Case Study: TRIZ for Business Problems
By Prakasan Kappoth, Kushagra Mittal and Priya Balasubramanian
Problem solving and innovation for business problems are still considered a strategic decision making process for organizations, with emphasis given to the immediate solutions needing to be generated. Although these processes follow certain techniques and tools, the amount of data and convergence thinking may dominate the entire solution generation process. There is increasing stress being put to bring a structure to the process of problem solving as organizations focus on the re-usability of the structure for similar situations. This case study is an outcome of propagating the Theory of Inventive Problem Solving (TRIZ) as a systematic problem solving methodology for strategic problems. The authors are also attempt to bring some “uniqueness” to the solution generation approach by forcing the stakeholders (strategic decision maker) to learn from other sources using the ideal final result and 40 inventive principles.
This case study is an illustration of applying a systematic problem solving framework, TRIZ, to a customer situation. The case study is fictional to narrate the background of the situation without divulging the real customer and other stakeholder details.
The Case: Marketing Channel Conflict
Ross Baxter was shuffling nervously in his office on the 12th floor of the corporate headquarters of MCT Inc. MCT, a Texas-based company, is the market leader in manufacturing and selling high-end, specialized toolsincluding home construction, automobile garages, and to the end user â€“ people who own vehicles â€“ a wide customer base. It offers a wide range of products, priced at a premium. MCT offers lifetime warranties and enjoys a good brand reputation. Ross had joined MCT a year earlier equipped with a marketing degree â€“brought in to drive the new e-commerce initiative that MCT had been thinking about for sometime. Things were going perfectly fine for Ross in his new job until a few weeks back, when he saw the first signs of retaliation against the new e-commerce platform that MCT was developing and that he was spearheading. A morning email from his manager, Tony Long, further sealed his fate. Tony asked Ross to present to the board how he willcompensate for the problems that may arise due to channel conflicts.
MCT has been marketing its tools for more than four decades with the help of a set of distributors spread across the country. These distributors deploy showcase vehicles that carry the tools to mechanics and other home users. They sell directly to corporate houses. Each distributor is handed a territory within which he needs to operate and sell MCT products. This model worked well for MCT until a few years ago when it started realizing the problems of over-dependence on one marketing channel. The attrition rate of distributors was high, new hires were hard to come by, there were instances of counterfeit products being sold by distributors in MCT vans at a cheaper price, and always the threat of losing business from a territory if the distributor moved.
Tony thought of introducing an additional channel to reduce this dependence. An e-commerce platform looked like a logical choice:
- It could reach a wider base of customers
- It would let customers order at their convenience
- It saved in intermediary costs (so MCT could price goods cheaper)
- It helped in brand building
- MCT retained complete control over its supply chain
Getting the buy-in for this from the board was not difficult and work started.
Ross was handed the responsibility of building a world class e-commerce platform. He partnered with one of the best IT consulting companies in India called MT Con Ltd., which had vast e-commerce experience and an impressive list of global clientele in the manufacturing domain. MT Con worked with Ross and MCT for more than eight months to shell out a state-of-art website for their e-commerce platform.
As word spread within MCT of this new site, some expressed concern over the conflict this may have with the existing distributors. What was only a concern soon became a reality. The Distributors Union sent a letter to MCT threatening them to withdraw their new e-commerce website or they would move to the competition. The distributors had reason to be upset; this new site would mean that some of their business would also move. Moreover, if MCT started pricing its products at a discount, distributors would quickly become unpopular. Succumbing to the pressure of the union, MCT’s board decided to withdraw the website. Tonyâ€™s pleading did not help, neither did his team’s effort over the past year in nearly completing this site. Tony asked for a monthâ€™s time to come up with a win-win solution in which both these channels could harmoniously exist â€“the board agreed. This morning Tony sent an email to Ross asking him to prepare a report that would state how both channels could co-exist. He pre-approved the budget for whatever external consulting help Ross would require.
Defining the Problem: Look at the Big Picture
This is a typical marketing channel conflict problem; a consultant with similar experience would likely not find it difficult to suggest solutions. But Ross wanted to develop unique solutions without compromising, adversely impacting any stakeholder or incurring large costs for implementation. Apart from that, he also believed learning the process of identifying the root problem and generating solutions was important for reuse in similar situations.
It is tempting to take a straight look at the above problem to suggest solution approaches. A direct contradiction is visible: to reduce the dependence on distributors and increase the geographic territories and existing customer base (the areas to improve), which impacts (worsens) the existing revenue model, losing the current customer base and adding competition. However, the overall problem is multi-dynamic in nature; understanding the “whys” and “hows” of the situation from different stakeholders might help understand the problem in detail. To define the problem in detail and to understand the big picture about the current scenario Ross used two techniques: 1) the ideal final result (IFR) and 9-windows (system operator).
