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e-Expertise in Industry Issue #17
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May 2003

In this issue...

Quote for today
"Nurture your mind with great thoughts" - Benjamin Disraeli

Feature Article: "Saville Row Training"by Edwin Ecob

When it comes to training, especially sales training, one size does not fit all. There are generic sales training courses, for example solution selling methodologies, which can be delivered "off the peg" - with or without "minor modifications" to meet specific company-wide requirements. Whilst these courses are certainly necessary, they are not sufficient to fully equip the sales force for the challenges they face. To use an analogy, sales skills training can be thought of as "helping sales reps learn how to sing". This leaves a clear gap for the sales reps to learn the songs which enable them to demonstrate their skills. In this context, the songs are the relevant industry issues and the ways they are addressed.

In the featured article in Issue 15 of Cambashi's ezine, Mike Evans spoke about our experiences "out on the road" giving industry training to sales people. The core of these workshops has been explaining how to call on different line of business managers ready to discuss business drivers, business initiatives and the pains the managers are experiencing. We have observed a change in the profile of the workshops we are asked to deliver. Instead of broadly based "production industries" sessions, now the interest is in specific sectors, and individual accounts.

In any analysis of the manufacturing industry at a "big picture" level, some business drivers and business initiatives appear time and again. Phrases such as "Increased competition", "cost reduction", "the impact of globalisation" and "faster time to market" are found in almost any industry analysis, irrespective of sector. Even something as specific as environmental legislation is a major business driver in industries as diverse as electricity production and forestry.

Corporate responses to some of these business demands are often similar from one organisation to the next. Many companies are involved in outsourcing not just support functions but "core" activities such as design and manufacturing. In large organisations, merger and acquisition activity is an almost ubiquitous business response to increased competitive pressure and the need to cut costs. Juggling the balance of "central" versus "local" control of resourcing decisions is another familiar response.
However, as soon as we take a closer look we find that in addition to these shared business drivers, there are also many that are industry specific, for example, patent expiration and the rising use of generic alternatives in the pharmaceutical sector. Further, even within an individual sector, the initiatives an organisation takes to respond to the external influence vary from organisation to organisation. One company's response to an increase in the cost of a raw material may be to change supplier, another's might be to redesign using a different material. These differences can relate to internal differences as diverse as the company's financial position, or in-house skill sets.

There is a similar situation looking inside companies at their use of technologies. So, for IT, there is a common set of applications which companies are "expected" to have / want / need - ERP, CRM, SCM and so on. However, the way a company applies a new application such as CRM - and the particular functionality it uses - depends on the company's focus. For instance, it may seem obvious that call centres are more prevalent in end-user facing companies, such as utilities, than they are in engineer to order companies. However, for a CRM sales rep to succeed, he needs to understand how to interpret and use these differences to put together the winning offer.

Companies are moving on from Manufacturing "101" and "201" workshops (which can last anything from a half day to 3 days - including factory visit!) to workshops focussed on a particular industry sector typically at the level of "food and beverage" or "consumer electronics" or "automotive". These workshops allow exploration of the drivers and responses in much more detail whilst allowing our clients to position their solutions in these sectors.

Indeed there is increasingly a requirement for this type of workshop at individual account level. While the business drivers mentioned earlier are common across industry sectors and there are some "typical" reactions to these pressures, most business responses and initiatives depend on the particular account, where its priorities lie, what technology it has in place, and so on. If a "sector" approach is used, care has to be taken when categorising accounts as belonging to a particular sector. For instance, whilst both Ford and Goodyear must respond to external drivers of the automotive industry such as over-capacity, they must also respond to other business circumstances. In the case of Goodyear, this may be the availability and price of rubber. As far as their internal manufacturing processes are concerned, the two companies are completely different whereas, for the big picture of supply chain planning, there will be a substantial overlap regarding geographic market expectations

So to sell effectively into a major account, the sales person has to be aware of both the external business climate and the internal situation within the account. Few, if any, major IT initiatives involve only one decision maker within an account. As an example, consider an account that has decided to respond to competitive pressure to reduce costs by rationalising its supplier base with a particular focus on direct goods. This initiative will probably be driven by the procurement / purchasing department. It will also involve engineering, quality and logistics departments and probably others. It may involve many plants in different countries

The salesperson proposing an IT solution will need to act as a facilitator, linking the various departments and also engaging with the IT group. Traditional sales skills will allow them to discover allegiances and rivalries. However, industry, business and account knowledge are key both to maintaining engagement, and jumping the hurdles of the investment decision-making process. For example, claims that a particular solution will give an ROI of x% cannot be made without a thorough analysis and understanding of the client's business, leading to a specific business case for that account. Fortunately customers are very often open to this approach. They like the fact that the vendor will work with them on their data to develop a business justification that they can present to their management.

The role of the sales rep has changed. They are at once a provider of business information, a source of references, an internal communication channel and a business consultant. To meet the needs of this extended role, the training provided has to change from "off the peg" to "Saville Row". Email Edwin Ecob for more details on how to provide Saville Row type training to your sales reps.

Edwin Ecob

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Hot Topic: Money, money, money

Nick Ballard describes how demand in local currencies shows the real extent of weakness in the engineering applications market

Vendors of engineering applications continue to suffer from lack of demand for their products. Our survey covers classic CAD vendors, analysis and simulation vendors and engineering document management vendors with publicly available filed accounts.

The graph on our website plots the average vendor revenues per 3-month period for the Euro against the US$ since Q1 2000, when the exchange rates were pretty close to parity - €1= $0.988. At the end of this period, Q1 2003, the Euro rate has, for the first time, gone beyond the $1 mark - €1=$1.07282. This means that the Euro has effectively risen by nearly 10% against the $US in this period.

