STRATEGY

Quality is not enough; you have to be quick

November 1 1989 by Richard D. Stewart


As a competitive advantage, the use of time is shaping up as critical in today’s fluid and highly charged business frontiers. The drive to deliver new products or services, and to respond to a changing marketplace in the least time possible, has become the growing obsession of industries all over the world, with astonishing and powerful results. The agile injection of speed into development, manufacturing, distribution, and most recently into sales and marketing, constitutes the ultimate competitive weapon. Doing it fast defines a winner; not keeping pace identifies certain losers. Even the previously “safe” businesses, such as the old, regulated airline, trucking, telecommunications and often insurance industries, are realizing the compelling need to do it fast and right the first time.

In the insurance industry, one not historically known for flexible operations, there is innovation brewing to decrease the time involved in purchasing a health insurance policy. Soon companies and individuals will also be able to tailor health insurance plans to suit their unique requirements, and input that plan directly to the provider. In addition, the information gathered from all sectors of the health care field will enable health care consumers to make more cost-effective use of health care services.

A graphic illustration is an oft-told story about the nature and consequences of business competition in today’s markets. It’s about the Honda-Yamaha war that exploded in 1981. Yamaha tried to unseat Honda as the world’s largest motorcycle producer. To the battle cry of “Yamaha wo tsubusu,” translated into a chilling, “We will crush, squash, slaughter Yamaha,” Honda vigorously, even mercilessly, defended its title and market presence.

Using the products of effective time-based management-speed and flexibility-as its major weapons, Honda brilliantly introduced or replaced 113 new product models in one-and-a-half years, though it had entered the war with 60 models. Honda also raised the sophistication of its product lines through the addition of such features as four-valve engines, and beat Yamaha into the market at every turn. Yamaha publicly conceded defeat and pledged respect for its competitor, while Honda returned its attention to breaking into the automobile market.

 

WINNING THE FIGHT

Not all competitive situations have the legendary quality of the Honda-Yamaha war, but most competitive crises offer three choices to management: fight, join the competition, or concede and walk away. Those companies that understand the competitive value of time and have the organizational flexibility to use time to their advantage have the best chance of winning the fight. In fact, companies who use speed as a tactic to “kill the competition” generally stay ahead of the pack and avoid these costly battles altogether.

George Stalk, Jr., a senior partner at Boston Consulting Group, eloquently describes the advantage speed brings to companies. “As a strategic weapon,” Mr. Stalk writes, “time is the equivalent of money, productivity, quality, even innovation…. The ways leading companies manage time-in production, new product development and introduction, sales and distribution-represent the most powerful new sources of competitive advantage.”

Companies that have recognized the competitive value of time and its products, speed and flexibility, are known now by various labels, including “time-based competitors,” “fast-cycle companies,” and “third-wave companies,” to name just a few. These keep moving; they anticipate change. They’ve collapsed their decision cycles and use technology, information and organizational flexibility as a foundation for product and

market decisions.

 

SPEED IN MANUFACTURING

In the 1970s, the introduction of new technologies to automate various product processes suggested a revolution in the way products could be brought to market. At that time, though, these new technologies, such as CAD/CAM (computer-aided design, computer-aided manufacturing) and robotics, were typically adopted to automate familiar product development or manufacturing tasks. One of CAD/CAM’s pioneers, Computervision founder Martin Allen, began his role in the industry when he realized that the drafting tools of the 1960s were almost identical to those of the 1760s. His goal was to automate the drafting process. He used the same basic approach, but with quicker execution. This was the beginning of a technology revolution.

The early corporate appetite for automation technologies, which ranged somewhere in the hundreds of millions of dollars, bordered on gluttony. Purchase decisions focused on machine-versus-man, or rather machine-mimic-man cost analysis, particularly in the adoption of robotics.

But with the on-site presence of these technologies soon came the realization that the traditional foundations of product design, high-volume manufacturing, and market distribution-though automated-were grossly underutilizing the potential of these new productivity tools. Technology enabled business to cut costs, but corporate structures and systems and the way business competed for market share anchored it securely to the past. Business paused and considered.

 

INDUSTRY’S PRODUCTIVITY TOOLS

The revelation came with the recognition that the same tools which automated the labor efforts of the engineer or production worker could also be used to add flexibility to a company’s product offerings; to respond rapidly to change; or even better, to create change by rapidly introducing new products and services in time periods not previously thought possible.

