George Stalk - Competing Against Time: How Time-Based Competition is Reshaping Global Markets

Competing Against Time

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Copyright 1990 by The Free Press

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Library of Congress Cataloging-In-Publication Data

Stalk, George.

Competing against time : how time-based competition is reshaping global markets / George Stalk, Jr. (and) Thomas M. Hout.

p. cm.

Includes bibliographical references.

ISBN 0-7432-5341-8

ISBN 13 978-0-7432-5341-3

eISBN 13 978-1-4391-0541-2

1. Time management. 2. Delivery of goods. 3. Competition, International. 4. Comparative advantage (International trade) I. Hout, Thomas M. II. Title

HD69.T54S73 1990

658.56dc20 89-23735

CIP

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We dedicate this book to the past, current, and future clients and staff of The Boston Consulting Group

The search for what has become time-based competition began in 1979. In that year, many of us were startled by some data shared with us by a client. The client had benchmarked the performance of his key factories in the United States and in Europe with those of a Japanese affiliate. The differences included substantially higher productivity, better quality, significantly less inventory, less space, and much faster throughput times for the Japanese affiliate compared to what were generally regarded as well-run factories by the client. The better performance of the Japanese affiliate was achieved despite the fact that the company had much lower production volumes and greater variety than did the client factories. As Bruce Henderson said at the time, Until the causes of these differences can be explained much of the conceptual underpinnings of corporate strategy are suspect.

Over the next years many more examples of companies able to establish similar performance gaps were found. Many of these companies are Japanese but increasingly the list includes American, European, and now Korean, Taiwanese, and Hong Kong companies. Two years were needed to establish cause and effect and the search carried us beyond Japan, the United States, and Europe to the rest of Asia and Australia. Two more years were needed to relate time itself to the many changes being made to factories and the organizations that need and manage factories. Another year was required to demonstrate that time is as important in non-manufacturing businesses as it clearly is to manufacturing businesses.

During these investigations many closely held assumptions as to how costs and customers behave have been altered. Instead of costs going up as run-lengths are reduced, they decline. Instead of costs going up with greater investment in quality, they decrease. And, finally, instead of costs going up with increasing variety and decreasing response time, they go down. Further, instead of customer demand being only marginally affected by expanded choice and better responsiveness, it is astoundingly sensitive to this better servicewith the company that is able to set customers expectations for choice and response very quickly dominating the most profitable segments of demand.

Many people are responsible for the development of this thinking. Most of them are members of client organizations. Any list would be incomplete because The Boston Consulting Groups policy of confidential client relationships prevents identifying many of the most important contributors. In fact, the authors have adhered to this policy throughout. In no case does this book contain data that have not been obtained from public sources or modified to prevent identification with a client of The Boston Consulting Group. None of the extended examples in which the company is identified are clients.

Many staff members of The Boston Consulting Group contributed early, especially Rene Abate, Barbara Berke, Len Friedel, Thia von Ghyczy, Shikar Ghosh, Richard Hermon-Taylor, Rud Istvan, Gilbert Milan, Anthony Miles, Sy Tilles, and Tom Wurster. Later, we were joined by Jim Andrews, Jeanette Besharat, Mark Blaxill, Dana Cain, Phil Catchings, John Clarkeson, Simon Cornwell, Mark Delfino, Jeannie Duck, Jeri Eckhart, Erin Esparza, Philip Evans, Brad Fauvre, Myron Feld, John Frantz, Steve Gunby, Ranch Kimball, Barbara McLagan, Bob Malchione, Mike Marcus, Bob Morette, Klaus Nadler, Dean Nelson, Michael Norkus, Art Peck, Gary Reiner, Wayne Robinson, Heiner Rutt, Simon Sherwood, Larry Shulman, Ashok Siddhanti, Mike Silverstein, Hal Sirkin, Carl Stern, Roger Walcott, lain Watson, Richard Winger, and Alan Zakon, and many others who made such a difference to their clients by helping them become time-based competitors.

We deeply appreciate the support and long hours of all these people. This is a book about their work and their companies. We also thank our skillful and wise editor, Nan Stone, Senior Editor of the Harvard Business Review, our copy editor, Marilyn Shepherd, and Professor Joseph Bower of the Harvard Business School. Finally, we are indebted to Jim Abegglen and Bruce Hender son for lighting the way these many years.

The Dawn of a New Competitive Age

In the competitive environment of the latter twentieth century, innovations in competitive strategy have life cycles of ten to fifteen years. Each innovation is followed by major shifts in competitive positions and in corporate fortunes. As these shifts occur, concerned managements struggle to understand the nature of their competitors newfound advantage. However, like a military secret the new source of advantage soon becomes understood by all and is thus no longer an exploitable innovation. A new innovation must be found.

Todays innovation is time-based competition. Demanding executives at aggressive companies are altering their measures of performance from competitive costs and quality to competitive costs, quality, and responsiveness. Give customers what they want when they want it. This refocusing of attention is enabling early innovators to become time-based competitors. Time-based competitors are offering greater varieties of products and services, at lower costs and in less time than are their more pedestrian competitors. In so doing they are literally running circles around their slower competition.

Companies are obtaining remarkable results by focusing their organization on responsiveness. Each of the companies in Table 1-1 uses its response advantage to grow at least three times faster than other companies in the industry and with profitabilities that are more than twice the industry average.

TABLE 1-1 Time-based Competitors (Estimated Performance)