Who suppliers need to reach at the OEMs.

In the January issue (http://www.autofieldguide.com/columns/0105insight.html) the five categories of organizational disciplines automotive suppliers need to have in place to be innovation leaders in their niche (alignment, processes, culture, support infrastructure, and measurement) were discussed. Continuing in that vein, it is important to know that a key part of effective innovation and new product development processes for suppliers is the creation of systems for listening to the "voice of the customer"--both industrial customers (those who buy your products) and end user customers (those who buy the cars your product goes into).

THE OEM WHO'S WHO. Most suppliers (especially those who have not positioned themselves as "systems integrators") still think primarily about the Purchasing function when you mention the "voice of the industrial customer." This is natural since Purchasing it is where their primary points of contact are, who ultimately determines whether they get a contract, and what price is paid for it. Companies who want to be positioned as innovators, however, need a much broader conception of who the OEM customer is: It is not restricted to just one function but to many audiences within the organization. Contracts are a result of the ability to manage the complex orchestration of these many points of view. Each OEM customer voice plays a different kind of role in the product development process, and needs to be handled in a slightly different way. Let's take a look at each one, in the general order of sequence in which they become engaged in a vehicle development program.

Marketing

The Marketing staff is responsible for defining the target segment for the vehicle; doing research on consumer demographics; and understanding the needs and preferences of the targeted segment group. This is an important audience for innovative suppliers to get to know, in order to understand the customer's view of their end user. Relationships can be developed with Marketing by doing end-user research and thereby adding to its knowledge base.

Design Studios

The Design Studios are responsible for defining overall vehicle styling, including the development of the "clay body." There are typically two different categories of Design Studios--"corporate" studios that do advanced concept car development, and the design studios that are specific to vehicle brands. If your product affects the look and styling of the vehicle, it is critical that you build relationships with both levels of designers. Remember that Design Studios are populated by industrial designers, not engineers. They relate to a language of aesthetics, ergonomics, style and artistry--not the language of function, performance, and quality. To connect with designers, you have to translate manufacturing capabilities into their ability to increase design flexibility and options (which is another compelling argument for having industrial designers in your own company).

Product Planning

Product Planning has responsibility for defining the "feature package" for the vehicle; for product life-cycle planning; and for overall feature & vehicle pricing. Since product planners typically have responsibility for more than one generation of a vehicle, they are interested in modular technology that allows evolution of a vehicle's feature package over several generations of design, without changing the fundamental underlying architecture. For product-oriented innovators, one can argue that Product Planning is the most important OEM audience to cultivate.

Advanced Engineering

Advanced Engineering is responsible for developing the performance specifications for major systems and components. It is these specifications in turn that will drive the RFQ requirements. A new product idea that utilizes novel engineering or technology, needs to be validated in advance by Advanced Engineering. The ideal situation, of course, is for Advanced Engineering to specify performance parameters that can only be achieved cost-effectively with technology that you own.

Product Engineering

Product Engineering is responsible for interacting with suppliers during and after the RFQ process. A supplier's primary point of interaction with Product Engineering will be around APQP processes and requirements.

Corporate Purchasing

Corporate Purchasing is typically focused on maximizing efficiency of the system/component design and associated supply chains across vehicle platforms and brands. They are seeking component modularity that has applicability to multiple vehicle styles, while reducing overall costs. (There is an ongoing tension between corporate purchasing and platform purchasing that suppliers need to be sensitive to.)

Platform Purchasing

This is the level of OEM "voice of the customer" that most suppliers are used to interacting with. The fact is, however, that once you're at this level, the vast majority of the key decisions have already been made, and the primary negotiation is about price, not about innovation.

Manufacturing

Suppliers who understand the concerns of Manufacturing, and collaborate with them on their Design for Manufacturability (DFM) strategies, can have an extra advantage in the sales process.

HOW TO ORCHESTRATE RELATIONSHIPS.

As can be seen from the chart on p. 18, the range of relationships an innovator needs to manage within the OEM customer base outside of traditional purchasing is extensive and complex. There are several keys to orchestrating these relationships to position your company as a successful and profitable innovator.

* Build a detailed database of contacts in each category at each OEM. There is no public data source that identifies the key decision-makers in each function. This requires disciplined knowledge management in your company (what we refer to as "industrial anthropology"). Every OEM is organized differently, and they change their structures frequently. In particular, you need to figure out which functions are "core"--organized outside of the platform/brand organizations--and which are in the vehicle groups.

* Map the contacts by subsystem for each of your key product groups. In addition to mapping across the organizational groups, you also have to map your products to the functional/system groups, such as Chassis, Powertrain, Interior, Electronics, NVH, etc.

* Clearly define responsibilities. Make sure you clearly differentiate responsibilities in your company for the different levels of contact at the OEM. In particular, be clear about where the dividing line is between advanced development/new product development and your sales and applications engineering staff. Integrate your maps of customer contacts and your innovation strategies in detailed key account plans.

* Understand their problems before offering your solutions. Suppliers often spend too much time "selling" and not enough time listening. While it is critical to provide product/engineering leadership, you need to start with a detailed understanding about what problems your customer is trying to solve.

* Control your intellectual property with a vengeance. Every conversation with your OEM customers is an opportunity to lose intellectual property. Only reveal innovations after you have a protection strategy. Don't trust anyone!

* Tune your message to the audience. Finally, make sure your "messages" are differentiated by the type of OEM audience. Remember, we only hear what we are ready to hear.

DEM AUDIENCE          ROLE                     WHAT THEY CARE ABOUT

Marketing             Consumer segmentation    Who the target buyer is
                      and research             and what they care about
Design Studios        Overall vehicle styling  Aesthetics, image,
                                               ergonomics, emotional
                                               appeal
Product Planning      Product life-cycle       Multi-generational
                      planning at the          feature evolution and the
                      platform level           "price package"
Advanced Engineering  System, sub-system and   Product performance and
                      component engineering    reliability
                      specifications
Product Engineering   Detailed specifications  Performance & price
Corporate Purchasing  Purchasing of            Reducing product costs
                      components that are      through communization of
                      used across platforms    components and systems
                      and divisions
Platform Purchasing   Select suppliers         Price
Manufacturing         Build the product        Manufacturability

DEM AUDIENCE          HOW TO BEST CONNECT WITH THEM

Marketing             Bring them valuable end user research
Design Studios        Bring them product innovations that broaden their
                      range of styling options
Product Planning      Bring them product innovations that allow them to
                      increase vehicle features at reduced costs over
                      multiple model years
Advanced Engineering  Bring them innovations that push the "performance
                      envelope" of your products
Product Engineering   Manage a highly disciplined APQP process
Corporate Purchasing  Help them figure out how to commonize parts
                      without adding unnecessary risk
Platform Purchasing   Innovate for cost reduction
Manufacturing         Engage them in your Design for Manufacturability
                      process

By John Cleveland, Vice President, IRN, Inc.

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