The use of productivity tools such as just-in-time (JIT) manufacturing processes made dramatic inroads toward changing business methodology and philosophy, changes that were key to both speeding up processes and reducing costs. Traditional thinking emphasized economy and efficiency in manufacturing achieved as a result of quantity. New thinking created processes that ensured the manufacture of a million widgets. But the ultimate benefit of the automation process, the CAD/CAM and JIT methodologies, came from the ability of the company to respond faster to customer demands, to offer new features and services that met a changing environment before the competition could react.

AT&T’s Shreveport Works plant, designed for manufacturing business and consumer phone and phone systems, adopted JIT processes and the concept of the focused factory as one important response to deregulation, and a new competitive environment. The Shreveport program improved its manufacturing processes by designing materials flow based on the pull of materials from customer to vendor, reducing waste and eliminating non-value-adding steps, and installing a continuous flow assembly scheme. The program has produced inventory reductions, substantial cuts in materials handling costs and decreases in required testing. The ultimate paybacks are faster time to market, reduced waste, and increased customer satisfaction -all decided competitive advantages.

But what about marketing, sales and product distribution? If companies can’t reduce time in the marketing, sales and distribution cycles, gains in production time may disappear from the total picture.

 

INFORMATION TECHNOLOGY

Information technology (IT), the productivity tool of marketing, sales and distribution, has been advancing just as meteorically as other technologies. And the appetite for IT is just as robust. In 1950 much less than 10 percent of corporate investment occurred in the area of IT, and even in 1978, investment in IT only reached about 20 percent of all new investment in plants and equipment. However, in the 1980s the IT explosion began. By 1984 more than 40 percent of all new investments in plants and equipment were for IT.

Just as was the case with initial CAD/CAM and other automation technology investments, business may now be in danger of choking on its huge investment in information tools, technology and capability, without an efficient way of accessing information the way managers want it, when they want it. The IT investment of the 1980s allowed companies to change from being product oriented to being market oriented. But being market oriented has its own pitfalls, which might be compared to the problems associated with a large, inflexible manufacturing plant-it is too big a unit to use as a competitive tool. Rather, the companies must be customer oriented to be able to identify and market to smaller, targeted sets of customer requirements.

 

FLEXIBILITY

The creative and effective use of IT can achieve this second most desired product of time: flexibility. To restate a blunt truth, in rapidly changing economies and markets, companies that exhibit flexibility to anticipate change and respond quickly will survive and prosper. The others won’t.

One constant in business today is change. The key to success is the ability to use information as a value-added entity to enable quick response where and when change is taking place. For example, European countries are gearing up for 1992. According to John F. Magee, chairman of Arthur D. Little, “A renewed European economy is a real threat to those American and other non-European businesses that fail to react quickly and flexibly to a change as potentially profound-economically-as any in European history…. The forces driving change in Europe are specific to each industry, and effective responses need to be specific to each company.”

If a company is not positioned to “play,” and no one knows for certain now what the competitive environment will be like, that company will not be among the competition.

“Playing” in the world economy today means anticipating change and responding quickly. For example, a midsize company today in a European country with a customer base of 15 million may find itself in 1992 with a potential customer base of 100 million. To react intelligently and maximize opportunity, company management must be able to gather the right information, use it to analyze the impact of the situation at hand, and design possible actions or orchestrate changes to the situation. In competitive battles, company management must use information to make decisions on fighting, joining the competition, or walking away from opportunity. Unfortunately, in most companies, the kind of information required to make strategic decisions isn’t always readily available.

Roadway Express, a leader in the “less than truckload” (LTL) trucking industry, broke forth from deregulation with an idea about information. Roadway believed that to be a leader it had to treat information as a product or service to its customers. In the LTL industry, shipments often make their way via a number of trucks. Tracking a particular shipment is a complex process which required extensive handling of information, but tracking individual shipments and providing quick and accurate information about shipment progress was just what Roadway’s customers wanted.

Roadway adopted advanced information technology, in the form of a networked computer system with distributed computing capability and intelligent workstations at each trucking terminal, connected by a data management product designed for rapid response and large capacity. This system allows Roadway to instantly track the location and arrival time of every shipment.

Further, Roadway has proved to be a leader in implementing voice response system technology, a method of allowing instant on-line access to shipment status information. A Roadway customer simply calls a phone number, keys in the specific freight number and receives a voice simulated update on exactly where the shipment is and when it is expected to arrive. The database is updated continuously from each workstation on the network. Once again, the use of information to strip time from the cycle provides the competitive advantage.

 

MARKETING AND SALES

Although tools and technology that increase productivity in product development and manufacturing have captured the attention of business management, little technology and few tools have been successfully applied to actually increasing productivity in marketing and sales.

