From Products to Solutions: Rethinking Differentiation in ManufacturingFrom Products to Solutions: Rethinking Differentiation in Manufacturing

From Products to Solutions: Rethinking Differentiation in Manufacturing Transcript:

Announcer: You’re listening to The Kula Ring, a podcast made for manufacturing marketers. Here are Carman Pirie and Jeff White. 

Jeff White: Welcome to the Kula Ring, a podcast for manufacturing marketers brought to you by Kula Partners. My name is Jeff White and joining me today is Carman Pirie. Carman, how are you doing, sir?

Carman Pirie: I’m doing well. I’m excited for today’s conversation. I think it’s going to be an interesting one. Agreed. Yeah. Something we haven’t really explored before. 

Jeff White: Yeah, I’m really curious to see where it goes. So yeah, probably easiest. Just get right into it. I think so. I’m trying to preamble the thing, but yeah.

Joining us today is Mitchell Jerine. Mitchell is vice president of business transformation at Customer Times. Welcome to the cooler ring, Mitchell. 

Mitchell Jerine: Hey, thanks guys. Nice to be here with you today. 

Carman Pirie: Mitchell it’s wonderful to have you on the show, and I wonder if we could maybe kick things off by telling us a bit more about the firm and how you ended up there.

Mitchell Jerine: Okay, that sounds great. Customer Times, I think, is a really, um, kept secret. In the global systems integration space, we have about 1400 employees on four continents, and we are very well known by large organizations in the manufacturing space, like Generac, Enersys, Industries, et cetera. And we do extremely good work.

That Venn diagram fast, good, cheap pick to write that old story. We actually do all three. We do great work. We’re very shall I say? Offering a lot of business value on the cost side. And we do it we focus on getting this stuff done. We get it done fast and we get it done.

The way I got here was I had been at another systems integrator and we had been using customer times as a sub on a few projects. And that’s how I met the principals here. So when it came time for me to make a move, they asked me to join them. Very cool. 

Carman Pirie: And, um, Mitchell in our conversations earlier, I think what was really compelling is that you bring a very interesting point of view around what is being experienced in the world of manufacturing.

What kind of, just how sales are changing there, how business development more broadly is changing in manufacturing and how maybe even how they view their organizations is changing. I want to begin to unpack that a little bit and if you will spend the next 20 minutes or so getting our listeners inside of your head to understand this world that you’re saying.

Mitchell Jerine: Yeah, we’ve seen tremendous changes over the past few years, and now we’re going through, I think, another radical change with the introduction of A. I. Until our everyday processes, everything that we do. And, I remember what I remember in the old days when the first laptop came out, getting one was like a novelty and no one thought it was going to go anywhere.

In fact, it was all made with generic parts that IBM decided they didn’t want to own it. They used parts that you could get anywhere instead of developing some proprietary edge. And look what happened, right? So we’ve seen that. We’ve seen Y2K. We’ve seen so much change.

And the internet, of course, blew everything up. And I think now AI is about to blow everything up, right? Yeah, 

Carman Pirie: Interesting intersection in that because of course, as we were discussing before the show, the kind of migration from relationship sales even and the old world to what you’re seeing now, and then it’s even when you start to layer on AI on top of that it, it paints a pretty interesting picture, how would you characterize the fundamental change that you’re seeing in terms of how the output of manufacturing is bought and sold?

Okay. 

Mitchell Jerine: You mentioned relationship sales in the old days, spit polish pat on the back and a lunch or a whiskey. Could get you the deal today. Every sales cycle begins on the Internet. The first thing someone does, they go to the Internet to look something up. There’s no relationship there, especially with millennials.

They’re okay. Buying stuff on the Internet. They’re okay. Spending a lot of money on the Internet. They don’t even think twice about it. So when you look at really large companies, I remember back in the, GE did a study, they want to see who are the most profitable organizations. And in almost every industry, the largest manufacturers of the largest players, the, for one or two, the largest ones were the ones most profitable and most efficient.

