Sunday, August 12, 2007

The CEO’s Dilemma

If you are a regular reader of my blog you will almost certainly know by now that on the 14th. of September 2007, my book 'Making a Difference' will finally be launched onto the market. For this week’s blog I have decided to share with you a section from the end of Step 2 in the book ‘The CEO’s Dilemma', exactly as it appears in the book. You may also know that as from the 14th. of September onwards you will be able publish your own solution to the dilemma directly on the book’s website. By doing so you could also win some great prizes, including admission onto the Vlerick Management School’s course ‘Mastering Interim Management’ (worth wore than 4150Euro’s + VAT), or an Acer TravelMate Laptop computer and many other prizes (the website will have more details on or around the 14th.). For now you simply need to know that your answer (or advice, however you like to call it) must not be longer than 500 words.

Because I am in a generous mood, I have one additional bonus for my blog readers: If, when you have read the dilemma, you would like to ask a question directly to either David the CEO, or John the Sales Director, or Peter the Production Director, or Samantha the Marketing Director, or indeed to Matthew the CEO’s bank manager, you may do so by using the comments section of the blog. You will receive an answer….

'The CEO's Dilemma'

David, the CEO of an electric lighting manufacturer, saw that year on year his profitability and sales were falling behind, to the extent that urgent action had to be taken. He was losing market share and at this rate his business would go bankrupt in less than 18 months. So David called his senior managers into his office one by one and asked each of them the same question.

First he asked John, his loyal sales director: “You’ve worked with us for fifteen years, why do you think it is that in the last five years our results have become steadily worse?” The sales manager thought it over and said: “The problem is that the market is changing faster than we are – we have been too slow to adapt. Our range of lighting is far too limited; we need more models, more colors, we need to offer our distributors a complete product range so they don’t look elsewhere. We have to become their sole supplier, so we don’t lose so many deals to outsiders.”

The CEO then called in Peter, the production director, and asked him the question. Peter replied: “The problem is that we have been adding more and more products to our range. We now have so many varieties of every type and color, that our production costs are running too high, because the production runs are too short and uneconomical. The solution is simple: cut all the models that are not selling well and reduce the number of colors and varieties for the others. In short, trim down our catalogue and offer only what is economical to manufacture. We may lose some business, but we’ll become far more profitable.”

Next the CEO called in his youngest board member. “Samantha, as Director responsible for marketing what do you suggest we do to turn around our worsening financial results?” “That‘s easy”, she answered, “Go up market, go direct. We have become too remote, our product range is too narrow and old-fashioned. The production department cripples us by telling us that things can’t be done! Our customers know what they want, we just need to offer it to them at a price they are prepared to pay. So what we should do is shut down our production, source all the lighting products globally, and re-brand them with designer labels endorsed by celebrities. We keep in touch with our end customers by opening showrooms in strategic locations, staffed with trendily dressed lighting consultants, and we cut out the distributors by selling directly on the Internet.”

Lastly the CEO spoke with his bank manager, Matthew. He had known him for twenty years and they had built the business together, the bank having provided the loans for starting up and subsequently met their financing needs, whether for production equipment or new offices. Matthew suggested: “If I were you David, I would complete the modernization program we have so often discussed. After all it’s been more than ten years since you last purchased new machinery. The machines you have are no longer as efficient as they could be. Without new equipment, you can never become as cost-efficient as your Asian competitors.”

The CEO went home for the weekend and reviewed the four basic arguments that his advisors had put forward. Each of them was so confident of his or her approach, that they had all guaranteed sure-fire results. But which way should he turn? He made a single PowerPoint slide summarizing each of the four key arguments. Much to the annoyance of his wife, he pinned it to the wall beside the bed so that he could focus on it before going to sleep. He told her that it could mean life or death to the business, and that the quality of their retirement years depended on it. Although she wanted to help him she could only say: “David, go to sleep. In the morning everything will be much clearer, and you will work it out.” Sure enough, the next morning David woke up and came to a decision.

22 comments:

Yves Hanoulle said...

I would start by putting all of these people around the table and let them talk to eachother.
Let them explain why their idea is so much better then anybody else. Or figure out how they can combine idea's.

Bertrand Potier said...