Approach to Systematic Problem Solving
One of the most popular methodologies for inventive, or systematic, problem solving is TRIZ. According to Wikipedia, TRIZ, in contrast to techniques such as brainstorming (based on random idea generation), aims to create an algorithmic approach to the invention of new systems and the refinement of old ones. It works on the philosophy of identifying contradictions underlying a problem and applying principles to remove those contradictions. TRIZ has a list of 40 such generic, inventive principles that can be used to solve technical and business problems. To identify the contradictions itself, problem definition must be refined and comprehensive. TRIZ provides multiple tools for this â€“ the IFR and 9-windows are explored in this case study.
The IFR concept in TRIZ brings the philosophy of thinking about the ideal situation as opposed to the incremental mode of thinking about the current situation. Most organization and individuals look at the problem by considering the situation in hand and work toward improving the problem by solving what is obvious now. This continuous improvement approach may work for a short-term solution generation, but will limit the exploration of solution space by not thinking of all the constraints. This approach also can hide the small issues inside the overall perceived problem.1
The IFR is, thus, an effective tool for expanding the thinking about a problem in an idealistic scenario and will help generate creative and out-of-the-box solutions. Applying the ideal final result requires a simple set of activities â€“ asking a few questions from each stakeholderâ€™s perspective. The MCT situation can be looked at through two stakeholders, MCT itself and its distributors. Going further, there are individual departments inside the company and a range of personnel. In this case, two stakeholders are identified for problem solving: the distributors and MCT channel management. The first step is to identify the problem in detail using the IFR technique within the practical reality, not the “real” IFR. The followingset of questions and answers is based on the distributorsâ€™ ideality (perceived) perspective.
What are strategies for achieving the IFR for distributorsselling MCT products?
- Maximum revenue from the territory without much effort in selling the products, such as advertisements, follow-up (pre- and post-sales), multiple trips to customer site, etc.
- Easy and informative base for the end customer on time, field support in checking the inventory and new product offerings, etc.
- Maximum credit period from MCT
- Fast and efficient inventory updating for products
- Maximum terrirtory rights and exclusivity in the respective geographic areas
- Minimize the inventory levels as much as possible and access to the inventories as fast as possible (minimum lead time)
It is interesting to see how the IFR helps get creative ideas from other disciplines by delving into the next level of questions.
What is stopping the distributors from solving these problems?
The only touch points for the customers are the distributors; MCT concentrates its efforts in selling the products by creating personal relationship with the end customers.
- MCT does not have a system to support the distributors for reducing their sales efforts.
- The necessary investment to establish different systems for distributors is a concern for MCT.
- No systems available for distributors to reduce their selling efforts.
- Getting maximum credit from MCT depends on the sales and revenue generated by distributors. Other parameters such as repeat business from the end customer, lower number of returns, etc. could be deciding factors for MCT to promote maximum credits.
- MCT manufactures their product from an original equipment manufacturer (OEM), and the popularity of the products may impact the availability of the products, geographically for a distributor in particular.
MCT has strict norms in providing dealerships based on the financial strength of the distributor, capability of selling the products, the number of end customers, etc.
- The route allocation may not cover the entire customer base.
- Minimum inventory cannot easily be determined for a particular SKU.
Why is it stopping them?
- MCT envisaged that its brand would bring in customers and that there was no need to put effort into developing new technology. Now the investment MCT needs to make in technology is keeping it from providing needed support to distributors.
- MCT is apprehensive about its needed investments beyond branding, advertisement and other activities (like sponsoring events, brand ambassadors, etc.). MCT believes the personalization approach distributors use with the end customers is important and, therefore, would want them to continue to be as close to them as possible.
- A good distributor may sell a majority of a product requiring the majority of inventory to be allocated to them.
- The geographic territories may be divided to accommodate the distributors. Giving exclusivity for an area may negatively impact MCT if a distributorâ€™s performance is degrading.
- Maintaining minimum inventory levels for a distributor may depend on the particular territory. There is no way for a distributor to check the availability of a product on demand for a customer and place orders â€“ the distributor will have to maintain inventory levels by anticipating future sales.
How could the distributors make products stop disappearing?
- Digitizing information and trying to use that information in more ways.
- Develop systems to help the distributors extend their markets.
- Identify the distributors (based on their territories) who will be permitted credit options.
- A system that will help distributors to understand the availability of the product from the nearest location.
- Time-based sales exclusivity
- Inventory forecasting systems
Now that the distributor view has been examined, the next section looks at the issues from the side of MCT.
