1 00:00:00,000 --> 00:00:19,720 Hi and welcome to Be The Flagship with our podcast host, Jeff Parsons. 2 00:00:19,720 --> 00:00:23,380 This is where we tackle the day-to-day talent management challenges you face. 3 00:00:23,380 --> 00:00:25,120 And now over to our host. 4 00:00:25,120 --> 00:00:26,880 Take it away, Jeff. 5 00:00:26,880 --> 00:00:29,520 Hello and welcome back to Be The Flagship. 6 00:00:29,520 --> 00:00:33,320 I am your podcast host, Jeff Parsons. 7 00:00:33,320 --> 00:00:39,120 And in this episode, episode three of our series, Finance and Operations, we continue 8 00:00:39,120 --> 00:00:45,800 our discussion with finance expert and I call him my financial guru, Jeff Smith. 9 00:00:45,800 --> 00:00:52,240 Jeff is the founder of Dynamic Strategy LLC. 10 00:00:52,240 --> 00:00:59,480 And his contact information is jeff.smith at dynamicstrategyllc.com. 11 00:00:59,480 --> 00:01:08,200 And that's jeff, G-E-O-F-F dot Smith at dynamicstrategyllc.com. 12 00:01:08,200 --> 00:01:12,000 I'll give you this information near the end of our podcast today. 13 00:01:12,000 --> 00:01:13,520 But again, welcome, Jeff. 14 00:01:13,520 --> 00:01:15,720 And we continue our discussion. 15 00:01:15,720 --> 00:01:21,200 Last week we left off in talking about some of the components of strategy and why it's 16 00:01:21,200 --> 00:01:28,320 important for operations leaders to focus on strategy more than just a day a month. 17 00:01:28,320 --> 00:01:29,320 Right? 18 00:01:29,320 --> 00:01:34,060 And so be back in just a minute with Jeff Smith. 19 00:01:34,060 --> 00:01:39,000 At Flagship Talent, we work with our clients to find and place the right talent. 20 00:01:39,000 --> 00:01:40,840 What do we mean by the right talent? 21 00:01:40,840 --> 00:01:45,480 We mean we find talent who will commit to your organizational goals and align with your 22 00:01:45,480 --> 00:01:48,160 values and behavior expectations. 23 00:01:48,160 --> 00:01:54,240 Talent who will perform to your expectations, talent who will stay and grow with your organization. 24 00:01:54,240 --> 00:01:56,240 How are we different from our competitors? 25 00:01:56,240 --> 00:01:59,080 We offer the lowest fee structure in the industry. 26 00:01:59,080 --> 00:02:01,900 We offer the best talent guarantee in the industry. 27 00:02:01,900 --> 00:02:06,740 We provide selection and interviewing support to our clients at no additional fee. 28 00:02:06,740 --> 00:02:12,120 We want to save you money, deliver high quality talent, become an extension of your organization, 29 00:02:12,120 --> 00:02:15,700 and be your preferred provider of talent acquisition solutions. 30 00:02:15,700 --> 00:02:21,440 To learn more, contact Jeff Parsons by email at jeff at FlagshipTalent.com or by phone 31 00:02:21,440 --> 00:02:26,440 at 1-800-530-4189, extension 101. 32 00:02:26,440 --> 00:02:30,120 Okay, we're back again with guest speaker Jeff Smith. 33 00:02:30,120 --> 00:02:32,200 Jeff, thanks for joining us again today. 34 00:02:32,200 --> 00:02:34,700 Glad to be back. 35 00:02:34,700 --> 00:02:41,760 So Jeff, if we go back in time to last week, we left our discussion off in talking about 36 00:02:41,760 --> 00:02:47,840 the importance of operations doing internal assessments, assessments of their effectiveness 37 00:02:47,840 --> 00:02:51,120 and how finance assists in that process. 38 00:02:51,120 --> 00:02:56,000 So we left off in discussing internal tools for assessment. 39 00:02:56,000 --> 00:02:59,000 So we're going to get into that subject today. 40 00:02:59,000 --> 00:03:03,840 So you mentioned tools for assessment, internal assessment, in terms of where are we good, 41 00:03:03,840 --> 00:03:09,960 where are we not so good, where do we need some help, you know, and that sort of thing. 42 00:03:09,960 --> 00:03:16,240 And so you mentioned two specific tools, the SWOT analysis and GAP analysis. 43 00:03:16,240 --> 00:03:19,240 So sort of briefly talking through those two tools. 