Unlocking Long Term Value with the Industrial Problems Framework
Creating a valuable industrial company
For industrial firms in manufacturing and logistics, creating lasting customer value is the cornerstone of sustainable growth. Whether it’s equipment downtime slashing profits or slow quoting processes driving customers away, solving the right problems can transform your business. In my work helping industrial companies embrace transformation, I’ve seen how a structured approach can unlock millions in value.
Artificial Intelligence (AI) creates a new set of tools we can use to solve problems customers care about the most.
I’m sharing the Industrial Problems Framework—a proven method to identify, prioritize, and address customer pain points, ensuring a customer lifetime value to acquisition cost ratio (LTV/CAC) above 5. This builds on my previous article, Creating Long-Term Value, where I explored fostering sticky customer relationships through customer-centric solutions.
LTV = total gross margin (sales – cost of goods sold) generated over the life of a customer. The longer you keep the customer and the higher the unit margins, the higher the LTV. This is the central test of value creation: a customer generates a lot of gross margin over a long period of time.
For example, you sell 1000 units of a product over 3 years at $ 100 per unit in gross margin. LTV = $ 100,000.
CAC = customer acquisition cost. This is the total cost (sales, marketing) to acquire that customer. This metric is a bit tricky to calculate but it’s worth the effort to put systems in place to understand it. For a start-up or early-stage customer, this number is going to be higher than at scale when you have various customer acquisition systems built.
Using the $ 100,000 LTV example, if you can spend no more than $ 20,000 to win the customer, your LTV/CAC ratio is at least 5.
A ratio of 5 is aggressive but if you can get there, you will create an extremely profitable business. Even a ratio of 3 is good.
Why the Industrial Problems Framework Matters
In a competitive industrial landscape fueled by re-industrialization and reshoring, customers demand solutions that tackle their deepest challenges. They will pay for these solutions. The Industrial Problems Framework, refined through my more than two decades leading industrial companies, helps you focus on high-impact problems and deliver AI-enhanced solutions that keep customers loyal and drive profitability. By systematically uncovering pain points and aligning solutions with clear ROI, you can generate five times the return on every dollar spent acquiring a customer. Here’s how to apply it.
The Industrial Problems Framework: A Five-Step Guide
1. Survey Operations to Identify Pain Points
Begin by understanding your business’s core challenges. Are manual processes, like quoting, delaying sales? Is downtime costing hundreds of thousands annually? Engage stakeholders—workers, managers, and customers—through interviews or feedback analysis to map key processes and pinpoint bottlenecks. For example, a manufacturing firm found that slow quoting processes cost $75,000 a year in lost deals due to delayed responses.
Actionable Tip: Conduct 1–2 hours of interviews with your sales, operations teams and core customers. Ask, “What’s one process that frustrates you or our customers?” It’s very important to get a cross section of insights about customer problems. For example, when I ran an industrial distribution company, I did ride alongs with our drivers because were very aware of common customer issues.
Document recurring issues and make this list as big as possible. Don’t judge the list (yet).
2. Quantify and Prioritize Pain Points
Not all problems are equal. Use a 2x2 matrix to sort pain points by severity (financial or operational impact and frequency). Next, think about how easily a particular pain point can be solved. The matrix looks like this:
Focus on high-severity, easiest to solve issues as the first things to attack. It’s best to get actual cost/impact data to calculate severity. However, I’ve found that front line team members have a pretty good idea of the most important problems so don’t get too stuck on quantifying things at first.
Actionable Tip: Create the matrix and prioritize the top-right quadrant.
3. Map AI-Enhanced Solutions
Design solutions for prioritized pain points, leveraging AI to maximize impact. Predictive analytics can prevent downtime, automation can streamline quoting, and data insights can enhance customer service. Ensure solutions deliver clear ROI—for instance, a $20,000 investment should yield at least $100,000 in savings in year one. A manufacturer can cut downtime by 30% with predictive maintenance, while a logistics firm can reduce delivery delays with real-time analytics, as seen in successful AI pilots.
Actionable Tip: For your top pain point, identify one potential AI-driven solution (e.g., automation for quoting) and calculate its potential savings or gains.
4. Craft a Customer-Focused Value Proposition
Translate solutions into a compelling promise. For a manufacturer, it might be: “We reduce downtime by 30%, saving $150,000 a year.” For a logistics firm: “We eliminate delivery delays, saving $300,000 annually.” As I discussed in my previous article, this clarity builds trust and fosters sticky relationships that drive repeat business and referrals, ensuring long-term value.
Actionable Tip: Write a one-sentence value proposition for your solution. Test it with a customer to confirm it hits the mark.
5. Pilot, Validate, and Scale
Test your solution with a small pilot to validate its impact. For example, can a $15,000 pilot for automated quoting increase your deal closures by 10% in 90 days. Use feedback and analytics to refine the solution. If successful, scale it across operations by investing more money into the solution; if not, iterate by adjusting data or scope and by talking to customers again. This iterative approach, central to my AI implementation roadmap, keeps solutions aligned with customer needs.
Actionable Tip: Launch a 3–4 week pilot for one pain point. Measure outcomes like cost savings or time reduction to justify scaling. This is like getting to product market fit that many start-ups do before scaling up.
The Path to Sustainable Growth
You can have several projects like these working at a time. However, it’s best to keep the project list to no more than 3-5 in any given quarter. I prefer projects to kick off and complete within a quarter because it’s easier to keep everyone focused.
The Industrial Problems Framework is more than a problem-solving tool—it’s a blueprint for creating value that lasts. By addressing high-impact pain points with AI-enhanced solutions, you can achieve an LTV/CAC ratio above 5, turning one-time buyers into loyal partners. This approach helps industrial firms thrive in a reshoring-driven market, delivering profitability and competitive advantage.
As I emphasized in Creating Long-Term Value, understanding customer needs and delivering sticky solutions is the foundation of growth. The Problems Framework makes this actionable,