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Thursday, August 11, 2011

KISS and DELL

A home built car is the most complicated consumer product in the world.  Your customer has to build or re build an automobile at home and you have to engineer some big boxes of parts that enable him/her do it.  The other side of the equation is the personal taste of each builder.  How do you combine the product into an offering that makes several segments happy and delivers on the manufacturing motto of keeping it simple to make?

KISS (keep it simple stupid) is a widely known engineering term that reminds all the creative tech folks in business to not let their abilities get the best of them.  Engineers these days can do amazing things with the tools we have available.  Even low budget operations can design intricate machines and products that can be realistically reduced to practice and sold commercially.  This is the problem.  KISS reminds us to keep it make-able and profitable.  Complexity is the enemy of any production operation.  If you want to go out of business just expand without adequate capital and talent.  My dad the operations management guru has a rule of thumb that has saved me every time I want to do a new project. going from one platform to two platforms does not double the complexity.  The details and tasks/follow up of a new platform is 4 times as complicated.  You can mitigate this by making the new platform as simple and as similar to the existing platform as you can...but complexity is the bugger that will sink your margins.

I will use my FFR experience as the perfect example of this.  In the beginning we had one platform and one product ...the ffr cobra replica that killed the category in 1995.  After a few years of the usual tough growing pains and investment we started cranking in the cash.  By 1998 the profit coming in had seven digits.  Time for a new product...the coupe.  Even though the coupe was a new car it was really our first car with a new body and a stretched frame.  90% of the parts used were the same as the first car.  Even though it was a new car it was made the same way with the same cuts in the tubes, the same wiring, the same engines, the same transmissions, and the same rear end.  Operationally it was STILL a challenge to incorporate it into the line though.  The complexity add to the organization still was tough to manage even though the car used so much of the same material and methods.  In  my estimation at the time with my dad we figured we had increased complexity about 50% organization wide by 1999.  50% sounds high for just adding a new version of basically the same car but it was accurate.    What saved us was that the new car had a higher price.  This balance between complexity and pricing is the key.

Next we tried the launch of the coupe convertible.  A coupe with no top.  Complexity not too bad buit still had a few new parts.  The car never sold well and was quickly discontinued.  Good move.  Without sales there is no excuse for keeping a low volume product.  The "its good for the brand" story works once...identify your brand image/loss leader and keep it if you really feel it helps...but if you find yourself with more than one...you are addicted to new products...not new profitable products.  Break the addiction to the new and trim the product line.

Fighting the KISS principle is the customer.  KISS applies to the making of the car but it also applies to the marketing of the car as well.  Even if you keep it simple in manufacturing you still can be undone by the sales guy in your organization that wants to offer all the options that will make everybody happy.  Complexity rears its ugly head again.  Dell does this well.  However you want to order a computer DELL will let you do it.  I am not Dell and either are you.  KISS.  Unless you charge big.

The key to adding complexity is to charge for it.  You can't always pull it off since you may be in a crowded market without the power of soapbox to define the category...but if you are the leader in your niche you want to use the position you have to make sure that you price for the complexity.

Lets look at the three new products we had at FFR in the 2001 to present time frame.

1.  the spec racer.

The spec racer is the FFR roadster converted to a full race car.  90% of the parts are the same as the stock raodster and the process is the same to make it.  Though I am dissapointed with the volume we ship of the car it fits the coupe path above...a good new product try that increased compleity a tolerable 50% or so when launched.  It was a decent attempot at a new product but only if the volumes are above 1 a week like the coupe.  Even though the car is valuable as a positioning tool for the brand, over time you only have room for a small positioning product and it still should at least carry its weight sales wise.  Great for the image of the company,  low complexity to the organization, but the low sales keep it from being an a student.  Worth a redo to try to increase sales...but never a leading product.

Assessment: Grade is a B.   Redo the configuration to try to increase sales, keep/raise  price at least 3 grand over a stock roadster with the same content.

2. The GTM

The GTM is a stunning looker, a world leading supercar on the track and on the street.  All the words that describe it are extreme because it is so very extreme by design.  Jim created one of the fastest cars in the world and the kit sells for 20 grand.  For around 50 grand you are done with it.  Amazing car.  Complexity is the fatal flaw in the GTM business wise though.  Most parts are different from the coupe/roadster/spec racer.  manufacturing metods are the same but the design and raw material is different for the plant.  With high design goals came high complexity.  The kicker is that even at a low 20 grand for the kit, 2 a week is a good sales week.  Since the car is a bit more complicated to build and source parts for, the tech support team spends time helping customers through their builds and they are good at it.

Assessment:  grade is a C-.   The redo bumped \sales and fixed a few of the launch issues the car had, but sales are still low and complexity to the organization is enormous.  Raise prices on the GTM at least 5 grand and reduce volume or discontinue.  A great car but bad business at 20 grand.

3. The 33 Hot rod.

The 33 is a hit.  It looks great.  It handles great. It is easy to build.  The added complexity of a totally new platform is worth it if the car has the sales volume to support the manpower nexcesay to support it.  And FFR has that manpower.  We passed on the hot rod launch in  1998 for a reason.  It would have killed FFR back then.  How can a hit kill a company then and not now?  Maturity.  FFR is 15 years old now and can do a new product like the 33 even if it is a new platform.  But only if it is a hit sales wise.  If the 33 did not sell so well it would not be able to pay for the complexity it adds to the organization.  But it does. In spades.

Assessment:  Grade is a solid A.  A hit with a potential to more than double sales when you add a chevy engine option.  Keep the car simple to build and make, let the customers add the options and charge another couple thousand dollars now that the quality of the car is world class.

The Smyth Grade.




Mark Smith

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