And today, because of the technology, we have the ability as manufacturers. To change the game, we can change everything. What it really comes down to is differentiation, differentiating yourself from your competitors, and providing value-added services, for example, is a great way. To differentiate yourself from your competitors who are selling on price and trying to compete on price.

Carman Pirie: Do you feel like the competitive landscape previously was just in some ways, capabilities or relationship-driven? So yes, the relationships help drive it. And then there was only X number of people that had the capabilities anyway. And I think what you’re saying is that things didn’t change as much of the capacity wasn’t there for things to.

But it is much in flux, but now things are more competitive. Easier to get things produced, bespoke solutions are more customized outputs are more the order of the day. 

Mitchell Jerine: I think that, today you have the ability as a manufacturer to reach. Markets that you can never have reached before and get access to organizations to sell to that you can never have reached before.

So it really comes down to establishing some differentiation, some competitive advantage, because when you’re selling on price, you’re never going to be that profitable. You’re always going to have a lot of customer attrition. Every deal is a new win in a sense, right? 

Carman Pirie: It’s an interesting counter to that, or the opposite is also true.

Of course, if you can sell to. New jurisdictions that you can never reach before. That means you can experience competition from areas you never could before. 

Mitchell Jerine: Yeah, but if you have the right differentiation, you’re going to win, right? Oh, of course. Yes. At the end of the day, adding, differentiating your product from a product to a solution, is the trend that we’re seeing.

I remember about a year ago when a sales rep from a software company came to me and said, Caterpillar tractor is a huge success for our company. We went from, some million a year in revenue to over 50 million a year. And we did it. Through the introduction of strategies that Caterpillar was willing to adopt having to do with turning products into solutions, which means the product with services wrapped around it, maybe some technology that differentiates them from the John Deere, it’s from the Kubota’s, et cetera.

So that gives you that competitive differentiation, and I’m seeing it in the manufacturing space General Electric with their Predix platform, turns sales of equipment into sales of I. O. T. Solutions so they can monitor the machinery at the site and add value and add services that their competitors did not offer.

Caterpillar did the same thing. As I mentioned, G. E. Jet engines. They don’t sell, they don’t just sell jet engines anymore. Install them under a seven 57 and walk away. They offer a complete turnkey solution where they maintain the engines. They make sure that all the spare part inventory is available, that they’re maintained efficiently and effectively, everything is certified.

And they don’t, so they, so when an airline buys an engine from GE, they’re not really buying an engine. They’re buying air miles and that’s how they charge. 

Jeff White: How, if you are. I’m thinking of the folks in our audience, marketers and salespeople within manufacturing organizations who are listening to this, who have.

Sometimes outside in outsized influence in terms of how they’re able to impact the overall, at least if they have the ear of the C suite sometimes, how might they help to re-fashion or re-prioritize or differently explain their offering and restructure that offering so that they can move more towards one of these solution type offerings, like how, how would they start doing that?

Mitchell Jerine: That’s a great question. And the answer is a difficult one, right? Because at the end of the day, people don’t want to change. In fact, my brother is volunteering his time in an ambulance Corps, and he’s come up with all these ideas on how to make them more efficient and effective. And the old-school people working there.

It’s ambulances, right? It’s saving people’s lives, and they don’t want to change, right? So you’re going to a manufacturing firm that’s been around 10, 20, 50 years, 100 years. And you got old-school people. How do you get them to change? I think what you got to do is you got to, you have to point out that what worked yesterday is not going to work today and it’s not going to work tomorrow.

And you got to get, you got to get buy-in on your ideas and selling your ideas by showing people the benefit and how other organizations might be doing things like that. And that’s tough. Change management issue. But I think what, and I can’t help with that on the radio, but what I can help with is share with you your listeners things that, that they can do, and there are about 10 or 12 different strategies that a typical manufacturer can deploy to create that differentiation, create the distance between them and their customers.

And they include things like. Short-term rentals and leasing equipment include machinery as a service, you sell the machine and you provide services to maintain it over time. Installation services, instead of having a third party or a dealer install, you guys sell the installation and then maybe sub it out to a dealer or do it yourselves by building a team.

