Thursday, 20 March 2008
18 Reasons for the Need for Speed.
In 1988 I was tasked to shrink the new product introduction cycle-time at the much acclaimed, design lead firm, Concord Lighting. 20 years later, now in 2008, time-based competition can still give strategic advantages. In fact, time compression has become an industry in itself. But why still the need for speed?
Here’s 18 reasons:
Leave Competitors Behind and Disadvantaged: Companies with relatively slow processes are by definition slower to change, and as such are left behind as faster competitors innovate new business models. When slower companies do respond they do so from a disadvantaged position, and so incur all the costs of becoming more responsive without securing many of the benefits.
Move Ahead of the Industry: If the competitive environment develops faster than a firm is developing, then the writing is on the wall. If a firm is developing ahead of the market, then that company will eventually breakthrough a competitive wall.
Time to Insight: As the number of competitors that recognise the same opportunity goes up, so the value of that opportunity fall to wards a commodity proportionally. Hence, the time it takes to recognise an opportunity is key to sustaining value.
Accelerated Learning: Shorter-cycles enable faster feedback for learning. This greater and deeper understanding at a faster rate facilitates better project control; delivers better quality outputs; and ultimately gives more advanced solutions ahead of the competition.
Risk Reduction: Such accelerated learning also reduces risk and uncertainty. Learning is number one route to reduce the risk of anything. The faster one learns, the faster one understands the details of a risk.
Time Value: Show me a market that doesn’t have collapsing windows of opportunity and I’ll name a dozen that do. Thus, in markets with shrinking life-cycles ‘value’ is not only finite, it is time dependent. In as much as the earlier a firm can launch a new product the more share of that finite value is gained.
Rapid Return On Investment: One of the most evident challenges for new product introduction is that there’s no residual value until the new product reaches break-even point in the market. This can be a strain on both a company’s capitalisation and cash-flow. In sum, get faster to the break-even point, and ROI comes back faster.
Rapid Attack: The traditional attack strategy is the cut-price/add capacity stance. However, a time-based attack is about surprise, as competitors often get confused, don’t understand what happening, and therefore cannot intelligently respond. Such a surprise can gain much market share. Surprise the competition with rapid introduction of radically innovative goods and services, super-fast delivery, then wow them by delivering more than expected faster.
Fast Following: Copying something that moves faster than a firm can copy isn’t a good business to be in. Faster-cycles than the competition enable a firm to track close behind the leader, but with the benefit of lowered risk.
Fashionising: It’s a fickle, down right ephemeral world. Cellphones, laptops, MP3 players, DAB radios, palm-top assistants, training shoes, and robopets aren’t just functional items anymore - they’re fashion accessories. Fast new product introduction cycles are a significant part of setting and leading trends.
Technological Leadership: It’s said that a slower pace of innovation allows for refinement of technologies. But there is counter point here. Whilst slower competitors hone their wares in the lab, faster competitors are learning in the real world with real products at two and more time the speed. But more, because learning happen twice as fast, technological development is compounded and thus the leader can pull away.
Market Preemption: Fast-cycles mean that you can get to market first. And that means that such a preemptive strike can allow you set the industry standard, in turn lead and gain greater market share.
Premium Prices: Leading the market whether through technological leadership, setting fashion trends, or being in a position to gain a preemptive strike means that your product or service will command a premium. First to market with a new product that satisfies customer demands above and beyond the competition will put a firm in a premium value position.
Reduces Rework: Lengthy cycle-times can give way to loss of information, as data, ideas and learnt knowledge is lost in the drawn out gap between start and finish. This, in turn, may increase error rates and rework. Fast cycles give faster communication feedback, thus less gets lost, and hence less rework.
Increase Productivity: As time-to-market or production cycle-times get faster, throughput naturally increases. But more, accelerating cycle-times mean more time for process performance improvement, so setting up virtuous circle of increasing productivity.
Increased Customer Responsiveness: Speed gets a firm closer to the customer, in turn, customers become more dependent on the firm. Fixing a problem quick is close to the customer. Fastest and reliable delivery leadtimes is even closer.
Increase Variety Whilst Reducing Costs: Time’s money of course. Traditionally, the costs of an organisation, whether it be a product or service business, can be very sensitive to the amount of variety that company is attempting to manage. On-the-other-hand, speed subverts the rising cost dilemma. Rapid cycle-times enables a firm to increase product variety, whilst at the same time lower overheads and indirect costs.
Increasing Returns. Who is first with most, gets! You don’t even have to be the best technologically speaking. Recall the old Sony Betamax Vs VHS video cassette tape war. VHS won because VHS were out in the market earlier with more product in the market, even though Sony’s system was better! Today, Sony have learnt that lesson, and have won the Blue Laser CD as standard competition for exactly the same reason. Who is first with most, gets.