RSC Level 2 Module 5:Margin Enhancement
Step 1) Overview: RSC Level 1 Module5: Margin Enhancement: Effective leaders understand that any improvement in the cost structure of work immediately drops into the bottom line as a margin enhancement. The leadership challenge is to navigate continuous improvement without sacrificing quality and safety. Margin enhancement is a team sport and as with any team sport, leadership makes a difference. Leaders distinguish between competitive advantage based on low-cost and differentiation. Learn the leader’s role in margin enhancement.
Step 2) Action Learning: Please watch Video A and Video B below.
Video A is a 13-minute introduction to margin enhancement - popularly known as cost reduction. It does not make sense to reduce cost by sacrificing quality or safety. An initiative that systematically lowers cost without sacrificing quality or safety must place the customer at the center and reduce or eliminate anything that the customer would not want to pay for while steadfastly protecting or enhancing everything that delights the customer. Effective leaders recognize the five wastes of the workplace – wastes that are universally shunned by customers – and learn how to use teamwork for margin enhancement.
Video B runs about 10 minutes and explores the ways in which strategy drives margin enhancement. Leaders of margin enhancement initiatives begin with a deep understanding of their business strategy. A low-cost strategy leverages a strong cost position to either drop selling price below industry average or earn an above-average margin using premium pricing. A differentiated strategy identifies and builds a premium position based on special and unique features that the customer is willing to pay for. With the help of classic case examples like Procter & Gamble’s Ivory bar soap and Airstream’s motor home we examine the similarities and differences of margin enhancement initiatives in a low-cost strategy and a differentiated strategy.
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Step 3) Points to Ponder:
1) Is your business engaged in cost reduction / margin enhancement? Are cost reduction initiatives sporadic and driven by specific opportunities? Describe a typical cost reduction project that you were involved in last year. Does your business have long-term cost reduction targets?
2) Does your business dedicate resources (money, time, effort, formal training) for margin enhancement? Do your people have training in the use of cost-reduction tools?
3) Do you serve an internal customer or an external customer? How do you learn about the needs and values of your customer (internal or external)? How do you track these needs as they change over time?
4) How much engagement do you have with developing and supporting the strategy of your business? How would you learn more about the current and future direction of your business? Any challenges or obstacles?
5) How well is the competitive advantage of your business understood by the people that you work with and the people who report to you? In your opinion, is your business a low-cost business or a differentiated business?
6) What “lessons” did you learn from the video segments that you can use right away? What obstacles do you anticipate when using these lessons to engage in margin enhancement?
Step 4) Interactive Discussion:
After viewing Videos A & B and exploring the Points to Ponder check your calendar for the Interactive Discussion scheduled for this Module. Go to the session prepared to discuss the lessons learned with others in your Rising Star cohort. If you have any questions or need more information, please send a message to dr.kamath@artesiaa.com
Step 5) Next Level: Read the Reference: “The Toyota Way Fieldbook”, by J.K. Liker & D. Meier, (2005), ISBN-13: 978-0071448932
Step 5) Next Level:
Read the Reference: “The Toyota Way Fieldbook”, by J.K. Liker & D. Meier, (2005), ISBN-13: 978-0071448932