Tuesday, May 8, 2012

How to Succeed in Business:The Value of a Zipper

Thanks to a reader.
From Evolving Excellence:
Great article in Slate of all places on YKK - you know, that zipper company you've never heard of.  Maybe some of you have seen the initials on your zipper but I bet most haven't.  I'll tell you why I was especially impressed, then we'll go through a bit more of the article.

A typical 14-inch “invisible” YKK nylon zipper (the kind that disappears behind fabric when you zip up the back of a dress) costs about 32 cents. For an apparel maker designing a garment that will cost $40-$65 to manufacture, and will retail for three times that much or more, it’s simply not worth it to skimp. “The last thing we want to do is go with a competitor to save eight or nine cents per zipper and then have those zippers pop,” says Steve Clima, Turk’s senior production manager. “The cost difference just isn’t enough given the overall margins.”

Now that's a zipper on some clothing, where a failure is a "wardrobe malfunction."  I run a company that makes components for medical devices - long term implantable devices no less.  Our $20 part must meet exacting standards otherwise a $30,000 device requiring a $100,000 surgery fails.  Failure can cause death.  So what is the value of that $20 part?  And why do some of our customers spend a lot of [wasted] effort each year to try to get us to cough up a 5% price decrease?  Should that be their focus?

End of minor diatribe - it's been something that has always bothered me.  It's also been interesting how different customers in the exact same market treat value radically differently.  Some do everything they can to support us and consider us a partner, some try to gouge us and treat us as a "costly" component supplier.  Guess which gets the best support and effort from us.  Well, actually both types do.  Sorta.  Maybe our sales folks needs to start carrying a YKK zipper, and tell the story.
So here's some more of the YKK story.  First, there's a believe in the importance of just doing
the right thing, for humanity and otherwise.
Yoshida also preached a management principle he termed “The Cycle of Goodness.” It holds that “no one prospers unless he renders benefit to others.” In practice, this boiled down to Yoshida striving to produce ever-higher quality with ever-lower costs. It seems intuitive, but it’s far from easy to do.
That focus on doing good and always improving creates value.
And in the end, the secret to YKK’s success is equally uncomplicated but equally impressive: YKK makes incredibly dependable zippers, ships them on time without fail, offers a wide range of colors, materials, and styles, and never gets badly undercut on price. The feeling in the apparel industry is that you can’t go wrong with YKK.

If "You can't go wrong with..." is the default position when your customers think of you you have a wider moat than a thousand patents can create.