A Tale of Two Cost Reductions

CIDM

June 2004


A Tale of Two Cost Reductions


CIDMIconNewsletter Beth Barrow, Resource Manager, Morotola, Inc.

Cost reduction has always struck me as a Dickensian subject: it is dark, complex, and smells of hunger. I went back and forth on whether to name this article “Hard Times,” “A Tale of Two Cost Reductions,” or “Great Expectations.” Any of those titles would have been appropriate. I have contributed to two significant cost reduction efforts, and neither experience was easy. Both, however, helped evolve the information strategy and managed to save some money at the same time. Here are my experiences. Hope they save you a penny!

Case Study 1: Nortel Networks

The situation
My group at Nortel Networks owned a large suite of user documentation (about 14,000 pages) that was delivered every three months. We were under the impression that most of our users (bifocal wearers) wanted paper documentation, with a minority using the corporate-approved CD-ROM interface. We had no Web interface externally, although we did have PDFs posted on our intranet.

We had virtually no direct user contact. We did have user feedback that came through our technical-support center and systems engineering. We concentrated on getting the information updated and technically correct, and that kept us quite busy.

Life as we knew it changed when I started working for a director whose pet interest was cost reduction. He noticed that the sales team often gave away extra sets of paper manuals as “freebies.” He noticed that those “freebies” were costing Nortel Networks about $500 a set. Once he and I got the numbers in front of us, a couple of things struck us:

  • Our users were opting to order multiple sets of paper documentation instead of using the CD.
  • Most sets of documentation were given away for free or sold at $100, even though the retail price was $500.
  • The $500 retail price was too low. There was no profit margin there. We were listing the documentation sets at cost.

The cost-reduction strategy
Once we had analyzed the sales and pricing data, we developed the following cost-reduction strategy:

  • Reduced the cost of “freebies.” We requested that the sales team sell documentation at cost instead of giving it away for free. If they absolutely had to give it away, we asked them to give away CD-ROMs, not paper documentation.
  • Reduced the amount of information we distributed. We did some user interviews and found that very few end users used the descriptive information, so we started streamlining it. Our goal was to decrease the existing information by 20 percent and to exponentially decrease the page count of any new products we documented. We used the “don’t ask permission, seek forgiveness” stance when eliminating information. We decided that the risk of accidentally eliminating any key information was minute and was definitely outweighed by the usability increase that resulted when we minimized the information in the books.
  • Made a usable CD. After interviewing our users, we found out that the corporate-approved CD-ROM interface did not work for them. They said it was hard to learn and too complex. They wanted a simple CD with a simple search capability. Within six weeks, we created a CD with an easy-to-learn interface and got buy-in from the sales and marketing teams.
  • Offered free Web access. We used an in-house tool to convert the 10,000 pages of FrameMaker documents to HTML overnight using a batch process. We offered lifetime seats for a nominal one-time fee.

The implementation
Once we had the plan, we started making changes to implement it. Here are the key changes we made:

  • Identified a salesperson. I drew the short straw on this one, so I put the cost reduction initiatives at the top of my “to do” list. I worked with the sales and marketing teams to educate them on the costs of paper documentation and lobby them to adopt our new strategy.
  • Created a tools team. We hired a contractor to free up a key person for full-time tools management.
  • Outsourced wisely. We worked with a multimedia vendor to create the new CD-ROM interface. (It took only six weeks to get a prototype.) We also outsourced our publishing efforts to a service bureau. (We defined “publishing efforts” as starting at final TOC and index generation and ending at print approval and archiving.) This change freed up writers to act as project managers for CD and Web releases.
  • Officially changed the “default” delivery method and optimized that delivery method. The tools manager and I explained to the writers that the new “default” delivery method was going to be CD instead of paper. We asked the writers to start writing for CD instead of writing for paper delivery.
  • Let our editor go wild with the files. We used our editor to minimize descriptive information. She actually made the changes in the files, which ensured that we avoided the “forgotten edits” syndrome.
  • Created a good working relationship with the corporate Web team. We were lucky in that the Web team reported to our director. We worked closely with them when creating the Web interface.

The business results
We had a number of business results that came out of our cost reduction effort (see Table 1). Here is the short list:

Table 1. Nortel Cost Reduction Results

Before cost reduction
After cost reduction

Pages per unit

14,000+

11,000+

Delivery distribution

Paper:

CD:

Web:

Primary delivery method

Limited distribution

Not offered

Limited distribution

Primary delivery method

Limited distribution to early adopters

Unit cost

Paper:

CD:

Web:

$500

$2

Not offered

$350

$2

Nominal

Retail price

Paper:

CD:

Web:

$500

$150

Not offered

$1,500 (mandatory-no discounts)

$100

$100 (lifetime seat)

Actual sales price

Paper:

CD:

Web:

$0-300

$0-150

Not offered

$1,000-1,500 (ok, a few discounts)

