13 Pages, Grade: 1,0
Boise Automation Canada Ltd. Case Study
ENSR International Case Study
Medical Equipment Inc. in Saudi Arabia
Heidi Roizen Case Study
Version 2015-06-11 (2012, Richard Ivey School of Business Foundation).
Official Link: https://hbr.org/product/boise-automation-canada-ltd-the-lost-order-at-northern-paper/W12785-PDF-ENG
- 1) Price with which Boise could have won the order.
- Thoughts and bullet points:
- According Jenny DeBour: 1.3 – 1.4m “we will likely be 25 to 50 per cent higher on price compared to“ the competition.
- According Dieter Haase: 1.4m “It is clearly worth at least a 20 to 25 per cent premium”.
- According Jason Li: 1.35m is “over 30 per cent [too] high”.
- Budget is most probably around 1m (often in full integer, not 0.9 or 1.1).
- Price at which Boise breaks even (lowest price possible): Between 1.12 and 1.17m.
- Lowest price of competition could be 0.7.
- Boise could at maximum claim a price of 1.04m, then they could get the order (according to Jennings).
=> For winning the order, Boise must take losses into account (worst case: also a negative contribution margin), but via supplements.
- Supplements (“Nachträge”) in Germany : Because the price is the most important criteria, many companies claim for a very low price (maybe even too low, but still with a positive contribution margin) to get the order. After that they tell the contractor that something needs to be changed on his/her elaborated specifications, what will lead to additional costs and the needed profits of the company.
- There are no concrete statements according the price of the competitors, only some vague evidence. This could be one red flag indicating that this order may be already assigned to JBT since Boise doesn't have any insider connections (mentor) within the company. According some statements of people from the buying center, the optimal price to win the contract would be 1.04m. The competition is way lower (in the worst case they only claim for 0.7m), but regarding Mr. Jennings, the higher quality will turn the page in this case. The problem is that Boise needs to charge a price ranging from 1.12 to 1.17m to break even. We don't know the cost structure of Boise, but if their contribution margin is still positive, they should charge the low price for future benefit. They maybe win Northern Paper as a future customer and benchmark for other orders in that area. Even if the contribution margin is (slightly) negative, via supplements, Boise could also prevent (huge) losses and benefit in the long-run.
- 2) How could Boise win this order despite their high price?
- Thoughts and bullet points.
- Members of the buying center (= decision committee) and their functions.
- Derrick Rogers (engineering staff) : Determine demand for updates, investments, etc. and work out specifications.
- Jason Li (engineering manager) : set up a cost-benefit assessment as starting point for the RFQ.
- Member of Corporate Finance : Assess the economic feasibility of this investment, weight against capital hurdle and priority of other projects, raise funds and determine the (maximum) budget.
- Bob Muma (mill manager) : responsible for the whole plant, every update, improvement or even change requires his approval.
- Dan Reynolds (Purchasing Department) : Work on specifications, send request for quotation to potential suppliers.
- Mister Jennings (Corporate Standards) : Evaluation of suppliers regarding subjective factors like reliability.
- Wood Chip Representative : ??? (no information about him/her).
- Contrary arguments and possible solutions.
- Jason Li: Doesn't want to justify a premium towards Corporate Finance.
- Convey the TCO (total cost of ownership).
- Only 10% of costs regarding any bigger investment are related to acquisition, 90% are subsequent costs which can be lowered by higher quality requiring a bigger initial investment.
- Common Law of Business Balance  : Only buy things with the highest value for the lowest price. Since Boise is highest quality and lowered their price, they are the best for the order.
- Boise can connect the system with other systems of Northern and increase operative efficiency.
- Less production faults & production rejects, increased quality of goods.
→ Increase of customer satisfaction and CSR (very important for strategy of Northern).
=> Convey the higher (emotional) value for Northern.
- Jason Li: Elaborated specifications are exactly those Northern needs.
- Boise's offer included some characteristics Jason didn't know.
→ Questionable if he already made the best decision.
- Further increase in efficiency is needed for Northern to survive in this times of global, low-cost competition from Asia.
- Bob Muma: Best engineers already made their best decision.
- Don't underestimate the importance of new, future-oriented characteristics of Boise's systems.
- Importance of alternative points of view.
- “Fresh breeze” within the production process, estrangement from JBT.
- Offer some special services like maintenance or free and regular staff training.
- Bob Muma: Operators prefer uncomplicated, familiar systems.
- Unique help functions integrated in the Boise system enable an easy walk-through.
- Experience of former clients are very well.
- Individual customizable user interface ensures safe and easy handling.
- Knowledge of Boise staff useful for instruction of operators.
- Boise should offer demonstrations, show the interface to Muma and maybe some operators, prove that it is easy to handle.
- Advantages of Boise (in direct comparison to competition).
- Sticks out of the mass through an USP (high quality and best service).
- Connection with the systems (→ future technology), worldwide experience, already worked out a detailed plan for implementation (reduced time for completion.
- Disadvantages of Boise (possible improvements).