44 00:03:19,240 --> 00:03:20,240 Yeah, yeah. 45 00:03:20,240 --> 00:03:26,240 So there's as many tools as you can imagine, right? 46 00:03:26,240 --> 00:03:31,600 You go online and you Google tools for internal assessment. 47 00:03:31,600 --> 00:03:36,440 You're going to get like acronyms coming out your ears. 48 00:03:36,440 --> 00:03:42,120 SWOT stands for strengths, weaknesses, opportunities and threats. 49 00:03:42,120 --> 00:03:48,120 And the reason why I included that is not because it's better than any other tool, it's 50 00:03:48,120 --> 00:03:50,560 because everybody knows about it, right? 51 00:03:50,560 --> 00:03:55,280 And so it's easy to talk about. 52 00:03:55,280 --> 00:04:01,440 Strengths refer to what are the, how it's an internal focus. 53 00:04:01,440 --> 00:04:06,640 It's what are the things that my company does well, right? 54 00:04:06,640 --> 00:04:15,800 And if you look at it like from an individual like sports sort of analogy is, you know, 55 00:04:15,800 --> 00:04:17,920 I enjoy running. 56 00:04:17,920 --> 00:04:19,480 What do I do well? 57 00:04:19,480 --> 00:04:21,880 I'm not a sprinter. 58 00:04:21,880 --> 00:04:23,800 I'm a long distance runner. 59 00:04:23,800 --> 00:04:29,320 So I run slowly very well. 60 00:04:29,320 --> 00:04:34,400 The weaknesses are kind of like the opposite of your strengths, right? 61 00:04:34,400 --> 00:04:40,320 Sprinting, I'm not a good sprinter, right? 62 00:04:40,320 --> 00:04:45,440 And so your strengths and weaknesses should be very internally focused. 63 00:04:45,440 --> 00:04:48,840 It's got to do with capabilities, right? 64 00:04:48,840 --> 00:04:55,280 Your opportunities and your threats have to do with the environment that you operate in. 65 00:04:55,280 --> 00:05:03,360 And so opportunities might be environmental opportunities, business opportunities. 66 00:05:03,360 --> 00:05:11,040 It might be a changing technology situation or something like that. 67 00:05:11,040 --> 00:05:19,280 Whereas threats are, again, more externally focused, they tend to be like, you know, maybe 68 00:05:19,280 --> 00:05:23,120 regulations might be changing. 69 00:05:23,120 --> 00:05:32,720 It could be that there's a threat of somebody else coming into the market with this disruptive 70 00:05:32,720 --> 00:05:39,920 technology or a disruptive sort of business pattern. 71 00:05:39,920 --> 00:05:48,440 So getting a lay of how things are and your strengths, weaknesses, opportunities and threats 72 00:05:48,440 --> 00:05:52,080 helps you to assess you and your business. 73 00:05:52,080 --> 00:05:58,080 Whereas a gap analysis is more of a, here's where I am now. 74 00:05:58,080 --> 00:05:59,840 That's the baseline. 75 00:05:59,840 --> 00:06:03,200 And then here's where I want to be. 76 00:06:03,200 --> 00:06:08,680 And so there's usually a gap between where I am now and where I want to be. 77 00:06:08,680 --> 00:06:16,920 And then we assess our people, our processes and our technology to see how we can get to 78 00:06:16,920 --> 00:06:19,040 our future state. 79 00:06:19,040 --> 00:06:20,040 Okay. 80 00:06:20,040 --> 00:06:21,960 All right. 81 00:06:21,960 --> 00:06:28,400 So it's very future oriented, but you have to understand where you are today and what's 82 00:06:28,400 --> 00:06:31,560 getting in the way of getting you to where you want to be. 83 00:06:31,560 --> 00:06:32,560 Yeah. 84 00:06:32,560 --> 00:06:33,560 Gotcha. 85 00:06:33,560 --> 00:06:35,560 And then addressing those gaps. 86 00:06:35,560 --> 00:06:36,560 Okay. 87 00:06:36,560 --> 00:06:40,720 So those tools are used for internal assessment. 88 00:06:40,720 --> 00:06:42,480 What about the external environment? 89 00:06:42,480 --> 00:06:47,560 So again, you can use as many tools as you want, you know. 90 00:06:47,560 --> 00:06:48,560 Okay. 91 00:06:48,560 --> 00:06:57,680 I am a big fan of Quarters Five Forces because it takes this structured approach to looking 92 00:06:57,680 --> 00:06:59,680 at the environment. 