Post #39,175
5/18/02 9:58:42 PM
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Manufacturing proprietary stuff is the only way to make...
a buck. Manufacturing commodity stuff is folly. Sad, but true. So you are right on with the box makers. Dell thinks it can do this at lower cost than anyone else, but could be copied.
In the services market, you do have a shot. The "Big Guys" charge a lot, so you have a price umbrella to work under. I sub-contracted with the part of AT&T that is now NCR and CSC (Computer Sciences Corp.) and these guys charge the customer about triple the rate my (one-man) company charged them for my time. There are small businesses that can't afford them and yet have needs. The problem is connecting with them and also know how to weed out the ones not worth doing business with. That's tough to do. I'm sure Andrew could tell you stories about that.
To stay profitable, a company needs some kind of real (or perceived) edge on it's competitors and work on maintaining that. No one seems to do it, on and on.
Alex
"Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing had happened." -- Winston Churchill (1874-1965)
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Post #39,178
5/18/02 10:31:05 PM
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I don't believe that
It is possible to make very good profits in a commodity business. What you have to do to do it is first get your overhead as low as possible, and then minimize your turnaround time from expenditure to revenue.
Think Walmart. Or McDonalds. Outlays turn into revenue very fast, many times per year, resulting in healthy annual profits.
Just in time sounds silly when you first hear it. But if it reduces the time from expenditure to revenue by a factor of 2 then someone in a commodity business doubles their annual profit (actually they do better because of savings on warehousing).
Of course this isn't a business model that is consistent with taking risks, being innovative, or doing research. But my opinion is that this is where open source is taking the entire software industry, so it is a model that is worth giving some serious thought to.
Cheers,
Ben
"... I couldn't see how anyone could be educated by this self-propagating system in which people pass exams, teach others to pass exams, but nobody knows anything."
--Richard Feynman
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Post #39,180
5/18/02 11:03:24 PM
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Re: I don't believe that
I agree that the battle is on the controlling the expense side because it's cutthroat on the revenue (i.e. product pricing) side. The big guys you mention do have the advantage of being able to squeeze their suppliers more than their smaller competitors. Indeed, companies like Home Depot, bypassed some distributors, who were once their suppliers, to deal directly with manufacturers in the Far East.
But, I hasten to point out, the companies you mention are not exactly manufacturers but retailers. Now, Dell is both, and it is doing all the things you say and has gained market share in a declining PC market. H-P/Compaq could, over time, adopt the same business model. Then, Dell would lose its edge and margins for all would drop. After all the consolidations, look at how few disk drive manufacturers there are compared to the past. They're losing money as well.
Alex
"Men occasionally stumble over the truth, but most of them pick themselves up and hurry off as if nothing had happened." -- Winston Churchill (1874-1965)
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Post #39,183
5/18/02 11:57:38 PM
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As a market matures . .
. . it trends to a state where there are a very few large "economy of scale" producers dominating the market, and a larger number of small botiques to serve those who need/want something the volume producers can't provide - and very, very little in between.
PC manufacturing is going this route rapidly, because under the Windows monopoly there is no significant innovation except in marketing - definitely a mature market.
[link|http://www.aaxnet.com|AAx]
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Post #39,227
5/19/02 6:19:09 PM
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Applies in manufacturing as well
I used retail because that is visible.
But both Kimberly Paper and Gillette stand as excellent examples of manufacturers in commodity businesses who had excellent earnings year after year.
The economic principles are the same. In commodity businesses, aim for low overhead and rapid turnaround.
Cheers,
Ben
"... I couldn't see how anyone could be educated by this self-propagating system in which people pass exams, teach others to pass exams, but nobody knows anything."
--Richard Feynman
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Post #39,182
5/18/02 11:29:57 PM
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So your advice to the young would be . .
. . "don't go into programming, because it's all going to be done in India to reduce overhead"?
I can't really say that I don't agree with that.
As a side note, Microsoft's XBox assembler, Flextronics, is closing XBox production in Hungary and moving it to China for lower cost. Former Communist countries are getting too prosperous, so it's time to move the work to a country that's still Communist. Capitalism at work!
"The downfall of the Capitalist system came when it ran out of underdelveloped countries with repressed populations to provide exploitable workforces."
[link|http://www.aaxnet.com|AAx]
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Post #39,198
5/19/02 3:40:47 AM
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Da tovarisch, kewlovitch____ but
pleased be not speakink louds on wonderful ways we havink with words in the new speak. Is beink not good for the babushkas to listened.