$0-150

$0-100 (lifetime seat)
  • Replaced paper freebies with free CDs. We eliminated almost all of the give-away paper documentation-all freebies were CDs. Most paper documentation sets that went out the door were sold for a list price of $1,500. That policy generated a decent amount of revenue for Nortel.
  • Sold more documentation altogether. Because the new CD interface was usable, customers started buying extra CDs for their staff to use on the road. Again, this meant additional revenue for Nortel.
  • Contributed to the bottom line. By the time we paid for the outsourcing, contractors, and multimedia vendors (about $500,000 total), we still were in the black by about $300,000. This was a welcome relief from the red numbers we had seen the year before.
  • Increased customer satisfaction. We increased customer satisfaction (as well as employee satisfaction) by more than 5 percent due to the improved user interface of the new CD (based on customer surveys and comments).
  • Evolved the delivery of information. We increased CD and Web usage and decreased the reliance on paper. (Note that we were working on implementing context-sensitive help when the product was sold.)
  • Increased employee satisfaction. Our group’s employee satisfaction increased due to the “cool tools” and job-growth paths for top performers. Also, we eliminated (through outsourcing) the major cause of unreasonable overtime for our group: the writers no longer had to do the publishing and QA checks at the end of the release. (Unreasonable was defined as more than 50 hours a week for more than two or three weeks.)
  • Sent some wake-up calls. My group had given consistent feedback to the corporate-approved CD interface-development group. We were a small internal customer for them and our comments were largely ignored. Our CD-ROM quickly woke them up to making more changes to their interface, which helped other lines of business and their customers.

Case Study 2: Motorola

The cost reduction activities that our group at Motorola has gone through in the past two years appeared simpler at the outset than the work at Nortel Networks. The reality is that this cost reduction took more effort.

The situation
In the past couple of years, the cell phone has evolved from a communication device to a multifunctional handheld that does everything but slice, dice, and julienne. This change means that the writers have to explain how to use the PDA functionality, the digital camera, the GPS, and the Internet, as well as all of the personalization options for the phone itself. Needless to say, our page counts swelled as the functionality increased.

The cost-reduction strategy
Because we print millions of guides each year, there is a direct relationship between page count per guide and unit cost. Once we hit the 250-page milestone, we decided to put our user’s guides on a diet. We also reassessed the physical print stock of the user’s guides.

The implementation
We created a new strategy that allowed us to print less, even though the phone did more:

  • Decided what was essential. We broke the content of the user’s guide into halves and printed the basic, essential half as the user’s guide that went in the box with the phone.
  • Corralled the fine print. We made plans to extract the legal and safety information from throughout the guide and use it to create a legal and safety booklet that would be printed in bulk.
  • Decreased our print costs. We eliminated a label that was placed on each guide and reworked our covers to accommodate that change.
  • Posted the advanced information. We placed the advanced, “gee-whiz” features in a reference guide and posted them on the Web. We also made the guide available in print from our call center, but we did not include it in the box.
  • Identified what would not work. We agreed that a CD-ROM would not typically be used; but we decided to include both guides, where possible, on any CD that other groups decided to put in the box.

The business results
We managed to decrease the page count of the user’s guide (see Table 2) and realized the following business results:

Table 2. Motorola Cost Reduction Results

Before cost reduction

After cost reduction

Pages per unit

250+ A6

125+ A6

Unit cost

Paper:

CD

Web

$.80

Free with limited distribution

Free

$.40

Free with very limited distribution

Free

Print management

Minimums and maximums identified

Same, but some common information is printed in bulk

Paper User’s Guide
contents

Getting started

Safety and legal information

Procedures for all major functions of the device

Getting started

Safety and legal information

Procedures for basic operation

Procedures for the three key features that sell the phone
  • Yielded the expected cost-savings. Yes, the page count reduction did decrease the unit cost as expected.
  • Received few requests for the advanced information. The call center for North America received a couple of requests a week for the reference guide. If the guide was posted on the Web, some people would download it. If the reference guide was not posted, very few people complained.

As we socialized our plan, we tweaked it a bit to accommodate feedback from our customers:

  • Considered all regions. We found that a Web-based reference guide worked fine for Europe and North America, but it did not work as well for countries with limited Web penetration and unreliable paper mail systems. For those regions, we created comprehensive guides by concatenating the user’s and reference guides.
  • Acknowledged that “gee whiz” features sell phones. The marketing department reminded us that we had to find a way to ensure that the key selling points of each phone made it into the printed user’s guide. To appease the marketing gods, we sacrificed 15 pages of basic content to create a virgin chapter to cover the three key selling points. We have, however, maintained a 15-page cap on that chapter.
  • Tried to convince the cost-reduction team that the cost-time-quality triangle has three sides. Our cost-reduction team struggled to understand that separating information into two smaller books would improve usability. We spent a good bit of time trying to educate them. Beyond that, they were not willing to increase the unit cost even a penny to accommodate such usability improvements. We therefore ended up spending a good bit of time to save a good bit of money, with only a minor usability improvement for the end users. Our cost-time-quality triangles looked like those shown in Figure 1.
  • Re-corralled the fine print into the back of the guide. The legal department was concerned that the legal and safety information would be lost if it were in a separate guide. We settled on having it in the back of the user’s guide, where it at least did not prevent the new users from getting started quickly. We are currently printing the legal and safety information as a separate signature and are placing it at the back of the user’s guide. This gives us a cost reduction and a slight usability increase. We would, however, still prefer to have the information in its own guide.

June 04a7

Figure 1. Morotola Cost-Time-Quality Triangles

The Moral of the Story

For two very different cost-reduction programs, there sure were a lot of commonalities! Here are some common threads that might show up in your cost-reduction program as well:

  • Know your user better to develop a better solution.
  • Employ the concept of minimalism to deliver the right information at the right time.
  • Find alternate means of delivering information.
  • Be sure to consider both development costs (time) and unit costs when planning cost-reduction activities. Per-unit costs can easily be eroded by increased development costs.
  • Be willing to pay a little for quality.

About the Author

June 0414

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