So there’s a bunch of strategies that could be adopted. And I learned that figuring out which of those strategies make sense on a case-by-case basis is pretty complex sometimes, right? People don’t know where to start, but that’s where I think our expertise comes in because we’ve done the, we’ve done the heavy lifting on that and we can help people figure that out.

Carman Pirie: Mitchell, I’m I’d be interested to know, because of course, as you imagine this change management process and to Jeff’s point, I think it’s in some ways leaning into the notion of not every marketer marketing leader listening to this show, for that matter, can kind of, there’s a, sometimes there’s a limit to what they can impact as well.

So, I’d be wondering, or the curiosity that I’m trying to figure out here is how much of this have you seen as we shift from people kind of function as a manufacturing company and becoming more of a solutions company? Does it always have to impact how it’s priced or do you see that this change can be nurtured?

Without fundamentally shifting the pricing strategy, because of course, as you talk about equipment as a service and some of those things, there’s gonna be very dramatic changes to an organization in terms of how they sell and recognize revenue, et cetera. And that’s the kind of change that might be hard for some people to impact.

So that’s why I’m curious if there if you’ve seen people succeed in this without shifting. The actual pricing strategy piece of it 

Mitchell Jerine: I can’t think of any examples where price remained constant and the solution was Expanded and you were able to maintain price now what I’ve because you know You’ve got additional costs when you have additional services technology You’re introducing that said you don’t need to charge the same way.

For example, Michelin sells tires, right? And maybe a Truck tire could cost a couple of thousand bucks. I don’t know. So you got a 18-wheeler you do the math, right? And if the tires are not properly inflated, then their gas mileage is negatively affected. And there could be if they’re not rotated sufficiently, then you will have bad wear, causing the tires to wear more quickly.

And you also could be fined on the road because of some other, technical issue in an inspection. So what they did is they introduced a thing called pay by mile, right? And they basically take care you never write another check for a tire You just pay for every mile the truck goes and they do all the maintenance and make sure the tires are adequate to get them there and they see cost savings decrease fuel consumption you know what they do they change the pricing so they’re not charging by the tire.

They’re charging by mile You And the customer doesn’t really know. They just look at the total cost of what it was costing them before. And you make a business case. They look like this is going to be at least as good or better. And you’re going to save money on gas and you don’t have to hire the people to do the maintenance and we take care of everything.

So it’s like a no-brainer. And the price goes, the price objection goes away when the solution is compelling and irrefutable. 

Jeff White: Do you think though, and I’m of a vintage where when I used to buy a piece of software, that software, Adobe couldn’t take it away from me? They couldn’t cancel the subscription.

All of a sudden I lose Photoshop. It was mine until I. Could no longer run it for whatever reason 

Mitchell Jerine: until you had to upgrade from version three to four and they charge you another 155 dollars 

Jeff White: Exactly. Yeah, so but if you didn’t want to upgrade you could keep using it whereas now you don’t have a choice Do you think that in this category?

We may begin to see subscription fatigue in the way that we might be more on the consumer side. 

Mitchell Jerine: That, that’s an interesting question. And I really don’t think so because when you look at Salesforce, for example, if people would buy that license one time and it might cost like 10, 000, 20, 000, but if I could pay it out annually for a hundred bucks.

And I could quit whenever I wanted. I’m not married to it. I can get something else. Then I think that the cost savings of this subscription in a scenario like that warrants a close look. And, so that, that’s advantageous on the other examples, the jet engines, the tires, those things, it’s very hard to compare.

The cost of what they are currently doing versus what they’re doing in the subscription model, right? Because you have to look at all of the cost factors and do the analysis. That said, you’re taking a lot of headaches away from the customer. I don’t have to have my people certified every year pay for their certification and make sure that they’re trained.

And when someone quits, I don’t need to worry that I have to go find someone with those skills, those capabilities, right? I don’t need to make sure that. The engine has the right amount of fluid and I have to have all of the lubricants, in my inventory that I have to have all the time, those guys are taking care of it for me.

