earned him greater profits, businesses can earn greater profits by delivering their products and services faster. In a world where companies compete selling similar products, the ability to deliver faster will generate not only more business but also higher prices.

The book Competing Against Time illustrates the benefits of delivering faster. An example highlights Atlas Doors which makes industrial doors. In an industry growing at 5 percent with deliver dates between 12 to 15 weeks, Atlas takes only 3 to 4 weeks to deliver a door while growing at 15 percent. Not only were they growing faster, their profit margins were 5 times higher than the industry average.

No one was more sensitive to time than Atlas. Typically when a customer calls to request a door they might have to wait as long as a week for a response. Atlas automated its order system linking engineering, pricing, and scheduling. Now 80% of order inquires can be answered while the customer is on the phone. The factory machines were upgraded to reduce changeover times along with a custom system to track the parts in production so they arrive at the shipping docks at the same time. While competitors were saying their customers will wait for their doors, Atlas was busy stealing them away.

But if machine setup times and supply chains plague manufacturing than group organization and workflows plague the software industry. For example, many software shops struggle to fix customer bugs in a timely manner. It may take 15 weeks to deliver a door but it can take years to deliver a requested bug fix. So few organizations have solved it that many just expect to lose a certain percentage of customers due to unresponsiveness.

The truth is more complicated. Most organizations are set up in vast pyramids with each group reporting to the group above it. Communications between groups is minimal at best. Some reported bugs simply never get routed to the proper group and the ones that do may not get prioritized and scheduled correctly. Worse, some bugs need collaboration from multiple groups to fix.

Beyond the communication issues lies process problems. Most companies incorrectly try to fix problems by working a new process into the existing organization rather than reorganizing the people to work around the new process. In Competing Against Time they introduce the concept of closed-loop teams. A closed-loop team includes everyone needed to handle a process. In banks instead of passing the loan application through different departments with different processes and lead times, one group is formed including credit analysis, asset appraisal, and senior bankers for fast response times. All the decisions for the approval of a loan can be done in one small effective group instead of three uncommunicative ones.

No where have I seen the concept of closed-loop teams applied better in the software industry than at National Instruments. So important is fixing customer issues fast that they staff actual engineers, called application engineers, on the front lines. When a customer calls in with an issue they won’t be speaking to a generic customer service representative but to an actual engineer who can usually solve their issue on the spot. Putting engineers on the front lines costs money but the fast customer turnaround creates loyalty and willingness to pay more for products.

As vertical software segments mature and competing software packages converge to the same features, competing on time may be the only way to differentiate yourself. Customers might not tell you they value time but make it a priority and you will be rewarded.

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About Me

I am a Principal Engineer with 13 years experience developing and releasing software products. I started developing in C/C++ then moved into .NET and C# and have tech lead multiple projects. I have developed products in Windows Forms, ASP.NET/MVC, Silverlight, and WPF. I currently reside in Austin, Texas.

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Pickaxe - An easy to use web page scraper. If you know a little SQL and how basic CSS selectors work, no web scraping product will be easier to use.

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