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This year we are going to have a tighter focus on factors like Instant Return on Investment and other ways to save money and increase margins especially in light of the New Economy. The 3 perspectives below focus on Virtual usage of Resources you don't own but "rent". So we can keep it simple Virtual means the resource is there for you to use but you don't own it. The common thread below is sticking to your work while you are utilizing others capabilities without having to invest in the equipment required or hire the talent required. Please send me feedback on these approaches and if you have additional ones you utilize.

 

Three perspectives one topic: Stick to your core competencies and benefit from shared (Virtual) resources.

 1) Talking with a customer:

I was recently working a customer of mine in the meat processing sector concerned with the cost and quality when pasteurizing his product.  As I'm sure you're aware modern pasteurization equipment and facilities can run several million dollars to setup, and these facilities can be few and far between requiring some processors to ship product long distances.

The Problem: His company needed meat pasteurization but it was outside their core competency.  The expense of quality pasteurization tools were too large to be covered by the value brought to his company alone.  

The Solution: He is in the midst of creating a local meat pasteurization company.  He's protecting his companies core competency (meat processing) by keeping the new company separate, he's 'sharing' the costs of the service by offering pasteurization to other processors, and he's gaining the benefit of a local pasteurization company. Now other processors can leverage his investment by using his services.

2) Reading a Blog on Internet Hosting:

On the software side of my business I see this process being mirrored with cloud computing.  A recent blog conversation on CRN.com had the following comments:

"Do you REALLY want to expend large amounts of capital on computing equipment, facilities, and staffing when your core business has nothing to do with technology?...

...Cloud technology is specifically attractive (if your applications can utilize it) because your costs scale more fluidly with your computing demands, and can be dialed up and down as needed.  Can you get the same sort of flexibility by running infrastructure in house?  Definitely not.  Try asking Dell if they'll buy back 40% of your servers after the holidays because you're a retail shop that sees seasonal sales peaks.  Good luck with that."

The Problem: Companies need hosting, but it is outside their core competency.  The expense of purchasing servers is too large to be covered by the value brought to their company. More importantly Vertical software (Food Distribution Software) to run on those servers requires a capital investment as well.

The Solution: Take advantage of 'The Cloud' a shared resource maintained by outside companies whose core competency is hosting. New SaaS products like VictualNet that let you "rent" or share the cost of computing across many users giving you a fully integrated On line Order Entry and Inventory Management food system

3) Looking back at a successful customer:

In Issue 220 we talked about how Joe and John Lorenzo expanded their business by offering premium sandwich making and catering services to companies (some of which already had full kitchens.)  The food and drink offered by these facilities were needed to operate, but weren't part of their core competency.  Joe and John identified the problem, offered the solution, and capitalized on the opportunity.

The Problem: For golf courses and meeting halls, and Corporate dining halls run by Food Service Companies serving premium food is a necessary part of doing business, but was not part of their core competencies, that is ordering food, hiring the help and handling the liability that comes with food handling. The cost of maintaining a kitchen and staff and the liability of preparing food exceeded the value it brought.So they are seeking to create "virtual" vendors that can provide the food preparation and procurement services

The Solution: Take advantage of Lorenzo's core competency (high end meal preperation and distribution) to supply premium food to the customers.

So we have three perspectives:

1) A company setting up a shared resource so he can benefit from the expense sharing.
2) Companies taking advantage of a shared resource for the reduced cost. Focused on IT expense reduction.
3) A company operating as a shared resource to increase income and reduce liability for their customers.

The point this drove home to me is that any business feature, outside of your core competency, can potentially utilize a shared resource to improve efficiency and profitability.

• Re-evaluate your company, your customers and your vendors.
• Identify areas inside and outside of core competencies. See what can be done to outsource non core competencies.
• Evaluate alternatives for cost effectiveness and quality/offer your core competency to others as an alternative to how they are doing business now.This will make them more profitable at the same time reduce your unit costs in your core business.

 

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