93 00:06:59,680 --> 00:07:06,680 And it's Quarters Five Forces that shape competitive strategy is what it's really called. 94 00:07:06,680 --> 00:07:07,680 Okay. 95 00:07:07,680 --> 00:07:09,360 Quarters Five Forces. 96 00:07:09,360 --> 00:07:10,360 Okay. 97 00:07:10,360 --> 00:07:17,760 But it really looks at five different aspects of the competitive environment. 98 00:07:17,760 --> 00:07:21,040 The first one being the rivalry of competitors. 99 00:07:21,040 --> 00:07:27,440 How do your competitors act in your environment and what influences do they have over your 100 00:07:27,440 --> 00:07:28,440 activities? 101 00:07:28,440 --> 00:07:29,440 Okay. 102 00:07:29,440 --> 00:07:34,520 The potential of new market entrance. 103 00:07:34,520 --> 00:07:40,600 How does that influence your plans for the future? 104 00:07:40,600 --> 00:07:42,040 Supplier strengths. 105 00:07:42,040 --> 00:07:46,880 What impact do your suppliers have on your business? 106 00:07:46,880 --> 00:07:56,680 How much power do they have over your pricing, your availability, the quality of your product? 107 00:07:56,680 --> 00:07:57,680 Right? 108 00:07:57,680 --> 00:08:01,160 How much customer strengths? 109 00:08:01,160 --> 00:08:06,980 Do customers need to do business with you or do they choose to do business with you? 110 00:08:06,980 --> 00:08:15,880 How much power or do they influence have over the price that you can offer in the marketplace? 111 00:08:15,880 --> 00:08:16,880 Interesting. 112 00:08:16,880 --> 00:08:17,880 Okay. 113 00:08:17,880 --> 00:08:21,800 And then you've got a threat of substitutes. 114 00:08:21,800 --> 00:08:29,600 Is my product completely unique or can somebody go in and find something that's similar? 115 00:08:29,600 --> 00:08:30,600 Right. 116 00:08:30,600 --> 00:08:38,520 And they spend their money on something different that will satisfy the same need. 117 00:08:38,520 --> 00:08:39,520 Okay. 118 00:08:39,520 --> 00:08:48,600 And the comments you made around customer strength is really interesting. 119 00:08:48,600 --> 00:08:51,600 Do they feel that they must do business with you? 120 00:08:51,600 --> 00:08:59,480 Do they see that value there or that they can do business with you or they can do business 121 00:08:59,480 --> 00:09:00,480 with someone else? 122 00:09:00,480 --> 00:09:01,480 Yeah. 123 00:09:01,480 --> 00:09:17,800 If you think about filling up your car, the various oil and gas companies, they try to 124 00:09:17,800 --> 00:09:22,240 differentiate. 125 00:09:22,240 --> 00:09:27,480 We put Tecron in our gas or put Sanitiv in our gas. 126 00:09:27,480 --> 00:09:28,480 Right. 127 00:09:28,480 --> 00:09:31,160 But really, it's gas, right? 128 00:09:31,160 --> 00:09:32,160 Yeah. 129 00:09:32,160 --> 00:09:39,560 So you go and you fill up with, I don't know, 87 or 92 or whatever it is and you pay whatever 130 00:09:39,560 --> 00:09:41,600 the rate is at the pump. 131 00:09:41,600 --> 00:09:42,600 Right. 132 00:09:42,600 --> 00:09:45,120 On one hand, you have no choice. 133 00:09:45,120 --> 00:09:47,600 You have to put gas in your car. 134 00:09:47,600 --> 00:09:51,360 But on the other hand, you don't have to buy it from Shell. 135 00:09:51,360 --> 00:09:52,360 That's right. 136 00:09:52,360 --> 00:09:59,800 You can buy it from anybody and have the same little come. 137 00:09:59,800 --> 00:10:10,160 So while there's a stickiness to the product itself, there's not a stickiness to the actual 138 00:10:10,160 --> 00:10:13,360 company that's offering the product. 139 00:10:13,360 --> 00:10:16,360 That's a great example. 140 00:10:16,360 --> 00:10:26,040 So going back to the Porter's Five Forces, the first thing you have there is rivalry 141 00:10:26,040 --> 00:10:28,120 of competitors. 142 00:10:28,120 --> 00:10:33,720 So what do you take into consideration when you're analyzing competitive rivalry? 143 00:10:33,720 --> 00:10:34,720 Yeah. 144 00:10:34,720 --> 00:10:38,000 So the first question is how many competitors? 