A day in Kunming China

Kunming is a important location for transit passengers traveling via China Eastern.

I had a unplanned 24 hour stay and I am glad that I found a reasonable accommodation. 

So for those that are looking for simple, straightforward transit stay in Kunming,  Dhaka Hotel Ph# 135 2933 2392 is a good option if you are within a budget. They have WiFi, Airport Transfer and South Asian food options.

Complete Gross Margin improvement framework

Posted above is a time tested framework for significant gross margin improvement to your business unit's overall gross margin.

Simple but very powerful. If you can deploy these buckets wisely then GM savings can be anywhere in thousands or millions .. depending on your operations scale.

 

Pricing strategies for services

How can a services provider (Advanced Services, Technical Services or Professional Services) make sure it has priced its services just right?

There are three ways to do pricing
1)      Cost Plus
2)      EVC (Economic Value to Customer)
3)      Competitive Marketplace

Just going by Cost Plus, you leave money on table. EVC is theoretically best pricing but you cannot price case by case (so you set list price and give discounts to adjust for case by case basis). Competitive Marketplace is what most people do but then you are treating your services as commodity.

I suggest that you follow a more methodical approach about pricing strategies for services.

1)      Creating a pricing model, which takes into account your fixed costs and business strategy.  A baseline formula would let you know what price range is NOT feasible.  Say your prices will not be less than this amount so that you maintain your Gross Margin and survive in the industry.

2)      Break down your costs into buckets (Server, support, manpower, gas, commute, task time, delivery model and expertise) and then have a variable formulae based on weightage to what you have in plenty and what is scarce for you.

3)      Research your industry (business cycle, technology trend)

4)      Research your customers (segment the market, are you their strategic partner, long term potential).

There is a constant pressure on services to invest in new practice areas, either because these investments would help meet business unit sales quotas or because the business units need more people/partners out there, evangelizing new sort of technologies. Evaluate those opportunities so as to keep your costs low.

 

Five pillars of Gross Margin Improvement

When growth comes to standstill or products start to become commodity …nothing else matters as much as maintaining your Gross Margin.

A company can have stagnant revenue but Wall Street will still reward it's shares if it show profitability growth and how do you do it? Look no further than Gross Margin.

Essentially the five pillars of Gross Margin improvement are:

1. Financial Planning
2. Operational Effectiveness
3. Pricing Optimization
4. Product Management
5. Sales Effectiveness

Want to know more? I am working on a Gross Margin play book. Drop me a note and will be glad to share.

Operational effectiveness as a Gross Margin tool

Effective Operations can help your company move in the right direction w.r.t. Gross Margin.

The 8 top most things that come to my mind when we look at GM in high-tech industry from an operations perspective are (in no order of importance).

Operational Effectiveness

NMS - (Fixed + variable) Others

Portfolio Alignment

NMS - Freight Savings

Over Head

Transformation Savings

Supplier Savings

Product and Theater Mix

Royalty Management

We will drill down into each some other day in a white paper.