Considering the relative consensus on the need to act on the Production (either to decrease its costs or increase its flexibility), I would want to discuss with Peter once more and discuss with him about the possible alternatives, ranging from full outsourcing to investments into new production equipments.
Peter, what about a mixed solution where the core production would be
outsourced while the personalisation, customisation and more advanced products would be done internally on renewed production system? On top
of your current responsibilities, you'll also be managing our outsourced production partners. What do you think?

Peter the Production Director said...

Dear Bertrand,

I do not agree with you that there is a consensus with regards to production. The Problem, as I see it, is with Sales. They simply keep adding more and more products to the range. And Marketing does nothing but encourage them! All this foreign travelling and business internationalization, I am not sure its what our business needs.

Ten years ago, we had a nice tight range of high quality, dependable products, with a loyal stream of distributors and re-sellers. Today there’s no strategy, it’s all over the place. One minute I am making this, the other I am making that! We still have a few models that consistently sell well, year in year out – we should stick to them.

As for managing the outsourced production, that’s not for me. Where would it be, India, China? That means more travelling! Outsourcing is not as easy as it seems, you have to make sure they make the units exactly as we do. The quality of the foreign production units, that I see, is nowhere near what we can make, apart from some of the Scandinavian and German brands, but they are more expensive than ours. But even they are beginning to move their production to China.

No, I am not interested in managing a foreign plant, I have enough issues here in our own factory, if I take my eye off this, we will be in even more of a mess. I am in favour of manufacturing a limited range of high quality products, right here. I don’t mind some special customization units for very high value clients, but not all the time and certainly not the junk that sales and marketing want us to produce.

Filip Van de Vliet said...

Hello David,
In order to help me make my decision, could you tell me how you personally judge the expertise, reliability and teamworking attitude of each of your senior managers?
Thank you.

David, CEO said...

Dear Filip,

It might seem a little odd, but I always find it difficult to comment on the expertise of my team and especially the senior management team. Apart from Samantha, who has only been with us for just over two years, I have known Peter & John for a very long time and what I can tell you is that they have always been extremely loyal to me and the company. Matthew too has always given me good advice and been very supportive when needed.

As far as I am concerned they are all very professional and obviously highly experienced in their work. But I have never worked for another company, so I find it difficult to compare them with other directors. Obviously, over the years I have come across similar people in similar positions (especially with suppliers and at trade shows etc.) and sometimes I am very impressed with what I see and wonder what my business would have been like if they were working for me instead.

So to be concrete, I would say, that I find my directors to be sufficiently expert in their roles, especially Peter – he knows everything anyone can know about lamp unit production. They are all extremely reliable, always on time, very dedicated, hardly ever take a day off (even for holidays), they work together pretty well, always remain polite in board meetings, even when the discussions get a little heated. It is obvious to me that often, in disputes with Production, Samantha and John tend to pull together, which was obviously not a problem before we had an ‘official’ marketing director. However, I am not aware of any deep seated animosity and when the debating is over, everyone gets on with their work as normal and the subject is closed.

Kind regards,

David
CEO
Atlantic Lighting Ltd.

Werner Peiffer said...

Hello David,

In order for you to devise a strategy that really works for your company, it is important to be crystal clear on the one aspect of your business that meets the following two constraints: what is it that you and your team can do better than anybody else, and that in the same time you and your team are really passionate about? It can be anything: provide better quality lamps than anybody else, be the cheapest, be the one that can best/fastest build to order, be the one with the sleekest designs, be the one with a distribution network that runs deeper or broader than anyone else's... Literally any aspect of your business will do as long as that is what you and your team truly excel in (do back it up with facts; personal convictions -yours nor those of your directors- will do) and as long as it gives you and your team true professional pleasure.

Before getting back to me you might consider doing a group session with your directors on this topic as such session might reveal deeper seated animosity than meets the eye in daily operation. It will be good to get such differences of opinion, if any, on what is the true core of your business, out in the open.

Now, in all fairness, I'm giving you here a tough assignment. Maybe there will not be a single thing that all of your directors and employees are unanimously fond of. Well, that's OK! As long as the vast majority is really behind it, you may have identified the cornerstone of your business.

Good luck! Hope to hear from you soon.

Kind Regards,

Werner
Director
GETBIS Business Improvement Solutions Ltd.

David The CEO said...

Dear Werner,

Your question / suggestion is gratefully received. I will give it some careful thought and come back to you, once I have discussed it with my board, I have some ideas of my own, but I will follow your advice and discuss it with the team first!

David, CEO said...