145 00:10:38,000 --> 00:10:46,560 The number of competitors that you have in the marketplace is going to impact the forces 146 00:10:46,560 --> 00:10:54,560 that impact strategy, the amount of growth within the industry. 147 00:10:54,560 --> 00:11:02,240 I'll give you an example as my wife owns a business in the senior services industry. 148 00:11:02,240 --> 00:11:08,520 There's something called the Silver Tsunami, which is a nice way of saying that all the 149 00:11:08,520 --> 00:11:11,240 baby boomers are getting older. 150 00:11:11,240 --> 00:11:12,720 Right? 151 00:11:12,720 --> 00:11:20,160 And so there's this large expected growth in the marketplace, which means that there's 152 00:11:20,160 --> 00:11:30,600 a lot of new competitors and new industries being created in the market. 153 00:11:30,600 --> 00:11:38,960 And so there's a lot of industry growth based on the expected aging of the baby boomers. 154 00:11:38,960 --> 00:11:40,320 Got it. 155 00:11:40,320 --> 00:11:47,960 Pricing structure is what is the pricing structure amongst your competitors? 156 00:11:47,960 --> 00:11:48,960 Right? 157 00:11:48,960 --> 00:11:52,320 So you have things like first mover advantage. 158 00:11:52,320 --> 00:11:55,360 We talked about gas. 159 00:11:55,360 --> 00:12:02,040 If you've got four corners of an intersection, a gas station on each corner, they all decide 160 00:12:02,040 --> 00:12:06,480 that they're going to charge $5 a gallon for gas. 161 00:12:06,480 --> 00:12:07,480 Right? 162 00:12:07,480 --> 00:12:09,120 They're not going to talk about it. 163 00:12:09,120 --> 00:12:12,320 Just one will put up a sign that says $5. 164 00:12:12,320 --> 00:12:18,120 Everybody else then within a couple of hours will put up their sign that says $5. 165 00:12:18,120 --> 00:12:19,120 Right? 166 00:12:19,120 --> 00:12:20,120 Mm-hmm. 167 00:12:20,120 --> 00:12:23,640 So it doesn't make any difference who you go to. 168 00:12:23,640 --> 00:12:31,080 Now what happens is that somebody decides that they're going to charge $4.85. 169 00:12:31,080 --> 00:12:32,080 Right. 170 00:12:32,080 --> 00:12:34,800 $0.15 a gallon. 171 00:12:34,800 --> 00:12:39,520 And the funny thing is, my car takes 10 gallons of gas. 172 00:12:39,520 --> 00:12:42,400 So $0.15 a gallon is $1.50. 173 00:12:42,400 --> 00:12:43,400 Right. 174 00:12:43,400 --> 00:12:48,680 It doesn't make any sense for me to even cross the street for that. 175 00:12:48,680 --> 00:12:52,000 But we're wired to do so. 176 00:12:52,000 --> 00:12:54,000 It's the outtake, right? 177 00:12:54,000 --> 00:12:55,000 Exactly. 178 00:12:55,000 --> 00:13:03,920 And so that first mover advantage is the guy that offers the gas at $4.85 now gets people 179 00:13:03,920 --> 00:13:06,000 coming into his gas station. 180 00:13:06,000 --> 00:13:07,000 Right. 181 00:13:07,000 --> 00:13:10,680 So what's going to happen is everybody else is going to follow suit. 182 00:13:10,680 --> 00:13:11,680 That's right. 183 00:13:11,680 --> 00:13:12,680 Right? 184 00:13:12,680 --> 00:13:16,080 And then you have similarity amongst products. 185 00:13:16,080 --> 00:13:17,320 Right? 186 00:13:17,320 --> 00:13:27,680 So where there's a high differentiation among products, there's more control that the provider 187 00:13:27,680 --> 00:13:29,560 can exercise. 188 00:13:29,560 --> 00:13:36,520 Where there's little differentiation between products, there's little control that the 189 00:13:36,520 --> 00:13:38,880 provider can influence. 190 00:13:38,880 --> 00:13:40,920 And then there's barriers to exit. 191 00:13:40,920 --> 00:13:42,240 Right? 192 00:13:42,240 --> 00:13:47,640 Do I have a large amount of capital invested in this business? 193 00:13:47,640 --> 00:13:52,920 Is it going to cost me more to exit the business than to just discount my prices? 194 00:13:52,920 --> 00:13:56,360 And so you think about airlines. 