2. Why do companies exist?

3. Where are the Teeth? Over the last half of the 1990s, we were all a little bit too shareholder focused, too growth-at-any-cost focused. I tried to get people to flip that around. If we create brands that make a difference to our customers and focus on the fundamentals, ultimately shareholder growth will take care of itself. A.G. Lafley, CEO at P&G Over the last half of the 1990s, we were all a little bit too shareholder focused, too growth-at-any-cost focused. I tried to get people to flip that around. If we create brands that make a difference to our customers and focus on the fundamentals, ultimately shareholder growth will take care of itself. A.G. Lafley, CEO at P&G

4. Companies exist to meet customers’ real needs, profitably! There is only one valid definition of business purpose: to create a customer. Peter Drucker

5. Meeting Customer’s Real Needs News flash: Consumers are actually willing to part with their money! As Marketing Requested It! As Sales Ordered It! As Engineering Designed It! As Manufactured! As Installed What the Customer Wanted! Creating a Satisfied Customer

6. Meeting Customers’ Real Needs To meet customers’ real needs, two processes must be managed effectively and efficiently: 1.New product/service development (the idea infrastructure). 2.Product/service creation and delivery (the physical flow). To meet customers’ real needs, two processes must be managed effectively and efficiently: 1.New product/service development (the idea infrastructure). 2.Product/service creation and delivery (the physical flow). As Marketing Requested It! As Sales Ordered It! As Engineering Designed It! As Manufactured! As Installed What the Customer Wanted!

7. The Idea Infrastructure IBM PC Microwave food Diet Coke Lean Cuisine Macintosh computer Super-premium ice cream Chrysler minivan Tartar Control Crest Athletic footwear USA Today Swatch watches Nintendo video games SPF sunscreens New Coke IBM PCjr Yugo LA Beer Home banking Pontiac Fiero Disk camera RCA SelectaVision Generic products Fab 1 Shot Holly Farms roasted chickens Hits and Misses of the 1980s Which have you heard of?

8. The Company Marketing Logistics ProductionNPD Supply The Idea Infrastructure Customer $ ervice, $ atisfaction, & $ uccess Objective Strategic Linkage Value-Added Functions Core Competency: Cost leadership Differentiation Value Proposition: Cost, Quality Delivery, Flexibility Innovation Resources People Information & Performance Control Systems Materials Technology Infrastructure Remember, Finance is the Language of Business

9. Can we meet customer needs profitably? The Idea Infrastructure The Cycle of Satisfaction Meets Customers Real Needs Achieves Verifiable Profit Get into the Mind of the Customer Conceptualize & Develop a Product Verify Viability Customer needs! The Source of Satisfaction? Creating a Satisfied Customer

10. Getting into the Mind of the Customer Marketing is the Gateway to Downstream Customers What the customer buys and considers value is never just a product. It is always a utility, that is, what a product or service does for him.” Peter Drucker First comes the willingness to rethink, fundamentally, what products are & what they do. Kenichi Ohmae Techniques for Understanding Customers: Surveys Focus Groups Expert Panels In-depth interviews Shadowing Ethnographic Studies Low High

11. Getting into the Mind of the Customer First comes the willingness to rethink, fundamentally, what products are & what they do. Kenichi Ohmae What the customer buys and considers value is never just a product. It is always a utility, that is, what a product or service does for him.” Peter Drucker Satisfaction Emerges from the Customer Interaction

12. Conceptualizing & Developing a Product New Product Development is the Future! The long-term competitiveness of any... company depends ultimately on the success of its product development capabilities. Steven Wheelwright & Kim Clark Knocking Down the Walls: The Sign-off The Integrator The Cross-functional Team The Cross-functional Department Who Should be on the Team: Marketing R & D/Engineering Finance Manufacturing/Operations Sourcing Logistics Suppliers Customers

13. Target Costing Process: Supplier Development Design Change Material Change Specification Change Cost Trade-off New Product Roll-out & Continuous Improvement Target Costing Process Cost Breakdown to Detailed Level of Component/Service TargetTarget Target CostPriceProfit =- Establish Target Sales Price Identify Product/Service Characteristics Verifying Financial Viability Six-step Process Measures of Financial Viability: Net Present Value Economic Value Added Can we justify the cost of bringing a new product to market?

14. Verifying Financial Viability Who Sets the Price? Customer Expectations Competitors’ Offerings Target Price Company Uniqueness For many, pricing power has vanished!