Dear Werner,

We had our monthly board of directors meeting this morning, which I extended by half an hour to carry out the exercise you suggested. I must say the results were very surprising. I thought we were going to have a great deal of dissention, and conflict but strangely the team very quickly came to one unifying point (there was not any doubt about it)!

You asked ‘What can we do better than anyone else?’ and ‘What is the team passionate about?’ The answer was striking:

‘The Brand’ Everyone agreed we had a fantastic brand. The Atlantic Lighting name in the industry spells ‘quality’. Many of our competitors are really jealous about it. Our paint finishes are better than anyone’s, our general finishing of non coated products is easily as good, if not better, than any of our competitors. Our overall quality is excellent. We pride ourselves on ‘no rough edges anywhere’. Even our switches are better. No jagged clicks, just nice, smooth, confident, ‘clonk’ sounding switches - or very smooth gliders (on our dimmers) that give the feel of re-assurance and quality. The whole board was unanimous on this, our brand, our quality.

(At trade fairs our competitors are always trying to squeeze out of us how we do it so well. They turn our lamps upside down and even shake them to hear if there are any rattles or loose joints).

The conversation during the brain storming session also spun on to our flexibility. We can make almost anything. We can make important customizations at very short notice. We are also able to switch from one kind of product on a given production line to another at very short notice. ‘Our customers do not have to wait for our quality’ is what John pointed out, during the meeting. For Peter and Samantha it was ‘The Brand’ that stood out. The only person missing was Matthew, but I phoned him this afternoon, and after first saying ‘good quality products at realistic prices’ he quickly confirmed that indeed it was the brand and its perceived quality that stood out as the most important element of the business.

I hope this helps you in your assessment? I am very curious to hear what you recommend for our business. But I know I have to be patient and wait for your report, after the 14th. of September 2007.

Kind regards,

David
CEO
Atlantic Lighting Ltd.

Philip said...

My questions to David are: How long does this company exists and what was the business strategy/positioning in the beginning? And what is it now? Seems to me that the company has an identity crisis. By wanting to do too much and forgetting the essentials(spine) of the company profitabily has decreased... In one way or another the company has grown in the past (by following the business strategie/positioning) and now the company has lost its profitability...

David CEO, Atlantic Lighting Ltd. said...

Dear Philip,

In fact you are asking me three questions, which is not what the exercise really permits, however I want to help you formulate a good solution for me as obviously it is in both our interests to find a really good solution.

Atlantic lighting was formed in 1951 by my Father Brian, originally we made a very small range of high quality desk lamps (you may know them as ‘angle poise’ lamps)? They were simple in design and worked extremely well. Our main customers, at that time, were government departments and offices of the Armed forces. In the 1960’s production was broadened out to cover domestic lighting, generally of slightly lower quality but still durable and in more attractive shapes and colours than our office range. (Our office lamps were only available in black or grey).

During the 1960’s & 70’s fluorescent or (TL) lamps became very popular in office environments and the angle poise lamp was in less demand. We were then forced to focus on new domestic markets and begin to look oversees for new business.

I am not sure I can agree with you about (as you put it) an ‘identity crisis’, we know who we are and our customers know us too. It’s really a matter of what to do next, which, I guess you call business strategy?

I hope I have given you sufficient information to complete your proposal? I would remind you, however, that some of my management team have also been quite candid in their responses and I advise you to also take into account their opinions too.

Your sincerely,

David

Matthijs said...

Dear David,

I would like to ask you to visit some of your most important end-customers together with Samantha in order to ask them:
- What's good about our products compared to our competitors?
- What do you think are the lightning products of the future?

David, CEO said...

Dear Matthijs,

Thank you for your suggestion. Samantha and I are going to visit some customers together next week next week, so I'll ask her to get back to you then. Expect an answer from her around Thursday/Friday.

Best wishes

David

Matthijs said...

Dear David,

I am pleased to hear that you appreciate my suggestion. Please, select the clients you are going to visit in such away that you expect that they willing to indicate as well how you can improve you products.

Best wishes, Matthijs.

Bernard-Xavier said...

Dear David,

After having mobilized and aligned your board of director around your basics (Who is Atlantic Lightning, what is your brand value proposition). You are starting to describe your problem by visiting your end customer. In the mean time I would like to understand the history of your investment on the production equipment. In addition I would need some explanation on your modernization program.

Thank you

Bernard-Xavier

David, CEO said...