195 00:13:56,360 --> 00:14:05,000 They've got billions and billions of dollars invested in airport deals, in their planes, 196 00:14:05,000 --> 00:14:13,840 for people, all the infrastructure to move luggage around and fuel planes and all that 197 00:14:13,840 --> 00:14:14,840 sort of stuff. 198 00:14:14,840 --> 00:14:24,720 It'll cost them more to shelve their business than it would be to operate an empty aircraft. 199 00:14:24,720 --> 00:14:34,160 And you saw that in the pandemic where there were airlines that were operating empty aircraft 200 00:14:34,160 --> 00:14:37,240 just to maintain their positions at an airport. 201 00:14:37,240 --> 00:14:39,240 No, that's right. 202 00:14:39,240 --> 00:14:40,240 Yeah. 203 00:14:40,240 --> 00:14:41,240 Very interesting. 204 00:14:41,240 --> 00:14:50,680 And again, going back to Porter's model, it references, it's important to understand 205 00:14:50,680 --> 00:14:54,280 your potential market entrance. 206 00:14:54,280 --> 00:14:58,200 Those new competitors, I guess, entering the marketplace. 207 00:14:58,200 --> 00:14:59,200 Right? 208 00:14:59,200 --> 00:15:00,520 And so how do you analyze that? 209 00:15:00,520 --> 00:15:03,200 What does that analysis look like? 210 00:15:03,200 --> 00:15:13,120 So if there's a new entrant, that can impact your strategy. 211 00:15:13,120 --> 00:15:17,160 It can impact how you bring things to market. 212 00:15:17,160 --> 00:15:24,920 And so when you're assessing the risk of new entrants entering the market, you look at 213 00:15:24,920 --> 00:15:27,000 things like economies of scale. 214 00:15:27,000 --> 00:15:28,000 Right? 215 00:15:28,000 --> 00:15:29,000 Right. 216 00:15:29,000 --> 00:15:34,800 And so economies of scale are the most important thing in the automotive industry. 217 00:15:34,800 --> 00:15:43,240 And so you know that in order to be profitable, an auto manufacturer has to be able to manufacture 218 00:15:43,240 --> 00:15:45,280 a lot of vehicles. 219 00:15:45,280 --> 00:15:46,280 Right. 220 00:15:46,280 --> 00:15:56,560 So economies of scale presents a large difficulty for companies that enter a market. 221 00:15:56,560 --> 00:16:04,160 For Tesla to become profitable or even efficient at manufacturing vehicles. 222 00:16:04,160 --> 00:16:12,800 And so that path to profitability reduces the number and the threat of new entrants. 223 00:16:12,800 --> 00:16:19,920 So you've gotten, you know, right now the electric vehicle market is kind of in turmoil 224 00:16:19,920 --> 00:16:26,160 because they're not able to make enough vehicles to really be efficient at it and to offer 225 00:16:26,160 --> 00:16:30,600 them at a price that the customer is willing to pay. 226 00:16:30,600 --> 00:16:31,600 Right. 227 00:16:31,600 --> 00:16:32,600 Right. 228 00:16:32,600 --> 00:16:36,720 You got product differentiation. 229 00:16:36,720 --> 00:16:44,920 You know, the more patents you can put on a product, the more secure it is. 230 00:16:44,920 --> 00:16:45,920 Right? 231 00:16:45,920 --> 00:16:48,040 So we talked about gasoline. 232 00:16:48,040 --> 00:16:55,200 Gasoline is, there's no product differentiation even though they try to introduce it. 233 00:16:55,200 --> 00:16:56,200 Right. 234 00:16:56,200 --> 00:17:06,880 Whereas, say an iPhone, an iPhone has product differentiation. 235 00:17:06,880 --> 00:17:09,500 It's patented. 236 00:17:09,500 --> 00:17:11,880 It's got proprietary software. 237 00:17:11,880 --> 00:17:17,000 It's got proprietary design features. 238 00:17:17,000 --> 00:17:29,000 And so there's not going to be another Apple like product that's going to completely fit 239 00:17:29,000 --> 00:17:30,320 that model. 240 00:17:30,320 --> 00:17:31,320 Right? 241 00:17:31,320 --> 00:17:33,840 There's other smartphones. 242 00:17:33,840 --> 00:17:34,840 Right. 243 00:17:34,840 --> 00:17:35,840 Right. 244 00:17:35,840 --> 00:17:41,920 But it's not going to be an Apple and it's not going to operate within the Apple environment. 245 00:17:41,920 --> 00:17:42,920 Right. 246 00:17:42,920 --> 00:17:43,920 Right. 247 00:17:43,920 --> 00:17:44,920 You got capital. 