An Interview with Mark Keenan, President of Technicon: Discussing Bill of Material Configuration and CPQ

An Interview with Mark Keenan, President of Technicon

“But, probably the most important thing we’ve noticed over the last couple of years is that the manufacturers have focused on what they call the “customer experience.” 

PPLM:  Mark, give us a little background about you and Technicon.

Mark:  I am an engineer by education with an electrical engineering degree from Georgia Tech.  Right after Georgia Tech, I joined Intel Corporation doing sales and marketing and then later managed the business development group for Intel.

About sixteen years ago, I joined Technicon.  At that time, we came out with one of the leading CPQ products for large manufacturers in North America.  My background revolved around some of the aspects that can be associated with CPQ such as CAD and mechanical engineering.  By selling Intel products, I also got a good feel for the complexities and issues in generating quotes and the proposal process for manufacturers.  Since then, for the last sixteen years, we have been deploying systems for very large manufacturers in North America.  Companies like Eaton, Borg Warner and Phillips are Technicon customers.  Today, Technicon is a leading CPQ provider in North America. 

PPLM:  Mark, we have heard numerous terms used to describe what you and the industry are doing.  Talk about the terms that folks might latch onto.

Mark:  Yes, indeed there are different terms.  CPQ, which stands for Configure-Price-Quote is the most commonly used term.  Other terms we use a lot are Design Automation and Product Configuration.  Those particular terms are all related.  However, there are important differences between Configure-Price-Quote, Design Automation and Product Configuration.

You’ve talked about CPQ in your previous newsletters, so I won’t drill in on that. But, the term Configure-Price-Quote typically suggests a solution that enables sales people to “configure” order requirements.  A proposal is developed and often will be routed through an organization before it is delivered to the customer.

The term Design Automation is fundamentally associated with CAD Automation.   That is, the requirements specified by a customer are processed and used to modify the actual geometry, material properties and behavioral characteristics.  I noticed you interviewed Scott Heide a few weeks ago.  Scott’s company focuses on design automation technologies.  Interestingly enough, these days, many systems deployed combine both CPQ for quoting and design automation functionality.  I was mentioning Scott because his firm, Engineering Intent, and Technicon often deploy systems at the same time that have both of those elements and the same system. 

Product Configuration tends to mean systems that are designed for end-users.  By that I mean, browser-based systems provided by Dell, Nike and automotive vendors to empower end users to configure a computer, sneaker or maybe a car. 

PPLM:  That is a nice way to describe the segments.  Let’s talk more about the CPQ area, not the Product Configurator, but the CPQ functionality.  What are customers using that for or applying it to in their businesses? 

Mark:  First, CPQ is automating the process of generating a quote or proposal, and as the name indicates, there is configuring that goes on.  By selecting the different aspects of a product such as its options and variations, the CPQ solution will crank out possible configurations.

“Price” means, producing a price or monitoring the pricing as it goes through various configuration options.  The “quote” refers to generating the actual document or proposal.

Let me drill in further on the “configure” portion of this.  For example, you could have a packaging product line that can be configured into hundreds of different options.  As the configuration is being developed, that CPQ solution could be used to optimize performance, pricing, weight, etc.  For example, a salesperson may say, “Optimize this quote, so it’s the least costly quote.”  In another example, a customer might want a quote to deliver the highest throughput on a manufacturing line. 

The last aspect of what CPQ is doing for our customers is what I call Life Cycle Management.  A manufacturer might allow sales people to quote products.  However, certain aspects of the quote might trigger reviews or special processes such as a credit review for new customers, the need to spec out special tooling, or to get purchasing feedback for long-lead times.

PPLM:  You’ve stated most of your comments in a sales context.  It would seem to me that CPQ could be used elsewhere in a business.  Are folks using CPQ for other activities beyond sales such as new product evaluation or engineering?

Mark:  You know they could, but I see that less often.  But, perhaps somewhat related is the fact that many customers use it with their distribution or representative channels.  This tactic is ideal when there are complex configuration options and consistency is critical.

PPLM:  Let’s move into implementation considerations.  Highlight for us the key steps that you and your customers go through to establish a CPQ capability.

Mark:  One of the nice things about CPQ is that many solutions today offer functionality pretty much out of the box.  Of course, there are times when professional services are required.  Some of those areas include application integrations with ERP or CRM systems, training, and loading customer product data and their rules.  We do follow a typical deployment methodology, going through different stages of the deployment, doing a defined proof of concept and then a deployment phase.