I am nyever firget first time am hearink Green Chri$tma$, by Komrade Stan Freeburg, dollink. Is bringink tears with eyes.
er that is, thou sayest - but try to 'teach that'; it's gonna be Guantanamo, steerage class. (is that like bat guano?) 'Course if the gamers got no more couth than the UAV types, and continue to buy that Box no matter what? Self-immolation. Fun to watch. Die Yuppie Scum (local bumper sticker)
OR:
Tried to find a CD today at Tower, of Nakariakov (Russ trumpeter phenom). None of course. Said - what's the discount, if you order it? She: "none". Said - I don't pay $16 to RIAA for anything. She: "what's RIAA?". Asked, what ya think they pay the artist? etc. etc. Couldn't believe = <$1 and thought it was kewl to just pay the $16 and buy her own CDs there. Too much trouble to notice. Anything at all.
Yup, she and the Box-gamers think alike. And the Suits love 'em all: Just That Way. Unconscious.
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Post #39,181
5/18/02 11:05:07 PM
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Yes, many of the businesses with the greatest need . . .
. . are simply too cheap to ever have systems that work (not too cheap to buy that new Mercedes SUV, though).
Qualifying customers is very important. If the guy you talk to has a copy of Computer Shopper on his desk, it's time to say, "I'll get back to you", - and then don't. If he's got time to sift through Computer Shopper, he's going to be nothing but trouble.
Further, when he needs something done, since you charge "a lot", he'll bring in a relative who works cheap, who will screw up everything 'till it doesn't work at all, then blame it on you, 'cuz you "did it all wrong". Then he'll expect you to come in and fix it all for free (and do that other thing he needs while you're there).
I still laugh over one woman who called many years ago (as you can tell by the rate I quoted her). She gave me her story about how her "computer guy" had been working for more than a day to get a modem working, and it still didn't work. I told her I did lots of modems and could probably get it working pretty quickly, and at only $60 per hour. "Oh", she said, "No, that's way too high. The guy who's working on it only charges $35 per hour".
It's very hard to be a generalist, because then you end up having to do all the work yourself. Specializing in, say, cabling, auto-id and barcode, backup systems, a particular POS system, industrial controls, etc. makes it possible to train others to do the work. This does, however, require far more and better marketing.
Never do stuff "on the cheap" to save a customer money - it's a losing proposition. Offer a solution that costs enough to work well and properly, and put in enough for good support, and if they say they can't afford it, politely decline the work. Otherwise, the client mentally associates you with that cheap stuff that doesn't work quite right and bad support, and when they're a little more prosperous, they call in someone else to do it right. That's the guy you want to be.
[link|http://www.aaxnet.com|AAx]
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Post #39,185
5/19/02 12:15:04 AM
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Big companies can be just as bad
My dad does auditing and quality assurance consulting mostly in the power industry. And many of those companies are worse then the small fry I did computer consulting for. You can forget getting paid in less then 60 days, the ones that are good with paying their bills time things so the bills are paid 60 to 90 days after invoice.
The bad ones take 90-150, assuming they didn't 'lose' the invoice or something else didn't go wrong. If that happens don't expect to see your money until you hire a lawyer or they need to hire you again.
One company my dad did work for was so bad that the UPS guys wouldn't take anything off or put anything on the truck till they had a check in hand. Took my dad the better part of a year to get his money from them.
Jay
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Post #39,186
5/19/02 12:42:23 AM
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. . and in government too.
One of my clients has the Navy on C.O.D. because they can't pay their bills. It isn't that they don't want to, they just don't know how.
[link|http://www.aaxnet.com|AAx]
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Post #39,199
5/19/02 4:07:07 AM
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Heh.. I beat IBM
When I gave a sample of Tweek (the "contact enhancer" for 'dry' electrical connections) to Jerry Pournelle, at the SF Computer show, he named it Product of the Year ('85?) second to the original Laser Jet (!) This after he fixed an annoying keyboard intermittent.
I agreed to peddle small qty. orders to individuals and Cos. as sample/test orders (so he listed address in his column). IBM (Research Lab IIRC) wanted 10. Wanted me to invoice them. Said, not setup for that - send a check or MO. Wasted another letter re-asking. Week or so later a check arrived. Always wondered if they found out what a bizness advantage it could be: if your stuff had fewer intermittents, infant mortality failures - than your competitor's (?)
(In my experience.. most just didn't get it! The stuff worked - still does. All board edges, IC-sockets get Tweeked when I get something in. Just 'fixed' a SCSI board today, with some: BIOS chip not making contact. A lazy droid would have sold her a new board without even looking.)
Got the money from IBM in 7. Then shipped. [cackle..] But when the guy who did most of the design on Osborne1 wanted one: it was free :-)
Believe this-all has deteriorated in recent years; no such trouble in the audio consulting days with say, Crown, Revox, Marantz, or local distribs. If you were late-pay more than once: dogmeat.
Ashton
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