What is the IFR for MCT?
Increasing sales at no cost.
What are strategies for achieving the IFR for MCT?
- Increasing sales (revenue), lower operational cost of sales and developing new customer base â€“ using e-commerce strategy
- Increasing the territories for distributors to cover available regions
- Reduce the dependency on one sales channel (currently distributors only)
- Better penetration to the existing customer base
What is stopping MCT from solving these problems?
- It uses distributor-based sales only; developing new customer base through e-commerce site will create a perception among existing distributors that MCT is losing loyalty, taking back support, etc.
- The current approach through distributors cannot stop due to the customer contact base they already have created.
- Alternative channels for increasing territories (using e-commerce) where distributors are not available may be used by those within existing territories, potentially creating a losing revenue base for distributors.
- Reducing dependency may require an alternative sales channel such as e-commerce, but implementing e-commerce may bring down the current revenue model based on the personalized approach used by distributors.
- Better penetration in the existing customer base needs high motivation and dedication from the distributors â€“ current distributor attrition rates are high.
- Developing an alternative system may lead to distributors going to MCTâ€™s competitors.
Why is it stopping MCT?
Implementing any cost effective new system will create problems with existing distributors, as they may believe the new channel may cannibalize them.
How could MCT make the distributors stay?
- Get buy-in from the distributors in developing the e-commerce site, helping convince the distributors that the e-commerce site is good for them.
- Keep the distributors motivated and happy.
- Have the distributors themselves develop a new customer base.
The previous possible solutions are now available, but these solutions still may be inside the box of constraints. To get more solutions from different angles, it is necessary to look at each stakeholderâ€™s detailed activities with the structured thinking technique called 9-windows.
Nine-windows allows structured thinking about a particular situation in terms of time and space, with a matrix split into nine boxes, or “windows” or “screens.” The central box of the nine represents the present system, and is the one brains naturally migrate to whenever facing a problem situation. This tool helps to structure thinking beyond what is obvious to the super-system, looking at the bigger picture and also zooms into the micro-details of what is in the present system.2
This tool is used to understand MCT’s anddistributor activities to expand beyond the current suggested solutions. (Tables 1 and 2)
|Table 1: Distributor’s 9-windows Matrix
|MCT End Customers and Market
|â€¢Emergence of new customers, new garages
â€¢MCT support with inventory (through third-party logistics)
|â€¢Other distributors from other territories
â€¢End customer calling a distributor to understand more about the product
â€¢Perception about the brand created in the consumer base
|â€¢Getting returns from the end customer
â€¢New market opportunity â€“ technological advancement in tools
â€¢Customer knowledge about technological systems impacts interactions among the vendors and their customers
|â€¢Have MCT specify particular geographic territories
â€¢Gaining enough domain knowledge?
â€¢Getting trained by MCT about the tools
â€¢Having MCT identify and share inventory needs
|â€¢Distributors selling products to customers
|â€¢Getting more business from existing customers, identify new customer
â€¢Identify tools based on customer needs
|â€¢Identifying and approaching customer base
â€¢Invest in vehicle to stock products and drive to the end customer
|â€¢Approach the existing/new customers with the product catalog
â€¢Identify the route to be traveled and fill with appropriate products to be sold
â€¢Get inventory updated based on sales
|â€¢Proactive selling, understanding customer needs and proposing the purchase of specific tools
â€¢Identify new customer base by partnering with related groups (such as teaming with a car showroom)
|Table 2: MCT’s 9-windows Matrix
|MCT End Customers and Market
|â€¢Unexploited customer base
â€¢Direct use of tools by end customers (car owners) instead of approaching the garages or service centers for their vehicles
â€¢Competitive products are specialized and cost is an issue
â€¢The brand will sell itself
â€¢Need personal touch with customers
|â€¢Getting returns from the end customer
â€¢Customer will directly purchase from the website
â€¢Shipping times may be longer
â€¢Customer cannot touch products before buying
|â€¢Identifying potential territories
â€¢Assessment for new distributors
|â€¢MCT channel management
|â€¢New sales channel â€“ e-commerce
|â€¢Operational issues involved in managing the distributors
â€¢Relationship-based business â€“ customer would like to see the products before purchasing them
|â€¢Bringing up the system, platforms, tools and technologies for new sales channel
â€¢Managing the existing channel without negatively affecting the new channel
The application of the ideal final result and 9-windows provides different perspectives of this problem from different angles. These structured thinking approaches helped generate a new and increased solution base. There are no solutions explicitly derived out of these techniques, just the preparing of a fertile base for generating new solutions.
Next it is necessary to go to the solution thinking space, using more familiar beginning tools in the TRIZ framework â€“ contradictions and inventive principles.