One only has to look to the sky to see other good examples of companies using IT to gain a competitive advantage. Most U.S. airlines offer a frequent flyer program. These programs have used information-based marketing to inject brand loyalty into an industry where convenience of flight time had previously dictated purchase patterns. Information about customers gathered instantly from frequent flyer programs is then available to analyze route offerings, flight schedules, fares, customer preferences and other factors. Quick reaction to customers’ needs is possible through the availability of the right data.

An exceptionally clever use of IT to achieve competitive advantage occurs within Gelman Sciences, a manufacturer of scientific filters. In the past, Gelman sold exclusively through its dealer network, which blocked its view of specific customers and users and hampered its ability to respond as quickly and effectively as it wanted to market changes and user preferences. This really affected its reputation.

To get to know their customers and reward customer loyalty, Gelman launched its “frequent flyer program.” As part of this program, coupons are included inside product packaging for return to Gelman, which tallies individual accounts for each responding customer.

Gelman expected that the program would encourage customer loyalty and heighten name recognition of its filters. What came as a pleasant by-product was its ability to use this new database to gain a competitive advantage. When a distributor chose to carry a competitor’s product, Gelman used the muscle of its identifiable loyal customers to maintain its clout. It also uses the frequent flyer group to test market new products or new directions, achieving significant marketing productivity. In Gel-man’s case, the speed inherent in its ability to implement IT to achieve its goals provided the edge.

Marketing is, of course, an area rich in opportunity for productivity gains. For example, Information Resources Incorporated (IRI), a leading and innovative market research firm, has pioneered the marriage between scanning technology and market testing in a product it calls Behavior Scan, to provide its clients with timely data on consumer buying patterns as a result of exposure to the client’s advertising campaigns.

The sample consumer (IRI uses a test market of 3,500 households) is selectively shown specific television advertisements from an IRI client. That same consumer brings a coded identification card to the supermarket, which is scanned before purchases are scanned and recorded. Combined with data gathered from the specially directed cable television showings of the client’s ad, the data collected from scanning systems identify clear preferences and buying patterns.

Using leading edge information systems with enormous capacity, flexibilty and rapid response time, IRI in turn provides proprietary information to its clients. This measurement leads to concrete decisions on advertising investments and airtime purchases for specific markets.

 

NOW AND TOMORROW

One can easily imagine the day when all individuals will carry coded cards that capture all the data a retailer needs to know as soon as a customer walks through the door. Or better yet, store personnel would anticipate customer requirements by using specific past buying patterns stored in databases. By quickly accessing this information, they would then send the merchandise directly to the home. The dramatic rise in the number of narrow niche catalogs is surely a precursor to this scenario.

Collapsing the selling cycle by using specific information of target markets is the goal of most of today’s consumer product companies. In the last two to three years, one of the nation’s leading food and consumer products conglomerates has developed and used an enormous marketing database-built by customer response to offers or surveys-to execute more and more precisely targeted marketing programs. Because their database software provides extremely large capacity, exceptional response time and flexibility of query, the marketing group can now see buying patterns more clearly and more quickly and can convert these data into meaningful findings and recommendations. As one company manager explains, “The technology is here. The real challenge is rapidly developing the application to take advantage of the opportunity.”

Companies that have recognized and met the challenge of increasing sales and marketing productivity early on are already way ahead of the competition and have made it difficult to be overtaken. These companies have been the “firsts”-the first to recognize opportunity, the first to introduce the right product, the first to gather market share, and the first to use information access and manipulation as the cornerstone of time-based marketing.

These companies tend to put information into the hands of those who can use it to make quick and effective decisions, whether those people are on the factory floor or the executive floor. These companies have recognized that new business frontiers, in fact, require new ways of doing business, new thinking on organization structures and processes. They have, in effect, begun to restructure and flatten out the organization, and have found that giving people an opportunity to use more and better information actually fosters ideas and creativity.

Competition now or tomorrow is certainly not for the faint-hearted. There will be the well-rewarded winners and some losers, and the rest will be “survivors.” The calculated injection of speed and flexibility into the decision-making process will be the edge needed to “kill the competition


Richard D. Stewart heads the Cambridge, Mass.-based Computer Corporation of America. Previously, Stewart was president and chief operating officer of GCA Corp., a manufacturer of equipment for integrated circuit production and factory automation. Prior to joining GCA, Stewart spent 20 years at GE in a broad range of operations, from applied research and development to product planning and marketing to general managem