The past year has not been a good one for "should cost" or direct material cost management vendors Apriori and Akoya. Both have struggled to get broader adoption for their solutions which help companies better understand the cost drivers -- and engineer out cost -- from their direct material parts and components. From what I've heard recently from my sources, Apriori's former CEO, Frank Azzolino, a highly respected technology executive in the Boston area, left the firm because of different growth expectations than the management team shared with the Board. A similar fate happened to Akoya's last CEO in 2007 as well. In this environment of new leadership, both organizations now appear to be retrenching.
The lack of high growth that investors of both companies were expecting is disappointing because both technology approaches are not only mature enough to pose little implementation risk, but also because they can provide clear cost savings in a manufacturing environment where every penny can count. So why hasn't either provider failed to cross the adoption chasm or at least gotten enough large-scale traction with a handful of providers (just as Profit Logic, where the former CEO of Akoya came from, had done)? My guess is that the problem with both organizations does not come down to technology or poor management -- far from it. Rather, it's a classic challenge for technology companies that do not exactly fit into a single bucket. And that's the fact that neither organization focused on identifying, developing and evangelizing a single economic owner/customer target for their solutions.
The challenge for these types of solutions is that they have numerous potential homes inside a company. One could argue that a procurement organization which has gone through significant category sourcing initiatives in direct materials categories would view approaches to engineering out cost rather than simply better negotiating with suppliers as a logical extension of their current portfolio of savings approaches. Of course it's also possible to suggest that these solution classes have a natural home in the engineering and design environments as an extension of CAD or PLM. Last, I could even see companies from a risk management perspective considering them because design decisions that narrow a supply base can create considerable risk.
You probably see the natural challenge now: there's not a single solution owner that either company can target. For some, this might appear to be a good challenge to have. But in general, it's a challenge that only companies selling mature solutions into a broader, accepting market should look forward to having. When you're in the early stages of a new solution area -- especially ones that both technically and process-wise take black-box approaches to spitting out recommendations -- the highest probable chance of success comes from identifying and evangelizing a single economic owner. So here's to hoping that in 2008 both Akoya and Apriori identify this figure across multiple companies -- or even a single industry -- given that manufacturers can certainly benefit from what both have to offer.
- Jason Busch