Dear Bernard-Xavier,

Thank you for your question. Sorry for the delay in getting back to you but I was away with Barbara my wife this weekend for our 35th. wedding anniversary.

The history of our investment in production is really a tricky one because apart from some of the presses and cutting machines (which were purchased more than 15 years ago and are still working fine today), much of the production line was custom built in-house. (I myself am partial to designing the tools as I am, by training, an engineer. I did an HND after I left school, it wasn’t called that in those days, in Design Engineering). Five years ago, we put in a monorail roof track system that allowed us to move objects around the production plant from the ceiling as well as, or instead of the floor. This allowed us to get the components to the assembly workers, quicker, safer and easier than ever before.

The paint shop too has been modernized with a robotic spray system that allows us to automate the application of the paint finishes. This is probably our biggest single investment in recent years. We have three basic production lines, one small one that focuses on ‘specials’, this is mainly for one off custom commissions. If we have a big order for custom units, for a shopping center, for example, or the such like - the custom production line sometimes spills over onto one of the main production lines.

Most, if not all, of our production equipment is written off financially, apart from the one of the three fork lifts that we own. But I guess that is not really considered as production equipment? We have little or no debts.

Of course Mathew would like me to take out a big loan on the business to completely modernize our (as puts it) ‘antiquated systems’ but I have serious doubts as to whether the new machines could ever re-pay themselves as they are prohibitively expensive and often are not much better than the old ones, with very high maintenance costs and short shelf lives!

Hoping this answers your question for now?

Kind regards,

David

Francis said...

Dear David, can you please explain how the steering meeting decision process is fulfilled? I have indeed a strong impression that the many different & pretty contradictorily opinions of your management are caused by a lack of decision-making guidance.

Samantha, Marketing Manager, on behalf of David said...

Dear Matthijs

David asked me to get back to you on a question you asked him last week. Apparently you asked him to ask some customers what they thought of our products, if you had asked me, I could have told you straight away, but I understand that David promised you to get back after some customer visits we did together this week?

The problem for marketing Atlantic products is the question, ‘who are our customers’? I like to think of our customers as being the people who switch our lights on and off, whereas I am constantly being reminded that our customers are the companies who we invoice! (These are mainly distributors but also include a handful of large department stores who insist on buying direct).

Since I joined Atlantic I have struggling with this question, and coincidentally this week, David and I have been doing a little tour of a few clients (he likes to do this to ‘keep in touch’, as he puts it). So we have visited two distributors and two retailers, one in London and the other in Bristol. But I have taken the trouble to double check your question to David and I notice you wanted to know what our end customers think, the question for which I have written below are what our distributors and retailers think about our company.

However I can answer from the end customer point of view because I have conducted numerous surveys.

As you probably know we have more than one range, but taking into account our ‘Classic’ Range, which is really what our end customers repeatedly ask for, the answer is clear, the fact that our lamps are classic clean designs, elegant, very reliable and (most important) when they buy one of our lamps they know it will become a family airloom, something that will last, something that they can hand on their children. David has on his desk in the office one of the very first lamps that his father made back in 1951, it still looks great and neither the flex nor the switch has ever been replaced!

From our ‘Highend range’ our customers like these because they are basically the ‘Classic’ range but with either more chrome or even gold plating. In the high end range we have more elaborate desk lamps, with weights and counter weights, our customers choose them because they know they are getting the best. We like to think of ourselves as the Rolex of desk lamps!

For the future our customers expect us to continue making exactly what we make now, possibly introducing a new model every two to three years or so. Our Classic range has not really changed in the last ten to thirty years, except now you can buy them in a whole range of colours that David’s father could never have possibly dreamed of.

Here is the answer to the question to the Distributors and retailers: I know it’s not the question you wanted answering, but I hope it helps?

David asked your question in this way: ”Why do you do business with us?”

The first person we asked was John Hemmings of Matherson holdings, a pretty big lighting & interior furnishings distributor near Oxford. he’s the chief buyer of electrical goods for retail. His answer was amazing, and I quote “1. Because you give me no hassle! Your goods arrive nicely packaged, ready for retail, they are almost never damaged (except for the time when that clown forgot to lock down the tail gate of the truck and a whole pallet crashed on to the loading bay! 2. Because I don’t have to work ie my retailers know your products, they know what sells. My margin is ok (could always be better)! ;-) 3. Your quality is great and I like doing business with you guys. You’re old fashioned, you know the game, I like that.!