248 00:17:44,920 --> 00:17:49,200 There's capital requirements. 249 00:17:49,200 --> 00:17:54,000 How much does it cost to actually set up a business? 250 00:17:54,000 --> 00:17:55,000 Right? 251 00:17:55,000 --> 00:18:00,360 And so there's some businesses where all you need is four wheels in a trunk, like a trapling 252 00:18:00,360 --> 00:18:01,360 salesman. 253 00:18:01,360 --> 00:18:02,360 Right. 254 00:18:02,360 --> 00:18:03,360 Right. 255 00:18:03,360 --> 00:18:05,920 Barriers to entry. 256 00:18:05,920 --> 00:18:09,080 So anybody can do it. 257 00:18:09,080 --> 00:18:11,120 Then there's regulations. 258 00:18:11,120 --> 00:18:17,880 You know, how many regulatory requirements do you have to jump through in order to get 259 00:18:17,880 --> 00:18:19,840 into that business? 260 00:18:19,840 --> 00:18:23,920 You know, as an accountant, there's a lot of regulations. 261 00:18:23,920 --> 00:18:25,160 I have to be certified. 262 00:18:25,160 --> 00:18:31,040 I have to, you know, there's a whole bunch of things that I need to do in order to call 263 00:18:31,040 --> 00:18:33,120 myself an accountant. 264 00:18:33,120 --> 00:18:34,120 Right. 265 00:18:34,120 --> 00:18:43,280 So in industries where there's a lot of regulation, it increases the barrier to entry. 266 00:18:43,280 --> 00:18:44,280 Okay. 267 00:18:44,280 --> 00:18:51,400 How much does it cost to switch for the customer to switch from one thing to another? 268 00:18:51,400 --> 00:18:59,040 A lot of what's going on right now in the marketplaces, NVIDIA, is having a great run 269 00:18:59,040 --> 00:19:07,520 of it because they were a market leader in developing the AI integrative technology. 270 00:19:07,520 --> 00:19:08,840 Right. 271 00:19:08,840 --> 00:19:16,680 And their chips are embedded in a lot of different companies. 272 00:19:16,680 --> 00:19:20,200 And the cost of switching is huge. 273 00:19:20,200 --> 00:19:28,920 So the threat of new entrants into the marketplace is fairly low because the customers are going 274 00:19:28,920 --> 00:19:31,480 to be like, I can't switch. 275 00:19:31,480 --> 00:19:35,760 It's going to cost me too much to retool my factory. 276 00:19:35,760 --> 00:19:36,760 Great points, Jeff. 277 00:19:36,760 --> 00:19:43,640 Tell you what, Jeff, let's take a final break and then we'll be back to wrap up our discussion 278 00:19:43,640 --> 00:19:46,460 in this episode of Be the Flagship. 279 00:19:46,460 --> 00:19:48,880 Are you in need of interim HR support? 280 00:19:48,880 --> 00:19:53,560 Would you like to transition your performance management process to a performance development 281 00:19:53,560 --> 00:19:54,560 process? 282 00:19:54,560 --> 00:19:58,500 Are you interested in implementing a robust succession planning process to create an internal 283 00:19:58,500 --> 00:20:00,000 talent pipeline? 284 00:20:00,000 --> 00:20:03,200 Need a wage survey or an employee satisfaction survey? 285 00:20:03,200 --> 00:20:07,300 We have over 30 years of HR and talent management expertise. 286 00:20:07,300 --> 00:20:10,280 Let Flagship Talent Solutions help you today. 287 00:20:10,280 --> 00:20:16,280 To learn more, contact Jeff Parsons by email at jeff at flagshiptalent.com or by phone 288 00:20:16,280 --> 00:20:21,560 at 1-800-530-4189, extension 101. 289 00:20:21,560 --> 00:20:23,360 Okay, Jeff. 290 00:20:23,360 --> 00:20:27,080 Going back to Porter's model. 291 00:20:27,080 --> 00:20:33,480 The model references supplier strengths and understanding the strengths of the suppliers. 292 00:20:33,480 --> 00:20:39,120 So again, talk us through the analysis of how you get that better understanding. 293 00:20:39,120 --> 00:20:41,240 What types of things do you look for? 294 00:20:41,240 --> 00:20:42,240 Yeah. 295 00:20:42,240 --> 00:20:47,680 So it's really answering the question of how much influence does my supplier have over 296 00:20:47,680 --> 00:20:52,840 the availability of product, the price of the product. 