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DPI Interview
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"We had no Internet strategy," says CEO Heinrich Bossard. "We had a lot of e-activities, not necessarily with just the Internet. We had customers and suppliers linked up. We had EDI connections of all kinds, some order placement and of course communications through e-mail. We were doing all kinds of these things, but there was no strategy for it. We felt we were using too many resources with no focus. We needed to give it that focus."
Heinrich Bossard had come to the realization that they not only needed to develop a strategy to set technical priorities - but also to detect threats to their business that the Internet might create, such as an e-competitor that could emerge and obsolete their business model.
"We had taken the Internet seriously from the beginning," he says. "We had tried to stay ahead in technology. We knew the Internet could be an important part of our business, but we could also see that it was possible for someone to make us obsolete if they used the Internet in the proper way, and we didn't. So it was in some ways a defensive wish to have an e-Strategy to protect ourselves from becoming obsolete."
For a company like Bossard, it is inevitable that the Internet will be, more and more, a cog in its business machine. With its head office in Switzerland, and sixty service locations worldwide, the company is a global supplier of "C-Parts". C-parts are essential to the integrity of finished products yet the parts themselves contribute little to the cost and value of a product. But Bossard doesn't manufacture the parts. It is in effect a value-added reseller. Bossard's customers in many cases are multinational producers of anything from medical devices to electronic instruments, to railcars.
As Heinrich Bossard explains, "In industry there are A, B and C parts. An A-part is the strategic part, which has a high value and a high impact on the product. Then there are B-parts, which are of lesser impact, and the C-parts, even less. C-parts could be electronic components or tools or roller bearings or rubber elements or oil or whatever. Our specialty is fasteners. Actually the C-parts are about fifty percent of the item which the industrial customer is buying. They take about fifty percent of the cost of purchasing, and only about five percent of the value. Which means the product itself, the C-part, cannot generate any competitiveness for the customer. Even if he gets it for free, it's a few percent of the final product. And the process of having that many items, and having them in stock all the time, the right qualities and the right standards, is a hassle.
"We had analyzed our business and it came out generally that of the total cost of a fastening, the total process of fastening, only fifteen percent is the hardware, like the washers, the nuts and bolts. Eighty-five percent is the process - sourcing, purchasing, stocking, logistics and the actual assembling technology. So if we can help a customer reduce this eighty-five percent of the cost, we can generate forty to seventy percent savings on that, and thus reduce his product cost by ten to twenty percent. This sells more tractors, it sells more scales, it sells more machines. When we reduce the price on the total cost of a commodity item - by ten percent - it affects the competitiveness of the customer. That is why they outsource this whole process to us. Our goal, our focus, is helping our customer increase his competitiveness. This is our aim. And we can do that because fasteners are still the most used C-parts."
Bossard's services become an essential part of its customers' operations, a critical link in JIT manufacturing systems, removing the burden and lessening the cost of such non-core activities.
To that end, Bossard has developed a sophisticated and unique process-from helping the customer select the right part for the product as it is being designed, to managing inventory on the factory floor through innovations such as the SmartBinTM. The SmartBinTM is a stocking bin equipped with a weight sensor, which enables Bossard to monitor, through a computer, the precise level of inventory at any given time. This allows Bossard to connect the entire supply stream from the fastener producer to the production line. Obviously, the Internet can serve to make this kind of process faster, cheaper and more effective. And Bossard was well into its efforts to realize the benefits the Internet might convey.
As most companies did, Bossard started with a home page, and built piece by piece from there, quickly getting into much more exotic systems to support these services and deliver further value to the customer. Says Chief of Staff, Julius Brun, "The Bossard Group had a homepage in 1996, redesigned in 1999. We also used the Internet for internal and external communication. In 1999, we had various projects using the Internet. We are in the process of building BossCalcTM, a program to calculate the right fastener application, and BossCADTM, an application allowing the engineers to download CAD drawings of fasteners into their own CAD drawings. But we didn't have an e-Strategy yet. These applications were built to support the overall business strategy, but we realized that we were starting to build various e-applications without a clear e-Strategy. So we decided to build an e-Strategy for the Bossard Group. We did an evaluation of different possible ways to do it, and the DPI e-Strategy Process was the most convincing."