The second distributor (Kinch Distributors, Alan Freeman of Nottingham), David asked exactly the same question, the answer was very similar, basically they answered: ‘Quality, no complaints from the end customers (peace of mind) and consistency in personnel. Apparently he gets fed up with other suppliers whose sales office girls are constantly changing. He likes to know who he is dealing with. + He likes the personal invitation from David every Christmas to show and shopping weekend in London, his wife loves it because they get to see a show and do some last minute Christmas shopping at the same time.

The two retailers gave very similar answers (I am not allowed to mention there names, company policy, I am afraid, not until we begin with a contract with you) but they said they liked dealing with us because they almost never get complaints from their customers. One said “People either like what we have and are prepared to pay for it, or they think that it is wasted money, they either want the Atlantic label and quality or they don’t). There are loads of cheap imitations on the market, but that’s not what our customers want, that’s why we don’t stock your budget range” one of the retailers said.

David, CEO Atlantic Lighting Ltd. said...

Dear Francis,

I personally believe that Atlantic Lighting has remained such a successful company for so long because of the fact that our decision making process is strong. The problem today is, because we are running at a net loss, everyone has their own opinion about the best way forward, apart from me. I used to be so self assured, now I am not so sure, that is why I am looking for an Interim Manager to offer advice and to eventually step in and help out.

We have Senior Management meetings (Director meetings) on the last Friday of every month, with small weekly meetings every Monday, when the team are around (often John is away for these meetings, so we tend to focus on the more administration aspects, such as orders outstanding, cash flow and the such like).

The structure of our meetings is very conventional, the meeting begins with my secretary going though the items outstanding from the minutes of the previous meeting. We then discuss whatever is required. Of course as the CEO I always have the deciding vote, or the last word, as I do not like voting. I find that sometimes the minority can be right. I try to go for a consensus but these days, it really is not possible. When we were making money and there were no jobs at risk, small differences were easily dealt with, but as you can see, Marketing, Production, Sales and Finance all have their own opinion and this time I simply must arrive at the right decision, but for the first time in my life, I am not sure what it is. Please be assured, when I know what direction to take, I will take, regardless of the cost. Atlantic Lighting Ltd. comes first.

Hoping this helps?

Kind regards,

David

Claude said...

Dear David,

You should probably take a bit of everyone's advice. Ultimately finance should be heard as a modernization plan to upgrade your current production facility will probably be a much-needed side effect of the decision you'll have to make. New machinery
is needed as it will not only bring costs of production down, but also allow for a more versatile and up-to-date production facility.

It seems to me that you should go back to the 'drawing board' with Samantha initially, and carve out a new marketing plan suggesting the penetration of market segments where Atlantic Lighting (A.L.) products are either #1 or #2.

Your Director of Production is (also) right as A.L. should probably seek to streamline its catalogue and focus on product lines where A.L. is the clear 'leader of the pack'.

A.L.is known for it uncompromising quality, longevity and little to no 'customer returns/complaints'...this fundamental set of value proposition is where you need to focus!

In practicality you'll probably need to sit down and dissect your p&l statements by product lines. (if you have not done so yet) The result of this exercise will most likely help you and your senior mgt. team to get rid of the loss-generating lines and focus on doing what you do best, what your customers and distribution channels seem to praise A.L. for (provided of course these – in-demand products- are profit-generating product lines, or at least have that prospect in the ultra short-term). Everything seems to point to the Classic and High-end range as being the most profitable lines/range.

18-months-to bankruptcy is not catastrophic, but at the pace our world is going it could be too late for A.L., so the number 1 priority should be to 'stop the bleeding'...today!

Obviously your major clients/distributors are extremely satisfied with your services and products...and that's GREAT NEWS for Sales!

Sales should use a reference-model whereby current (extremely happy:) customers would act as references in praising the many merits of doing business with A.L. and the overall quality of their #1,2 products. Use your satisfied customer base to reach out to new clients and prospects…and grow your revenues! John should probably re-visit the reasons for loosing deals to outsiders and work on a better ‘sales pitch’…the world is moving on, and sales techniques that were appropriate years ago may or may no longer be relevant today!