Contradictions are the root of the TRIZ systematic innovation framework. According to TRIZ, every problem is a contradiction. A problem occurs when we want to do something good (improve) and correspondingly something goes bad (worsens). The solutions for problems are many times a compromise of these contradictions. TRIZ suggests, however, identifying the correct contradictions to generate out-of-the box solutions. Proven structures of identifying contradictions are possible from this caseâ€™s business contradictions. From the original problem statement and subsequent ideal final result workings, the contradictions are:
What MCT needs to improve:
- Reduce dependence on distributors
- Increase territory coverage for their products
- Increase penetration in the existing market
What will worsen if the above parameters are improved?
- Losing revenue from the current distributor-based sales channel if MCT pulls out
- Reducing the personal interaction with the customers (distributors are leveraging this now)
- Attrition rate of distributors
Now it is time to refer back to the earlier IFR questions to understand the contradictions in detail. Mapping the above contradictions to the TRIZ business contradiction matrix (from Darrell Mannâ€™s book Hands-On Systematic Innovation for Business and Management1), the following parameters are deemed relevant in nature.
Improving parameter: Interface â€“ supply, support, production and research and development (R&D)
Company A would like to increase its sales (supply interface) in new territories, reduce its dependencies (R&D and production interface) with the distributor base, and increase penetration in the existing market (supply interface). A supporting system for this new system is also important for successful execution and sustainability (support interface).
Worsening parameter: Tension and stress, system-generated harmful effects and stability
As a result of implementing the e-commerce system (improving area), there are factors that could affect the situation: distributors pulling out (tension/stress), losing revenue from the current market base (system-generated harmful effect), reducing personal interaction with customers, resulting in customer loss (stability).
Continuing this examination based on the business matrix in Mannâ€™s book, Table 3 describes the application of inventive principles in this problem situation â€“ it illustrates the useful solutions derived using certain principles relevant for implementation.
|Table 3: Solution Options Based on 40 Inventive Principles
|The distributors of the company are varied in terms of geographic region, experience and revenue generation. If they were divided into three bands (considering their current potential and local consumer cultures) then it is easier to launch the e-commerce channel at varied levels across the different bands of distributors. This categorization will also help facilitate a sense of competitiveness among the distributors, thereby enabling the company to successfully utilize and optimize the use of the older and the new marketing channel. Another benefit is that this e-commerce launch might bring the product/brand to a new segment of customers who shop mostly online and have remained ignorant of the product due to its presence only in shops.
A.Change the structure of an object or system from uniform to non-uniform, change an external environment from uniform to non-uniform
|The main challenge is not to intimidate the distributor into thinking that the e-commerce site is a rival, but rather to educate the distributor about possible usage of the website in favor of the distributor. Some of the ways in which online marketing can prove beneficial for the distributor are:
A.Package the e-commerce site not as an e-commerce site, but as a service improvement initiative for distributors to do the business better
B.Provide support to distributor to place orders on the truck (mobile computing)
C.MCT can communicate with distributors on new product brochures
D.Distributors find new customer base
E.E-commerce site helps a distributor to know status of orders in order to improve support to customer
A.Change the form of a system or object from symmetrical to asymmetrical
B.If a system or object is asymmetrical, change its degree of asymmetry
|In manufacturing, it often happens that the demand pattern is unpredictable and that the supply chain can take a hit with inventory shortages. At the same time there might exist an excess of the same product at a different location. To fully utilize the common inventory present across all area grouped distributors, it is necessary to have networking between them. This type of an arrangement of “give and take” will effectively solve the potential problem of not having sufficient inventory and also minimize the piling up of inventory. If the distributors had group communications using the e-commerce channel then discussions, transaction details or inventory requests can be easily handled.
A.Bring close together (or merge) identical or similar systems or objects, assemble identical or similar parts to perform parallel operations
B.Make operations contiguous or parallel, bring them together in time
|Reverse the supply chain using distributors and increase the revenue model. Often, several services provided by a company require the same kind of resource but are not exactly utilized or grouped. For instance, vans and trucks carrying company products to neighborhoods for retail selling might also bring back defective products or warranty-related returns. To achieve this, even the e-commerce channel may be utilized to make appointments and maintain addresses of consumers. By paying some amount to the distributor, the company saves considerable revenue; in turn, the distributor gains revenue and the consumer benefits from the service.
This case study illustrates the application of TRIZ for strategic business problems. The situation described here was a fictional story to provide background about the situation, adding further explanation about applying certain techniques and finally developing solutions that helped the authors package a unique offering, including technology implementation, to the real world customer. This case study also helps propagate TRIZ as a strategic business consulting tool within an organization.