With most of the Q1 2003 financial results announced, the above chart gives two main messages:
1) 2003, regardless of which currency view is taken, is not looking as though it is the end of the downturn for EMEA. The peak of Q4 2002 was less pronounced than the previous 2 peaks in 2001 and 2000, and the trend continues downwards.
2) Whilst the picture in $US may be more positive, showing a small (2%) increase over Q1 2002, when we look in Euros, the measure of domestic demand, we see a sharp fall over Q1 2002 of some 15%.

This decline in investment in engineering applications is consistent with the pattern of investment in the European economies over the last two years. The latest (February 03) forecasts by PwC show investment picking up in 2003, but we rather doubt whether engineering applications will be in the frontline for this investment. Other areas such as industrial automation appear to offer better business cases in the short term - and with today's economy it is the short term that matters.

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How to help your customers make money! by Allan Behrens

I hate to be the bearer of bad tidings, but our research tells us that investment in engineering design applications was down last year, with a further decline predicted this year. After a year of wars, bombs and natural disasters, design solution suppliers are looking for light at the end of the investment tunnel.

An interesting observation is that a number of companies selling analysis and simulation technologies are seeing increased sales, as they did last year. Take MSC Software. Last quarter worldwide revenues were up 28% over last years' results. Ansys Inc., another major analysis company saw revenues increase over 15% compared with the previous year.

So what's the difference between the analysis and simulation market and the design solutions market? We'd argue that the answer lies in the inability of vendors to present their products in a light that delivers positive business value. The board of directors wants to see profit, not technology. They want to hear about positive cashflow in short timeframes with minimum risk. Gone are the days when you could justify an investment because of its great new features or long term benefits.

Generating a business case that conforms to the typical user's internal rules on capital returns etc. is not easy. It often involves processes to manage the risk that benefits won't be achieved, several departments may have to sign up for a particular saving. Simple return on investment is not sufficient.

Successful implementations of engineering design and product data management improve sales capability, reduce time to market, improve production throughput and reduce service overheads. They reduce overhead costs by reducing inventory, manufacturing rework and prototype costs. They improve engineering innovation, efficiency and capability. They allow companies to integrate suppliers and customers into the development cycle, improving the quality of product and service. They reduce risk and encourage greater product and service differentiation. Benefits are delivered throughout the lifecycle of a product to numerous stakeholders.

For example, by improving part reuse in design, manufacturing inventory can be reduced and product quality improved. In addition, fewer spares are required to be stocked for service, and procurement is able to achieve more favourable prices on these parts due to higher volume discounts with fewer suppliers.

One of the major issues is that vendors are not able to articulate this message to their potential customers. Their use of acronyms doesn't help. Customer research developed for last year's Cambashi Seminar showed that customers often don't understand their suppliers. Customers want to hear how benefits can be achieved in their business, in their language.

Engineering design and associated data management solutions deliver significant value to customers but vendors must develop more competent business and customer centric sales arguments. Money talks, and the more money you can make for a customer, the more they'll listen.

Allan Behrens

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Book Review: Key Management Ratios by Ciaron Walsh is reviewed by Allan Behrens
FT Prentice Hall £21.99 ISBN 0-273-63529-8

These days, sales representatives selling IT for Industry have to knock on a lot of doors and some of these doors have accounting professionals behind them. We have to communicate with these individuals in their terms. For those of you looking for a better understanding of company and corporate accounts, this book should prove a valuable reference.

It provides clear and well constructed insight to company accounts and values using simple examples. The reader is led through core concepts into often hidden details of company (and corporate) figures. Starting with investigations in balance sheet and profit and loss accounts, the chapters investigate cashflows, profit, loss and stock movement. More sophisticated concepts of liquidity and corporate values build on initial concepts to allow useful comparative investigations into corporate security and value.

To its detriment, example accounts use only the US format and are referenced in dollars. However, the non-US reader can, with a little extrapolation, apply them to local practices, as they are detailed in a manner applicable to most common businesses. This book should prove useful not only to managers but also to executives wanting to analyse customers and competitors.

Allan Behrens

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Noticeboard

Postscript to the Cambashi Seminar - Stopping the decline?

"We already know that 2003 will be tough" - our words in the last issue and, as if to prove the truth in these words, the effects of the economic climate combined with the War on Saddam forced us to postpone our seminar. But, because of the significant interest shown in the content of the seminar, we have repackaged this as a powerpoint presentation which is available by completing the Free Information form (the presentation is the first on the list) on the Cambashi website.

DTI/MANist: Framework 6 IST: Succeeding in the 2nd Call

Cambashi partners with TUV to provide the MANist service on behalf of the UK Department of Trade and Industry. MANist helps UK organisations, interested in IT in manufacturing, win funding support from the European Commission's "Information Society Technologies" (IST) programme. IST is one component of "Framework Programme 6", which is a 4 year, 16.2 Billion euro programme to support Research and Technology Development.

Following the success of the Framework 6 IST Launch Event organised by UKISHELP and MANist in October 2002 another joint event is being run to discuss the objectives and challenges of the 2nd Call for proposals.

The event is being held on the 10th and 11th June at the Hertfordshire Moat House, UK and will include plenty of opportunities to hear from Commission Speakers, attend workshops and network with other proposers. A special Beginners Session will be run on the first day for less experienced proposers or those needing a brush-up before the weightier sessions on the second day which will go into the detail of the 2nd Call.

A Conference Dinner will also be held on the 10th June for delegates, speakers and exhibitors.

The 2nd IST Call under FP6 is anticipated to open on 17th June and close on 15th October 2003 and is expected to have a budget representing more than Euro 525m for IST.

DAC: Design Automation Conference 2003, takes place in Anaheim, USA from 2nd to 6th June.

A full list of industry events can be found at IT Industry events on the Cambashi website

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