Among the other approaches considered were those proposed by Internet solution providers, each with their own products and systems to sell. Bossard's management preferred to use a method which would allow them to examine the possibilities without the bias toward specific solutions that solution providers might be inclined toward.
Says Brun, "With DPI, what attracted us was the Process. They do not bring a solution, they bring you a process. This is our business and we know how it works. That's why we are best suited to know how to get the answers. One of the companies we screened wanted to buy us plane tickets to Silicon Valley right away and show us this or that - totally solution oriented. That's not what we wanted."
Adds Heinrich Bossard, "Actually, DPI's methodology is process oriented without distortion of the content. We weren't, at that point, looking for a particular solution. We were looking for a process to help us decide what we wanted the Internet to do for us. DPI's way gave us the opportunity to develop our own strategy using their instruments neutrally, without bias toward a specific solution. They acted like a metronome. We had to play the piano, but they provided the metronome. They didn't try to impose any solutions. I always watched out for that during the process. I would say DPI managed it well."
One of the obstacles most companies come up against in creating e-Strategy is that the people involved have widely disparate understanding and ideas about the Internet and its capabilities. This is quite natural, given the newness of the technology. After all, for most business people the Internet has really only become a commercial reality in the last three or four years. This syndrome makes it difficult to even frame the discussion. There are no models to follow and no common language among the participants. Bossard's management group was no exception.
Comments Mr. Bossard, "The understanding of the Internet among our managers was highly varied. We had a core of people who felt they were experts. And we still had people who believed it was a fad and it would go away. We had people who thought that this is the last thing we should do now, let's wait until there's more experience in the market. And others who felt if we don't do it now we'll be lost. Actual knowledge about the Internet, I would say, was generally higher in some than in others and opinions as to what we should be doing varied all over the map."
The Bossard team found DPI's e-nablersTM invaluable in cutting through the confusion, bringing a clarity that they lacked and badly needed. "The concept of the e-nablers did a lot of things," says Bossard. "It really demystified the issues by navigating through the amorphous mass of e-information. Before, we had a kind of a jungle developing. People were saying have you heard of this, have you heard of that, people went to seminars, and were saying why don't we do this or that, everybody else is doing it, why aren't we further along? And DPI's Process helped us to navigate through that amorphous mass and develop a proper understanding of what we want to do or don't want to do. It gave us the ability to position these e-nablersTM in our minds and have a common understanding of what we are talking about. We can label it and grasp what it is. This is a Market Exchange. This is a Portal. Later on in the process this helped us to understand which ones would help and not help us, but it was mainly mental, to understand what we are talking about. Are we talking about a Portal, or are we talking about a Market Exchange or are we jumping from one into another? It gave us a common Internet language which the management now understands. So when we say we want to do this or this or this, we know what we're talking about."
Once an understanding of the e-nablers was established, Bossard's people were directed in the exercise of determining which e-nablers might impact each of Bossard's core business processes. Then these impacts, plus or minus, were prioritized based on a filter created by the overall business strategy.
"I think it was absolutely necessary to look at this map of our processes", says Brun. "It's a must to do that, because first of all, you have to have an understanding of what you do. So you have to map out the business processes. And when you do that, you have a common understanding of what you are doing on quite a high level. And then once you look at this and reflect and apply the e-nablers to it, all of a sudden you say, 'Aha, that's where this one belongs. Aha, that's the way that works. Aha, that's how it could affect us. Aha, that's what we should do.'"
So a picture of Bossard's Internet future began to take shape. The top people now were able to see, from a strategic viewpoint, which of the various e-nablers would help or possibly damage them the most. It would now be possible to begin to generate a list of high- and low-priority e-initiatives, with a rationale for each rooted in the company's business strategy.
A Look At e-Competition
With an analysis of the internal processes nailed down, Bossard's people prepared to turn the company inside out. It was time to look at their business model from the perspective of competitors - known, existing competition, and e-competitors that might emerge in this new Internet environment. The objective was to determine their areas of potential vulnerability, or new opportunities where they might incorporate elements of new e-business models into their own.
The next two steps in the DPI Process called "Competitor.com" and "Killer.com" helped them to envision the future business "seascape" in order to develop a plan to deal with it.