- Boise is known for exact implementation of customer needs, but can't meet them of Northern.
→ Supposes to know the needs of them better then they do.
- Trade-off between rapprochement with the “corporate guys” (Mr. Jennings) and the persons in charge for the production process (Jason Li, Bob Muma) who are much more important in the buying center than Corporate Standards.
- Allison could have tried to bring the buying center together and discuss any issues to take away uncertainties and convey the benefits of his systems.
- Top-level door opening: Connect with the customer on every level (Finance staff of Boise should be connected with finance staff of Northern, so the engineers, etc.).
→ Diamond relationships. 
- 3) When did Boise lost the order?
- (a) Questionable if ever had a chance.
- Detailed specifications are already elaborated, only a request for quotation RFQ is sent to Boise, no request for proposal RFP.
- Specifications didn't fit with Boise's offer.
- Missed the chance to influence the specifications.
- Via top-level door opening, conveying the TCO or other benefits.
- Will justify the price, reduce the competition and align the hard budget plans.
- Jason Li and Bob Muma not willing to change the situation, just agreed on the predetermined specifications and Allison didn't try to convince them (enough).
- Price seems to be the crucial criterion, Boise can't hold up with competition.
- Only supporter, mentor, sympathizer is Mr. Jennings from Corporate Standards, no great influence, fixed on him and neglected the others.
- (b) Lost after the 9th May.
- Search for backing from the Corporate Standards leads to anger between him and Jason Li.
- Budget seems to be unchangeable and Allison didn't talk to Corporate Finance to convey the long-term benefits.
- Calls with Mr. Jennings are shorter → Searches for distance, maybe want to hide the bad news.
- (c) Doubts from Allison at 15th April.
- Allison is interpreting the statement of Jason Li.
- Possibility that buying center has already rejected Boise's offer at the first meeting.
- BUT: Assertion of Mr. Jennings from the 9th May indicate that Boise is still an opportunity.
→ Possible, but not very likely.
Version: May 27, 2004
Official Link: https://hbr.org/product/ensr-international/an/503075-HCB-ENG
- The overall problem of ENSR International.
- The effectively solve the existing problems, set up a problem statement to better understand the problems and find a solution easier.
- ENSR is offering services, Consultative Selling problem, provide information before the clients have to pay for it → Higher losses in case of lost clients.
- Financial trouble of the company is recognized, key drivers of success are analyzed.
- Behavior of Clients: Influenced by legal framework and externalities.
- Behavior of Sales Department: Influenced by performance of seller doer and by organizational structure.
- No incentives for 30 seller-does who aren't CSC managers to generate profits.
- Introvert behavior, only concentrating on own CSC.
→ Too few cross-CSC projects.
- 1) What are the advantages and disadvantages of organizing around geographies?
- Advantages .
- The near to the clients and industries or close contact to regional culture.
- Clear hierarchy, everyone knows whom to contact and superiors can support projects better.
- Working in a team to fulfill a certain project in a certain region leads to specialization.
- This special culture increases moral, motivation and indirectly efficiency.
- With own VP the CSCs have greater influence, more support and will receive requested resources faster (in the best case).
- VPs are accountable for the performance of their CSCs, have strong incentive to control them, (but can easily become overstrained).
→ Faster response on changing circumstances and quicker decision making process.
- Opportunity to spin-off single regions or even sell them (regarding the idea of Bob Petersen).
- Evaluate the performance of the CSCs in each region to assess whether some regions should be abandoned or supported more.
- Disadvantages .
- Many projects need comprehensive knowledge and support from other CSCs, therefore high travel and administration costs to send consultants into other regions.
→ Synergies can't be used effectively.
- Structure is less flexible and less dynamic than others.
- COO (and even CEO) must coordinate the actions of all VPs and control the CSCs (burnout).
- Single CSCs can lose the overview of the company and follow only goals they estimate to be useful for the company (but they don't know it better).
→ CSCs could act introvertedly and cause disputes.
→ Increased competition among the single CSCs (can also be positive if CEO wants to improve operate efficiency).
- Problems of under-utilization of capacity; every CSC is equipped in the same way to face the same problems with the best preparation, but in some areas (Camarillo, CA CSC) there are less projects and therefore too many people for to few work.
→ Maybe misallocation of capacity even worse.
- 2) How does the BDO solution look like in detail and what are the (dis-)advantages?
- Bob Weber suggested to establish a group of Business Development Officers (BDOs) to develop relationships with former, current and new customers instead of the “seller-doers”, who are primarily consultants (waste of potential).
- Hunter-Farmer discussion: Are consultants only hunters (capture clients) or also farmers (customer care)?
→ If not, problem of hand-over arises: Client is acquired by one person and has to deal with a different one after signing the contract.
- Company doesn't invest much time in acquisition of new customers, therefore some specialists could enhance growth.
- “Seller-doers” are paid a salary based on billed hours rather than on success rate.