297 00:20:52,840 --> 00:20:54,120 Okay. 298 00:20:54,120 --> 00:20:59,920 And so number one is how many suppliers are in the marketplace, right? 299 00:20:59,920 --> 00:21:10,000 So if I'm talking about screws, nuts, fasteners, those sort of things, there's a ton of different 300 00:21:10,000 --> 00:21:12,840 suppliers in the marketplace. 301 00:21:12,840 --> 00:21:17,440 Things sell at market price, right? 302 00:21:17,440 --> 00:21:20,880 Whatever the competitive price is, you can get it. 303 00:21:20,880 --> 00:21:21,880 Okay. 304 00:21:21,880 --> 00:21:30,120 Whereas if there's a very few number of suppliers in the marketplace, and we'll go back to computer 305 00:21:30,120 --> 00:21:38,360 chips for example, there's probably I think less than half a dozen chip manufacturers 306 00:21:38,360 --> 00:21:39,920 in the entire marketplace. 307 00:21:39,920 --> 00:21:40,920 Okay. 308 00:21:40,920 --> 00:21:45,680 So you've got very few options of where to go. 309 00:21:45,680 --> 00:21:50,440 You've got the availability of substitutes, right? 310 00:21:50,440 --> 00:21:58,520 Do I have to have this proprietary fastener to hold my two pieces together? 311 00:21:58,520 --> 00:22:00,960 Or can I buy an off the shelf part? 312 00:22:00,960 --> 00:22:01,960 Right? 313 00:22:01,960 --> 00:22:12,240 And so when you're designing a product and you think about how much influence I'm giving 314 00:22:12,240 --> 00:22:22,200 to my supplier by requiring a special sort of fastener or a special sort of part of some 315 00:22:22,200 --> 00:22:26,920 sort, then there's the cost of switching. 316 00:22:26,920 --> 00:22:32,060 Before you go there, going back to the availability of substitutes, that's also dependent upon 317 00:22:32,060 --> 00:22:37,640 your customer requirements, depending on the industry at least based on your customer requirements, 318 00:22:37,640 --> 00:22:38,640 right? 319 00:22:38,640 --> 00:22:43,520 Because they have certain specs if you're delivering them to them. 320 00:22:43,520 --> 00:22:51,840 And if you change a supplier, it may look like a substitute out there, but is it going 321 00:22:51,840 --> 00:23:00,280 to create an issue between you and the customer in terms of their specs and meeting their 322 00:23:00,280 --> 00:23:01,280 specifications? 323 00:23:01,280 --> 00:23:02,280 Yeah. 324 00:23:02,280 --> 00:23:06,160 So a good example of that. 325 00:23:06,160 --> 00:23:11,200 So I worked for a machine tool manufacturer at one point in my career. 326 00:23:11,200 --> 00:23:19,080 And so we had motors that were American made motors. 327 00:23:19,080 --> 00:23:28,360 And then we had motors that were cheaper, but they came from offshore, right? 328 00:23:28,360 --> 00:23:36,800 When we sold into the deep South, they wanted those American made motors because they wanted 329 00:23:36,800 --> 00:23:45,680 to know that their machine that they were doing their machining on was made in America, 330 00:23:45,680 --> 00:23:47,460 right? 331 00:23:47,460 --> 00:23:58,240 Even if the other motors were just as good and cheaper, we could not substitute out those 332 00:23:58,240 --> 00:23:59,240 parts. 333 00:23:59,240 --> 00:24:00,240 Gotcha. 334 00:24:00,240 --> 00:24:01,240 Okay. 335 00:24:01,240 --> 00:24:02,240 Okay. 336 00:24:02,240 --> 00:24:03,240 Sorry to interrupt you, Jeff. 337 00:24:03,240 --> 00:24:04,240 No worries. 338 00:24:04,240 --> 00:24:09,120 It's a good rabbit hole to jump down. 339 00:24:09,120 --> 00:24:11,880 So switching costs, you were talking about there. 340 00:24:11,880 --> 00:24:12,880 Yeah. 341 00:24:12,880 --> 00:24:14,800 The cost of switching, right? 342 00:24:14,800 --> 00:24:22,120 So sometimes you've got a vendor that's embedded in your company, right? 343 00:24:22,120 --> 00:24:31,400 So it might be that there's a lot of tooling that needs to be switched out. 344 00:24:31,400 --> 00:24:38,960 Again, when I was working for that machine tool manufacturer and we had to switch foundries, 345 00:24:38,960 --> 00:24:44,840 that meant that we had to switch all of our molding to a new foundry. 