So there are a lot of intangible benefits that actually, baked into the model of this of servitization, asset monetization and subscriptions that it’s hard to figure out exactly where. A break-even might be, usually, it’s there and most of the time it’s there and at the end of the day, it’s not about price.

It’s that’s one less headache for me. I’m a logistics manager. I’m booking, I’m selling cubic feet of space on the trucks. I don’t want to deal with tires. I don’t want to deal with engines. I’m going to deal with all that stuff. I just want it to work. 

Carman Pirie: Yeah. Sometimes it’s funny to both of your points, I think.

Part of what I see is that sometimes the change management is harder on the internal side than it is on the customer side. It is man, you got sales folks that are, maybe they’re used to selling into capital equipment, but like that’s what they’re tapping into, they’re selling large pieces of equipment, they’re used to selling it a certain way and positioning the value a certain way.

And now all of a sudden they’re asking them to sell not just change the story and change the. Benefits that they highlight and how they find differentiation, but also how it’s priced. I sometimes it can be I find that sometimes a big, bigger hurdle than sometimes it’s like the market’s ready, more ready for it.

And the salespeople, 

Mitchell Jerine: I always think of it like this. They loved doing what they were doing until they started losing every deal. Love doing it the old way, the way they know, the way they’re comfortable. When the competition comes in with a solution. That you can’t match. All of a sudden you’re taking a hit.

I was recently talking to a company that does flooring and they had something like 185 salespeople who had an average of 25 years experience in the field. And many of them were about to retire. They’re already older and they were freaking out cause there was no. All the tribal knowledge was not in the CRM.

It was in the heads of the salespeople. So the management was challenged, right? What are they going to do when these people retire? How are they going to maintain their revenue, right? And their relationships. So they tried to implement a CRM and get everyone to use it and nobody would use it. So you know what they missed?

They missed what’s in it for me. Give them, if you’re going to ask people to change, give them some benefit that they’re going to see that, the TPS report from office space, generate the TPS report for them. Okay. Get it, give them metrics, give them dashboards. This person just placed an order six months ago and based on their historical order volume, they’re due for another order.

In another 60 days, you should call them immediately. And this is the message that we have a promotion on these products. According to the predictive analysis that we’ve done through our artificial intelligence engine where we could see that this is likely going to be an easy sale for you.

How would you like that as a salesperson? 

Carman Pirie: Probably depends on the salesperson. 

Mitchell Jerine: Yeah, I guess it does. 

Carman Pirie: But I agree with you. You can’t so often the migration to try to capture that tribal knowledge, if you will from the longer tenured salespeople So often that comes down to basically trying to enforce regulations rather than they’re doing decidedly more stick than carrot, and and you’re advocating more carrot, which I think that’s probably a good good idea. It’s 

Jeff White: better than paying them a few cents per per CRM field filled out.

Mitchell Jerine: I, I’ve worked in those places where they tell you this is a condition of employment. You better do it by July 19 or else. And I’ve worked in places where they say, listen, we’re all on the same team. And this is how we’re going to Excel and grow together. And we’re all going to win. We’re going to be, we’re all going to win together.

And this is what we need to do. And if you have any concerns or issues, let’s discuss them. And we’ll figure it out. We’ll figure out a way to get it done. So partnering, teaming, and getting the buy-in that is crucial, right? And it really depends, on, the leadership and their ability to empathize and understand the conundrum that those employees who are less likely to adapt and change are facing and working with them.

But at the end of the day, they got to either change or get out because the competition’s changing. And they’re doing this stuff. 

Carman Pirie: We’ve talked a lot about this selling off, or how to migrate, how the attitude and mindset of the sales may need to shift as we begin to think more solutions-oriented, and we’ve talked a bit about how the buyers need to change their mindset and maybe re-imagine what they value in order to be ready to buy in that new environment.

I guess I’m curious Mitchell, as you. Seeing companies make this transition is there anything else that jumps out that is a key challenge as a manufacturing organization changes its point of view to really think of itself as a solutions company versus a manufacturing company? Are there any other hurdles that you find consistently present themselves?