→ BDOs are networking experts and would be paid by success rate and therefore invest more time and attention in customer acquisition, they are not distracted by consultant tasks, can focus only on networking and interaction with clients.
=> Limit the downside risk (in case of failure no / lower compensation).
- Company made bad experience with BDOs in the past, therefore abolished this system.
- Sending BDOs to clients failed to bring credibility, but competitors will probably do the same.
→ Kind of inconsistent corporate behavior, ENSR states to be very close with its clients, but on the other side sends BDOs.
→ New times, technological progress, changes circumstances may lead to a different result.
Fig. 1: BDO Solution Organization Chart
illustration not visible in this excerpt
- It seems to be a good choice to turn 25 to 50 of the actual “seller-doers” into BDOs, the others can focus on their consultancy tasks or, unfortunately, have to be made redundant.
- One very effective possibility could be to divide the BDOs into three categories:
- Premium Sale Officers deal with the most valuable clients and projects.
- Client Acquisition Officers meet and network with companies in the field of action of the CSCs to acquire new clients.
- Sale Officers will deal with all other clients and projects.
- BDOs should be at the same level as the regional managers because they should work together (or at least stay in contact).
- Regional managers should know the concerns and performance of their CSCs and direct these information to the BDOs to improve the situation.
- Simultaneously the BDOs should inform the regional managers (and CSCs) about their actions and maybe about plans for the client acquisition (to see whether it is demanded, needed, intended etc.).
- 3) How could the compensation solution look like and what are the (dis-)advantages?
- Bob Kelleher suggested that a new incentive system would increase profitability.
- Now, only objective, measurable targets are taken into account and generate a percentage bonus based on basis compensation.
- Only motivation was a challenging work and a sense of societal contribution.
- New incentive system should take subjective things like effort or customer satisfaction into account.
- This will encourage seller-doers to take more risk and maybe come back to acquisition of potential clients and boost motivation of consultants.
- Consultants will focus more on customer value and sales growth will increase.
- But measuring such subjective factors becomes very hard and increases the afford (and costs) of the HR Department.
- This is also a monetary reward, maybe better to offer some fringe benefits (free access to a gym, own cheap canteen, company cars for private use) or other perks (maternity leave).
- Sometimes (as Anderson indicated) motivation is not the problem, but the huge workload and stress; maybe relief by hiring trainees or supportive workers for the “simpler” tasks.
→ Enhance the information provided by the research Department to enable consultants to know their clients and their situation better.
- 4) How does the key account program look like in detail & what are the (dis-)advantages?
- Kathy Anderson suggested that a key account program would boost sales.
- Teams of people (lets say 8 – 15 people each) should be created and assigned to the most valuable clients like Northfork Inc, the US government and American Aviation.
- Anderson indicated to create teams for the biggest 10, 20 or even 50 clients, but this will exceed all costs.
- After this three clients, there is a gap in gross revenue, therefore 3 teams should be implemented and be assigned to them.
- These teams are more flexible, staffed in an adequate way and have the demanded expertise.
→ Reduction of time delay, costs and administrative burden.
- Furthermore they specialize to the client, which makes a customer migration less likely and increases the total amount of sole source contracts.
- But this is very costly, especially because one client doesn't need services all the time.
- Problems can arise with the ratio of revenue and expenses.
- Also the company has no experience for such an approach, yet.
=> Assign a team to two big clients or one big one and two to three small ones located close to each other, but make sure these companies aren't competing.
- Positive (side-)effects of a strong relationships / a strong network are contact to new potential clients, influence on specifications or even shaping of projects.
→ “Big” clients are less likely to fall, therefore its a business relation for long time.
illustration not visible in this excerpt
Fig. 2: Key Account Program Organization Chart
- Anderson suggested that for each “bigger” client a single team was composed, therefore one (big) team will be assigned to all other clients.
- Would turn the company's organization from multi-divisional (regional) into more formal structures.
- 5) Which option should the company choose?
- A hybrid form of both, the BDO and the key account program solution.
- As indicated before, the idea of key account teams is very useful, but only for the biggest three clients; for all other clients the regional concept could be held.
- The BDOs should take care about the relationship to the current and potential customers and relieve all other consultants.
- This re-structuring may be very expensive and time-consuming, but this will increase operate efficiency and total revenue.
- Problems of the geographical approach still be there, but reduced and not for the biggest clients.
- For every client an individual cost-benefit calculation should be done to determine whether one project is profitable and should be followed or not.
→ Maybe losing some projects by this, but the BDOs take care about the acquisition of new clients, market is growing and demand increasing.
- Also considerable.
- Reduce the total amount of CSCs to minimize fixed costs and let more consultants work from home. Via Skype / Lynch contact between the active consultant visiting the client and the other experts can be established and knowledge be exchanged.
- If some research has to be done, if federal departments have to be contacted or something
 Further Reading: http://www.lifeofanarchitect.com/john-ruskin-common-law-of-business-balance/
 Image Source: https://salesbenchmarkindex.com/wp-content/uploads/2011/06/capturewiz025.jpg
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