Solution should be cost effective and implementable, finance people need to better understand operations and customers should be willing to pay for both service and solution.
By Srinivasa Moorthy
First, company is into manufacturing an item (I don’t want kick up any issue here so I am calling the product as “ITEM”) with a production cycle time of 15-18 hrs. But critical aspect is the measurement of parameters at the 8th hour of the production cycle. The time window available for measurement is just about 15 mins. With in which they have to measure the parameters for about 10000 units. Today the process is manual and measurement requirement is not completely met. Above all, lack of measurement at the 8th hour is leading to final product failure to the extent of 8-10% (i.e for every 100 item 10 is scrapped). However, the product line has been telling the management the yield is close to 99% (one out 100 only is failing!). Rest of the organisation know the real story and the pressure is on the company to improve the yield. The IT team which realised and entrusted with the solution for the issue reached out to me and we demonstrated a Proof of Concept meeting the requirement end to end. In fact the solution we proposed is so transparent that anyone can the see production status online. We gave the final proposal and the customer knows the RoI. However, the production team has stonewalled saying this solution is not needed because it is expensive and RoI is far away. Above all the yield is close to 99%. The real intent is that once the solution implemented their game will be up and they (product team) will be in trouble. After pursuing for a month we just stopped following up knowing very well that the company will soon feel the pinch when the competition beats them in their game.
Second one is entirely different, this is beverage company which wants to measure their liquid product’s volume under production continuously. Their products are stored in tanks and there is a risk of loss in volume due to weather and related aspects. Even though they have 10,000 tanks in a day they will measure the volume only for 200 – 300 tanks only as the measurements have to be done once in 15 days only. By the way, currently they are not doing any measurements. Being in a backward area they can afford to have manual labour to do the job. So when we proposed a solution, we proposed a semiautomated solution with measurement being automated through IoT, but the instrument will be carried by manual workforce to each tank that has to be monitored. After presenting the proposal, customer said he wanted 100% automation and despite our warning they insisted on a proposal. Once the proposal which had one IoT “Thing” per tank customer felt it is expensive (yes it was!) and said they can’t afford. The interesting fact is, the operation head is convinced that the semi automated process will help him in his operation in a great way. Since the management is not convinced he is keeping quiet. In fact I did ask him why he is not expressing his opinion to the management as he is responsible for the production. He says if he pushes for the solution the management will think that there is some vested interest.
I do have two more cases exactly in the same situation and we have not given proposals as we see the solution will disturb the existing situation and there will be no cooperation. So there are three lessons I have learnt after this and want to share.
- Your solution may be real, cost effective and implementable. But if it is going to disturb the existing scenario in the client organisation chances are high it will never be implemented.
- CFOs who control the finance worry about the present and never about the future. They have no clue about especially nimble competition. They just worry about classic P&L and veto any investment which has a longer payback. Almost all the companies CFOs whom I interacted are very powerful than the operations team have bigger clout. Unless the MD/owner is hands on and understand the operation, it is very difficult convince the bean counters with technology and efficiency. Most finance people never understand intangibles!
- Under these situations many of the prospective customers ask for a “OPEX” model where they are willing to pay for the service but not for the solution. While this is attractive, for the startups funding such a large amount and long payback period (close to 3 years) is a challenge. In addition customer winding up and not paying is an additional risk.