PPLM:  When you say it’s “out of the box,” it almost sounds like there’s some kind of wizard in capturing data.  You’re being prompted for things like product data, potentially some options and variances, pricing, etc.  Talk about that just a tad more.

Mark:  Let me answer that in two stages.  One aspect is the front end.  We may spend a few days setting some configurations so the user interface meets the style of what the manufacturers will want when they are using the user interface.

The second aspect is related to product data.  All these systems rely on product configuration driven by “rules.”  This product data and associated rules define valid product configurations.   Let me give you two simple examples.   A car may be configured with 15-inch wheels, or it may be configured with 17-inch wheels.  Yet, that car cannot have both options.  That is a rule.  A different example is a fuse box that may have room for 20 fuses.   That box could not be quoted with 21 fuses.   Again, that is simple.  In general, the “fuses” are of different shapes and characteristics and can require complex rules.

Technicon’s CPQ platform is driven by “constraints,” rules that tell the system what the restrictions are for a valid product configuration.  The manufacturer’s product marketing people are the ones who typically understand those product constraints.  We train those people how to load that information so that the system will then have those constraints for the sales people to keep in mind.  One reason for doing it that way is that manufacturers like to have control.  Typically, they are adding new products or changing products.  If they are the ones that loaded the system, they will be in the best position to quickly add new products or make changes to them. 

PPLM:  Talk about sourcing data from ERP or PLM systems.  What are you retrieving?

Mark:  Our system is driven by rules; it is NOT the system for maintaining any product data.  We would expect manufacturers to have this data in a variety of other systems. Typically, those systems are systems of record for product data.  ERP systems have released product information, pricing, approved vendors, etc.  In generating a quote, you definitely want the costing information from ERP.  We don’t want to manage data that’s best left to other applications.

Believe it or not, another common source of information is Excel spreadsheets.  It’s common for manufacturers to have multiple spreadsheets tracking information about their products and different attributes.  The rules and constraints are not dependent on any of that product information.  So, that product information can change on a daily or hourly basis and not affect the validation process. 

PPLM:  Talk about documented outcomes, benefits, values, competitive edges, etc. that a company may enjoy because they have done these things.

Mark:  Sure, there is a lot of documentation in the market place about CPQ improvements, but there a couple of key benefits worth highlighting here.

The first is shortening the time to get a quote produced.  It’s common for the time to go from weeks to literally hours or minutes once a system is in place.  As a result, it’s not just the speed of the quote; companies are improving efficiencies … taking less labor and time.

Second, the benefit is the consistency enforced in the quoting process.   We have manufacturers who talk about random variability in their quotes.  What they are referring to is salespeople tend to quote what they know or what they like.  But, if you have a hundred sales people, you can have a hundred different types of things you are quoting.  So, one of the efficiencies that manufacturers pick up with a CPQ system is they get more standardization around their quotes.  If you take variability out of what you are manufacturing then, that leads to lower costs associated with manufacturing and delivery.

But, probably the most important thing we’ve noticed over the last couple of years is that the largest manufacturers in North America have really focused on what they call the “customer experience.”  They put it in different terms, but the notion is how can they enhance and deliver a compelling customer experience.  If you had asked me five years ago, I would have said that manufacturers wanted to manage cost.  Costs are still important, but manufacturers want their customers to have a frictionless experience in easily and quickly configuring their orders.  Naturally, this results in producible products, accurate costs and shorter time to delivery.

PPLM:  That is a nice recap.  I want to go back to the first item, which was accelerating the quoting cycle.  Would it be fair to say that the ability to accelerate the quoting cycle allows companies to do more quotes, and hence drive additional revenues? 

Mark:  Oh, absolutely.  Think about it … companies can do more with the same or even fewer resources.  We have a customer with over 300,000 users on their system in a year.  They win 80% of the specifications they develop.  There is no possible way they could have a large enough sales force to service 300,000 customers.

PPLM:  That is a great example; the readers will enjoy getting this perspective from you.  Are there any other comments that you may want to add that we didn’t talk about?

Mark:  The biggest thing is that there are a lot of acronyms being used: CRM, ERP, Design Automation and CPQ, with big differences among these tools.  So, we as vendors need to help customers find the right tool for their applications.  The analogy is that there are probably 50 different applications on my phone today.  Everybody has a different phone and a different set of applications.  The trick is to have the right applications for the problems the manufacturer has.  So, to the extent that we can find the right application for the manufacturer, we can make a huge difference in their day-to-day business.