Another thought could be for Samantha to look into the high-end customization market, since it appears to be one of A.L. strength today, which can only improve with the new machinery! A new market could be at hand with the right marketing campaign...maybe a new 'ultimate desk lamp' gold plated for high-end 'wall street boyz',
or the "i-Lamp" with its own integrated iPod connector...etc

A lot of those high-end customization could be offered through a virtual web-based design platform, where customers and distributors alike could place their on-line customized or ‘plain’ orders! That said, I think it is naive of her to think she can ‘kill manufacturing’ as it exist and source all items globally…Manufacturing as it exists is probably what is keeping the perceived quality of A.L. so high, and that’s the last thing you’d want to kill!

I would also probably recommend for Business Development activities such as Strategic alliances and 3party networking to be emphasized…Would it be too far fetched to conceive a business relationship with a high hotel chains (such as Ritz, 4 Seasons, St Regis…etc) or group of hotels (such as Starwood), to include an A.L. desk lamp in every suite of their luxury hotels? How about offering the lamp as an award for the “frère lumieres” festival or any other film festival…Pixar uses a desk lamp as its logo…maybe A.L. could replicate/customize that lamp for a Pixar-specific campaign aligned with the release of their latest flick?

A quick SWOT analysis will probably suggest focusing on making A.L. the "Rolex of desk lamp" not just the perceived ‘best-in breed’. You already know A.L. to be just that…better marketing campaigns should be designed to get this message out FAST! God knows Rolex' are often customized (at least here in the US) and Rolex does not outsource its manufacturing to China, neither should A.L.

The branding should be re-articulated/emphasized around the key value statements of their Classic and High-End Lines: Elegance, great quality and overall reliability, prized family possession, authentic European craftsmanship...etc

I hope these few pointers will come in handy David! That said, don't forget that in every crisis lies an opportunity...and this could be A.L.'s chance (blessing in disguise) to re-capture and reinvigorate a market in which you are already the undisputed leader: Rolex-quality “Classic and High-end desk lamps” with a high degree of customization (color, gold, platinum, diamonds…you name it!)…this is your market.

A.L. has been somewhat derailed over the past few years, you just need to regroup, modernize and focus production on these few highly profitable lines so A.L. can come up with new model every couple of years which is what your (happy) customers want!

Just my $0.02 ... :-)

-Claude

Claude said...

Dear David,

You should probably take a bit of everyone's advice. Ultimately finance should be heard as a modernization plan to upgrade your current production facility will probably be a much-needed side effect of the decision you'll have to make. New machinery
is needed as it will not only bring costs of production down, but also allow for a more versatile and up-to-date production facility.

It seems to me that you should go back to the 'drawing board' with Samantha initially, and carve out a new marketing plan suggesting the penetration of market segments where Atlantic Lighting (A.L.) products are either #1 or #2.

Your Director of Production is (also) right as A.L. should probably seek to streamline its catalogue and focus on product lines where A.L. is the clear 'leader of the pack'.

A.L.is known for it uncompromising quality, longevity and little to no 'customer returns/complaints'...this fundamental set of value proposition is where you need to focus!

In practicality you'll probably need to sit down and dissect your p&l statements by product lines. (if you have not done so yet) The result of this exercise will most likely help you and your senior mgt. team to get rid of the loss-generating lines and focus on doing what you do best, what your customers and distribution channels seem to praise A.L. for (provided of course these – in-demand products- are profit-generating product lines, or at least have that prospect in the ultra short-term). Everything seems to point to the Classic and High-end range as being the most profitable lines/range.

18-months-to bankruptcy is not catastrophic, but at the pace our world is going it could be too late for A.L., so the number 1 priority should be to 'stop the bleeding'...today!

Obviously your major clients/distributors are extremely satisfied with your services and products...and that's GREAT NEWS for Sales!

Sales should use a reference-model whereby current (extremely happy:) customers would act as references in praising the many merits of doing business with A.L. and the overall quality of their #1,2 products. Use your satisfied customer base to reach out to new clients and prospects…and grow your revenues! John should probably re-visit the reasons for loosing deals to outsiders and work on a better ‘sales pitch’…the world is moving on, and sales techniques that were appropriate years ago may or may no longer be relevant today!