Say Julius Brun of the Competitor.com segment of the DPI Process, "If you put yourself in the shoes of the competitor, you look at things from a different perspective. We found both Competitor.com and Killer.com very interesting, inspiring and challenging. We gave Killer.com special brilliance and asked sixteen young professionals, none over thirty, to create the Killer.com."
The object of this exercise was to flush out every CEOs worst nightmare - the upstart dot-com with fifty million in venture capital whose goal is to put the company out of business.
As Heinrich Bossard recalls, "We brought together these sixteen young people from all over the world. These are good ones, flexible, international ones. This was an excellent experience, on the one hand to see what these kids can do, and on the other hand find out where we are vulnerable, and what opportunities we have."
Heinrich Bossard relates the power of this step in the Process, "The benefit to creating the Killer.com is to seriously work through a clear business plan for this new e-competitor that might appear and see how the company could work. We looked at several possible cases carefully and some of these young guys really thought they could beat us. They were motivated. They were in a winning mood. One guy said to me when I came into the room, 'You're a dead man walking.' I was surprised but I liked it. It meant they were committed to seeing the worst-case possibilities. The end result tells us what we need to anticipate, and what elements we can incorporate now."
The debate as to the possible impact of these potential e-competitors goes on, and the real future impacts cannot be defined to a certainty, but forewarned is forearmed, as the saying goes.
Says the CEO, "It showed us that some of those fantastic ideas cannot really hurt us too much. A Killer.com might reach some segments which are not our core segments, but it could definitely not gain those segments which are our core segments. It shows where we have to be prepared for defense and where we don't have to, especially in areas where the total value of our services is not just product, where we have a richness of skills and capabilities that the customer requires and would be very difficult to duplicate. We feel that the pure Killer.com solutions, which are very, very much price dominated, could not replace our Engineering and Logistics services because that's against the general tendency in the industry. People want technical services with the product. They can't fully replace those services, not the way we do it today. We are already much further along than our competitors, and actually we often win in pitches because of our profound technological background and our logistics, even when we are more expensive. How would an auction or how would a price-oriented system deliver those services? This was the Killer.com team's big headache. How could they overcome the very strong technical competence of Bossard? It takes up to two years for a customer to tie up with us fully to tap all the resources, and it's very hard to imagine that only short term auctioning would let our customers risk all those achievements. But maybe I'll be wrong. We'll have to monitor it because we have the Killer.com concept and we will not forget it. We are using important elements of it. We have included it in our plan. Now we know what to look for. And if we see a Killer.com company coming up, we will be very alert to certain issues. So thanks to DPI's approach we know how e-competitors will be likely to impact us."
Today, Bossard Group embraces a comprehensive e-Strategy that supports the company's business strategy. Because the Internet is evolving daily, the e-Strategy will continue to be monitored and debated - evolving as new knowledge, technology and ideas present themselves. Yet the Bossard team now has an agreed-upon basis of understanding from which to build.
"For us, the DPI e-Strategy Process was of tremendous importance," states Heinrich Bossard. "We were in a situation of destabilization because of the Internet. We felt insecurity and had conflicting solutions. We were at different stages of awareness, for instance USA vs. the rest of the world, or believers vs. disbelievers. And all this has changed into a controlled management process with measurable results.
"We know what to do now. We have an e-Strategy. We have always had a clear business strategy and the fact that this process allowed us to be careful not to have the e-Strategy take us away from our business strategy was very important. The management was deeply involved, so we have a complete communication of the e-Strategy. We are now able to say yes or no to new ideas, whether they're a fit or non-fit, because we have an e-Strategy. We know where we want to go. Before, it always made us nervous when something new came up. This has helped us arrange our resources better. So instead of tons of new and confusing ideas, we have an orderly approach. Our management now speaks one language so communications about new processes are better. I can see that it would have some major impacts such as reduced risk of becoming obsolete and flexibility to tackle new opportunities. Our overall strategy is an excellent one at this stage. It really matches the needs of industrial OEM's in all major parts of the world including China, America, Europe. We really have services that go at the core of the current needs of the OEM's. Today e-enabling those processes isn't really generating more business yet but we might become obsolete if we don't and somebody else does. So it's an offensive activity with a defensive character. For me this is strategically of the greatest importance - how I can protect my company from becoming obsolete in this new environment!"