346 00:24:44,840 --> 00:24:54,240 And that was a very, very expensive and time consuming endeavor. 347 00:24:54,240 --> 00:24:59,040 The reason why we had to switch was because the foundry that we were using was going out 348 00:24:59,040 --> 00:25:00,760 of business. 349 00:25:00,760 --> 00:25:10,800 And so we had no choice, but we had to do it in a real structured format because it's 350 00:25:10,800 --> 00:25:20,560 so critical to make sure you get the quality and the timing right. 351 00:25:20,560 --> 00:25:22,340 Forward integration. 352 00:25:22,340 --> 00:25:27,920 And that's just the fancy way of saying is, can my supplier make my product, right? 353 00:25:27,920 --> 00:25:28,920 Okay. 354 00:25:28,920 --> 00:25:29,920 Oh yeah. 355 00:25:29,920 --> 00:25:30,920 Right. 356 00:25:30,920 --> 00:25:38,240 So what is the risk of my supplier going, why am I selling these parts to these guys 357 00:25:38,240 --> 00:25:41,440 when I could just make the whole thing on my own? 358 00:25:41,440 --> 00:25:42,440 Right. 359 00:25:42,440 --> 00:25:50,560 And so when you're looking at forward integration, you're looking at, am I outsourcing my proprietary 360 00:25:50,560 --> 00:25:53,880 or my competitive advantage? 361 00:25:53,880 --> 00:25:58,200 Because that increases the risk of forward integration. 362 00:25:58,200 --> 00:26:09,280 Am I giving too much of my product, sourcing too much of my product from one supplier, 363 00:26:09,280 --> 00:26:15,600 which would then give them the opportunity to become a competitor? 364 00:26:15,600 --> 00:26:16,600 Gotcha. 365 00:26:16,600 --> 00:26:17,600 Right? 366 00:26:17,600 --> 00:26:18,600 Okay. 367 00:26:18,600 --> 00:26:22,040 The other one is industry importance. 368 00:26:22,040 --> 00:26:28,080 How important is this supplier to the industry as a whole? 369 00:26:28,080 --> 00:26:36,920 And so if they've got a high level of importance, then they're going to have a lot of influence 370 00:26:36,920 --> 00:26:40,760 over the price and availability of the product. 371 00:26:40,760 --> 00:26:42,880 Great discussion, Jeff. 372 00:26:42,880 --> 00:26:45,760 We've talked about suppliers. 373 00:26:45,760 --> 00:26:51,120 Now let's transition, shift our focus to the customers, but let's do that next week. 374 00:26:51,120 --> 00:26:55,840 This is a great stopping point for our discussion for this episode, but next week we'll pick 375 00:26:55,840 --> 00:26:56,840 up our discussion. 376 00:26:56,840 --> 00:27:02,360 We'll begin with Jeff Smith and we'll begin our discussion and focusing on customer requirements 377 00:27:02,360 --> 00:27:08,040 and how finance can assist operations in meeting the needs of their customers. 378 00:27:08,040 --> 00:27:13,400 Before we go, let me give you Jeff Smith's contact information again. 379 00:27:13,400 --> 00:27:26,060 It is jeff.smith and it is G-E-O-F-F, Canadian spelling, jeff.smith at dynamicstrategylc.com. 380 00:27:26,060 --> 00:27:31,640 If you need to reach out with questions regarding this episode or previous episodes, feel free 381 00:27:31,640 --> 00:27:35,640 to contact him via email, jeff.smith at dynamicstrategylc.com. 382 00:27:35,640 --> 00:27:38,720 It's been another great episode, Jeff. 383 00:27:38,720 --> 00:27:42,240 Can't wait to pick up the discussion again next week and we'll talk about our customers. 384 00:27:42,240 --> 00:27:48,280 To our listeners, don't forget, work hard, strive hard to become the flagship within 385 00:27:48,280 --> 00:27:49,280 your industry. 386 00:27:49,280 --> 00:27:50,280 For now, goodbye. 387 00:27:50,280 --> 00:27:55,720 Thank you for listening to this episode of Be the Flagship with Jeff Parsons. 388 00:27:55,720 --> 00:27:57,280 We hope you enjoyed it. 389 00:27:57,280 --> 00:28:00,360 If you did like it, please subscribe and share with others. 390 00:28:00,360 --> 00:28:26,120 Until next time, take the step to become the flagship in your marketplace.