Another thought could be for Samantha to look into the high-end customization market, since it appears to be one of A.L. strength today, which can only improve with the new machinery! A new market could be at hand with the right marketing campaign...maybe a new 'ultimate desk lamp' gold plated for high-end 'wall street boyz',
or the "i-Lamp" with its own integrated iPod connector...etc

A lot of those high-end customization could be offered through a virtual web-based design platform, where customers and distributors alike could place their on-line customized or ‘plain’ orders! That said, I think it is naive of her to think she can ‘kill manufacturing’ as it exist and source all items globally…Manufacturing as it exists is probably what is keeping the perceived quality of A.L. so high, and that’s the last thing you’d want to kill!

I would also probably recommend for Business Development activities such as Strategic alliances and 3party networking to be emphasized…Would it be too far fetched to conceive a business relationship with a high hotel chains (such as Ritz, 4 Seasons, St Regis…etc) or group of hotels (such as Starwood), to include an A.L. desk lamp in every suite of their luxury hotels? How about offering the lamp as an award for the “frère lumieres” festival or any other film festival…Pixar uses a desk lamp as its logo…maybe A.L. could replicate/customize that lamp for a Pixar-specific campaign aligned with the release of their latest flick?

A quick SWOT analysis will probably suggest focusing on making A.L. the "Rolex of desk lamp" not just the perceived ‘best-in breed’. You already know A.L. to be just that…better marketing campaigns should be designed to get this message out FAST! God knows Rolex' are often customized (at least here in the US) and Rolex does not outsource its manufacturing to China, neither should A.L.

The branding should be re-articulated/emphasized around the key value statements of their Classic and High-End Lines: Elegance, great quality and overall reliability, prized family possession, authentic European craftsmanship...etc

I hope these few pointers will come in handy David! That said, don't forget that in every crisis lies an opportunity...and this could be A.L.'s chance (blessing in disguise) to re-capture and reinvigorate a market in which you are already the undisputed leader: Rolex-quality “Classic and High-end desk lamps” with a high degree of customization (color, gold, platinum, diamonds…you name it!)…this is your market.

A.L. has been somewhat derailed over the past few years, you just need to regroup, modernize and focus production on these few highly profitable lines so A.L. can come up with new model every couple of years which is what your (happy) customers want!

Just my $0.02 ... :-)

-Claude

Bart said...

Keep in mind: there's no time to waste. Or put it this way: there's no reason to waste time, as in this case time is money.

SWOT:

Strengths:

- quality
- staff
- sales channel
- brand image
- bank relations

Weaknesses:
- old product range
- expensive production, and partially outdated machinery
- no use of new sales channels (online)
- changed market trends not reflected in product range

Opportunities:
- sell more via new channels (online)
- revamp product range, sell via existing channels: split the production & the product range: a inhouse high quality & design brand, and a second product line manufactured (or bought-in) abroad: still high quality, but mainstream: less top edge exclusive design.
- bank is willing to loan the money:

Threats:
- change/people
- bank maybe changes its will to loan as you will be asking less for Capex (production), more for Opex (operational expenses, changes in organisation).


Short Term Action Plan:
* Talk to your bank about the new plan
* Replace your Sales Director: seems he had no ambition to translate the market's demands & trends correctly into the organisation, OR you did not give him the power to do so. Anyway, it's better to let him manage the Sales Channel, more on a relational level, and less on a Product Manager level (see next item).
* Hire a good sales guy: the type which really calls all day and drives around all day visiting his customers (e.g. architects)
* Headhunt a good Product Manager: seems (out of the old types still hanging around in the production and not being sold) there is not a good view on what the market wants.
* New Sales Channels: let your new marketing manager do some proposals for setting up sales via online channels
* Money from the bank: use it for new organisation, broadening product range, and marketing actions. Only part for new production tools.

Change is difficult. And too many too long talks sometimes lead to less than to more. Sometimes you need to take swift and hard decisions (like re-orienting your sales director) . Have a "New Horizons Meeting" as I'd like to call it -instead of a " It's 5 minutes to 12 meeting "-, making clear that only when you leave the railroad tracks you will see new opportunities.¨Propose the plan in high level, let them fill in the details. If you steer them well, you'll get there.

Looking forward to reading your feedback.

Kind regards,
Bart

David, CEO Atlantic Lighting Co. Ltd. said...

Dear Bart,

Sorry for the delay in getting back to you, I have been away on a short holiday. With the competition final coming up and the selection for an interim manager things are quite hectic here.

With regards to your suggestions, I find them very interesting but I would like to strongly advise you to submit them on the 'Making a Difference' website ('Enter the Competition' page) - it is not too late, but please be quick.

Yours sincerely,

David