Mitchell Jerine: I think that a lot of times the transition to moving from a product company to a solution company, change management is the biggest issue. We also see that a lot of times to really accomplish this and do it cost-effectively, you’ve got to have the systems, and the technology in place to support the changing business model.

And I see a lot of times organizations get held back because they don’t have the internal team that has experience in driving those new types of solutions and technologies that are required, right? It takes an investment in that. And you also have to get expertise To, manage those programs and oversee them, the old-school sales manager or a sales leader may not be the type of person, like more of a quantitative sales ops kind of person who really understands, the numbers underneath the metrics and, the KPIs that need to be established so they could figure out if they’re on target and they are on track to hit their business goals and objectives.

Right. 

Carman Pirie: That’s It’s a fascinating transition. And I can imagine you’re quite right. Like this notion of if you don’t have the technology in place to support selling and delivering value in this new way this is a, it’s a change that’s well beyond just having one lunch and learn, and now all of a sudden we made the shift, 

Mitchell Jerine: right?

Yeah. We talked about it before, It really it’s how you define the organization and it starts at the top railroads. Remember we talked about railroads When they dominated trade and travel across the world and in the U. S. and Canada as well? When we saw, cars and buses and we saw airplanes and all this stuff, they defined themselves as railroad companies and look at them now.

Had they defined themselves as transportation companies, they could have been still, we would have you know, Burlington Northern Airlines, Baltimore and Maryland. 

Carman Pirie: This is a reference that’s near and dear to my heart. My father is a railroad man, worked on the railroad his entire career, really engineer, conductor, et cetera hauling freight, and he would consider himself a railroad man today, not a transportation man, right?

Jeff White: Man, are we all worse off for it? 

Carman Pirie: Who knows? But I guess we’re. I’m drawing a, maybe a two, maybe it’s not as strong a connection as I think, but I wonder about that when you think about manufacturing companies, especially some of those kind of, mid-sized family-owned enterprises that have been around 50-plus years.

Often engineering driven and their worldview of themselves is pretty established. Maybe they’re not as stuck in their way as my old man, but they’re pretty close, I think. We make this machine. Yeah. Yeah. And we’ll sell you. 

Jeff White: one. 

Carman Pirie: Yeah. 

Mitchell Jerine: Yeah. But, that’s the problem with that.

I remember many years ago, I had my own software company. I was looking to sell it to a company. And I was, I remember these southern guys, and I’m, as a northeasterner, I thought I was pretty sharp, and I made these southern and they’re talking real slow. And they got that accent right. And I went out, to lunch with one of their leaders.

And he and I were negotiating the deal. And he said to me, Jimmy Bob, he may fool you, but he doesn’t leave any money on the table. And you know what he didn’t. And I learned not to leave money on the table. You sell that product as your asset. And when you sell it, it’s someone else’s asset by bundling services and technology after sale, post sale.

You no longer sold a product. You have an asset in the field that can generate revenue for you throughout its lifespan. And by considering the product as the end, that’s the end, but considering the product as an asset. That’s money that you’re taking off the table. Don’t leave it there. It’s your money to go grab.

So my advice is to figure out how to monetize that asset that you would normally have sold in the past. And keep it on your books in the sense because there’s a wallet out there that’s going to follow that piece of equipment or that Product and you should put your you could put yourself in a position To take it off the table.

So the next guy doesn’t grab it 

Jeff White: and that’s really good advice. Yeah, I 

Carman Pirie: really I was Too Jeff. I’m like, I really hope the listeners are listening to that because he’s just given you the script for that tough conversation Oh, 

Mitchell Jerine: yeah. 

Carman Pirie: Yeah, I think it’s a way of navigating it and talking about it that I think those exact people that I was just describing a minute ago I think it will resonate with most of them.

I think that’s a Mitchell, that’s a really I’m tempted to almost try to leave the show at that, but, here we are. Let 

Mitchell Jerine: I share with you a little bit more because that is a very difficult transition to make and without the expertise of the staff to be able to say, okay, leasing is the right thing for us to do to lease that 250, 000 product instead of leaving it to the bank or the finance company.

