Competing Against Time by George Stalk Jr.
by Parker · 10 things on Twos
- How Time-based Competition Is Reshaping Global Markets
- Innovative competitors came to view their collection of businesses not as profit centers but as members of a portfolio of businesses, each of whose elements have different cash generation potentials as well as different strategic objectives. Some businesses are mature with healthy competitive positions and can generate more cash than needed to sustain their position. Others are growing rapidly and need more cash than they can generate to strengthen and preserve their emerging competitive positions. Thus, a business that needs cash for strategic growth could be fed from another, slower-growing, cash-rich division. In other words, instead of regarding the corporation as a collection of individual businesses where reinvestment is driven by the profit performance of each unit, the collection of businesses is managed as a portfolio of businesses-a portfolio that should contain some stable properties, some high growth/high risk properties, and some properties that are to be disposed of when the opportunity arises.
- Corporations grow when they have good products, competitive prices, and growing demand. Cash is needed to grow a business. The cash available for growth is a function of the profits generated by the business and the financial policies chosen for the use of that cash. Pricing, debt policies, and dividend policies are the key financial policies influencing growth.
- To support variety and market responsiveness, managers must identify these costs and reduce the complexity of the processes that generate them.
- While entrepreneurial systems reduce overhead through compactness and focus-thus sacrificing some variety and possibly sacrificing the increased innovation that a desire for greater variety fosters-the closed-loop cell in a time-compressed operation provides focus without specialization. Thus, compressed systems can reduce overheads even further than can entrepreneurial systems.
- To be truly flexible, however, the cells must have short operating and change cycles. They must take less time to get valuable work done, less time from design concept to introduction, less time from receipt of order to start and completion of production, and less time from identification of a problem to its successful reso-lution. Because compressed operations take less time in production, they waste less time managing the flow of materials. Quality problems are discovered sooner and are rapidly eliminated. Shorter cycles also mean that employees accumulate more experience in less time. In effect, the momentum of compressed organizations is greater than that of either the bureaucratic or focused organizations.
- Transforming bureaucratic organizations into compressed organizations is a two-step process: the first step is downsizing, which takes the organization up to the performance levels of the entrepreneurial system. When downsizing, management sheds product lines, manufacturing processes, and operations that add complexity and therefore costs in an effort to enlarge the organization's focus. Downsizing reduces overhead costs but does not fundamentally make an organization flexible or fast. This step has been or is being accomplished by many U.S. companies including General Electric, Xerox, Chrysler, and Ford. The second step is time-compression, which is more difficult and takes longer. Time-compression means that the basic structure of work in critical processes of the organization is altered to minimize the unproductive consumption of time. Only a few large American firms-Ford, Hew-lett-Packard, Xerox, and parts of General Electric-have progressed beyond downsizing to time-compression. Timecompression allows an organization to improve on all dimensions: cost, variety, speed, and innovation.
- The faster a company can consistently respond better to its customers than can its competitors, the higher its growth, prices and profitability will be.
- Investments in field service responsiveness often pay more handsomely than do investments in features or in price cuts.
- Money is made by providing the most output per unit of input and that includes the input of time.