stages of development - International Business Growth Radio Network

S12 E5-9 (BECOMING THE LOWEST COST PRODUCER) - THE LCP MODEL WITH WILLIAM EASTMAN

3/1/2023

20% of all startups fail within the first year, after 5 years only 50% remain and only 30% last a decade; 2 of the 5 reasons for the failure are related to costs under control.

Today’s show covers the core capacity of cost control - achieving the position of lowest-cost producer in a niche, market, or industry.

In order to be competitive, a company must provide superior value to customers while maintaining healthy margins. This allows businesses greater flexibility to use price as a competitive advantage and self-fund improvements. This requires analyzing and improving internal costs (variable and fixed costs) and external costs.

Show Objective
Given a method for mapping processes, how to determine value provided and reduce steps, time, costs to improve quality.

EPISODE 5: WHAT IS A LOWEST-COST PRODUCER (support podcast)
Before we get into the details of achieving status as the Lowest-Cost Producer within your market, let’s tackle the difference between cost and price. LCP status is simply producing a product or delivering a service better and faster than the competition. That means if you don’t change the price, you will have better margins than the competition or you can reduce the price and have the same margin as the competitor - both are excellent positions in the market.

You can use the additional margin to increase your marketing spend or price reductions, which will not hurt you, to buy market share from the competition. Usually it will force them to do the same and because of lower margins, they are jeopardizing the health of the company.

The easiest method, especially if you are starting from scratch, is to use the value mapping process.

IMPORTANT SUPPORT IS NOW AVAILABLE - Next Monday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: recession proofing your business, becoming lowest-cost producer, cost control, profitability, activity based costing, operations, IBGR, IBGR Network, William Eastman

EPISODE 6: KEY TERMS YOU NEED TO KNOW (support podcast)

LCP "Lowest-Cost Producer"
“As Is” - what it actually is – what people are doing
“To Be” - what is possible – how much of the gap can close between Should Be and As Is
“Should Be” - what the organization believes – what policy requires & best practices built on a clean slate
Value Checklist - Customer Value, Technical Requirements, Legal Requirements
AGILE - project management process that is iterative and collaborative, uses internal and external resources (SME) to solve problems and build solutions
SME – Subject Matter Expert, either internal or external
QSFD – Quality/Service Function Deployment – technical method of integrating end user demands with technical requirements, used for designing processes, products, and services.
ABC - "Activity-Based Costing"

IMPORTANT SUPPORT IS NOW AVAILABLE - Next Monday at 1PM EST is our CHALLENGE Session where we will review the previous Financial Shows. It is an open forum for you to ask questions and challenge your thinking about Owning Your Numbers. Click Here to Reserve a Seat.

Tags: recession proofing your business, becoming lowest-cost producer, cost control, profitability, activity based costing, operations, IBGR, IBGR Network, William Eastman

EPISODE 7: THE LCP PROCESS - PART 1 (support podcast)

Select the Target Process: Project Manager selects a target process.
Assemble Process Teams: Simple Projects – Project Manager creates an Action Team to handle the design, building, testing, and finalizing of the new process. Complex Projects – Executive creates a Design Team for research, design, and project management; and an Action Team for building and testing the new process.
Create “As Is” Process: Project Manager or Design Team works with employees in the targeted process to determine what they “actually do” and why those steps/methods were chosen.
Conduct Market Research: Based upon the output produced from the targeted process, Project Manager conducts research to establish a Benchmark (Should Be) as a starting point.
Compare “As Is” to “Should Be” Process: Project Manager or Design Team compares what should be done against what actually occurs to determine the reasons for the difference. This information is critical for designing the “To Be” process.
Perform a Value Check: Check 1 - does this step provide value to the customer will pay for? Check 2 - is the step required for technical or quality demands? Check 3: is the step required for legal or regulatory demands?
Complete a QSFD: A structured process for creating design specifications based upon user needs and technological requirements. Should include project manager, functional management, subject matter experts, and front-line employees.
Create “To Be” Process Map: Starting from the As Is, Design and/or Action Team, build a process that establishes the company as the LCP (Lowest-Cost Producer) or as close as possible.

Test “To Be” Process: Action Team tests the new process under actual conditions to identify cycle time, costs, and detect constraints in achieving LCP.
Upgrade “To Be” Process: Action Team incorporates improvements to reduce costs and cycle time, and eliminates defects until performance standards are achieved.
Finalize “To Be” Process: Project Manager or Design Team reviews results from the Testing and Upgrade Steps and “freezes” the final design as a new “As Is”.
Integrate Policy & Procedures: Project Manager or Design Team updates Corporate Policies and Procedures to formalize the new process – creates the new standard – the “As Is” process.
Create / Update Standard Operating Procedures - creating documentation of new best practices
Create / Update Position Descriptions: Ensure new and/or revised tasks are incorporated in Position Descriptions for hiring, management, and compensation.
Scheduled Review: Each significant process should undergo periodic review to ensure the organization maintains LCP in their market.