Maybe we even do a third-party program where we hire a leasing company, which Microsoft did with us a long time ago with another product offering they had where we would lease software, but they would lease it on their paper, but it was all managed and held by a third party leasing company.

So that’s an example of how easy it is to do. But is that the right thing? Is leasing the right thing? Are maintenance and repair services making a commitment in field service to be able to do that yourself as opposed to letting your competitors pick it up or your third-party operation? So understanding what those strategies are and figuring out which ones are going to be most accretive.

To the business, which ones give us the highest revenue lift, which ones give us the quickest payback based on the investment we need to make and which ones are going to provide us with the highest ROI from a financial perspective? And you know what I’ve spent, I spent the last year or so working out a model that would help organizations figure out which of those strategies Could apply to their business and which ones would have the most impact.

And that’s how I think we got together because that’s something that I don’t think is done, if you look at atlas cop go or you look at healthy tools or these, multi-billion-dollar companies They may have people on their staff who have experience with this and know what they’re doing And they could do that But smaller manufacturers or manufacturers who are new to this kind of thinking they could use some help And we offer this program at no charge.

It’s a workshop. We offer at no charge With the expectation that we’re going to do such a good job and demonstrate our expertise and that should the Manufacturer decide to move forward. They’ll give us a shot at winning the business So that’s what’s behind it. 

Jeff White: also a great sales strategy. 

Carman Pirie: Yeah.

Yeah. I want to just look We’ll try to do this, rapid-fire and fast here, but we’re getting towards the end of 2024 So that means that as a guest that’s You know recording a podcast with us as the year is drawing rapid to be rapid to a close, we feel that we need to get your predictions for what’s going to be new and exciting in 2025.

Now, my modification to that is I don’t think we can say AI anymore because that’s the easy answer. So I guess beyond AI, is there anything that jumps out to you? What has you excited for 2025? 

Mitchell Jerine: Yeah, I think that I’m just gonna say AI in a sense that to frame it, what, from my perspective, I think AI is going to be that impactful, the next internet if you will, kind of impact even greater.

I read that McKinsey’s saying it’s gonna have a $30 trillion impact on manufacturers by the year 2030, which is amazing, right? But AI, for the sake of AI means nothing. You need to have business objectives and business goals clearly defined. You need to have a business strategy clearly defined.

And then once that’s done, then you can look at deploying technologies. AI included other technologies as well. And People who are equally as important, if not more so the right people in the right place, the right technology and the change management, the training and all of those tools. So I think that in 2025, I will be a catalyst to drive.

Radical change and a lot of companies are going to fail in a number of ways because they’re going to embrace the wrong AI solutions. They’re going to, they’re going to find that they have to replace what they’ve done. They’ll trip, they’ll fall. It’s going to be an interesting fight. But if you start with a top-down vision, How are we going to get to the next level?

How are we going to grow from a hundred million to 250, 300 million? How are we going to go from a million to 10 billion, whatever those things are, having that business strategy in place will be enabled with AI technology, but you have to have everything understood very clearly in advance. And I would say that there are very few manufacturers that I talked to today Who don’t already have some asset monetization servitization program in place And those that are not are actually very keen on doing it So I think starting with a strategy in 25 And, committing to considering what AI could do, what technology could do and what could do, and then getting all of the people, the technology and the corporate cultural line.

Those are going to be the stress points that’ll make the difference in 25. 

Carman Pirie: Mitchell. I really appreciate you sharing your time and insights with us today. It’s been wonderful to have you on the show. 

Mitchell Jerine: I got to tell you, it’s great to talk to people who are willing to listen and ask good questions and make you think.

Making me think is good. I think of things and I always say I have a, I have tremendous ideas. Most of them suck. It’s only one or two good ones and they think you’re amazing. So my hope is that the listeners will take one or two of my ideas and say, wow, that’s a good idea. And they’ll be able to use it.

Thanks so much. All the best for you. Thanks, gentlemen. 

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