Fast Does Not Mean Cutting Corners

Tweet

I believe that, to be successful today and in the foreseeable future, companies will need to continually increase speed and flexibility.  Changes are occurring faster than ever, and those companies that are able to adapt to - and drive - changes quickly will be much more competitive than those that are not.

Whenever I  mention the subject of improving speed and flexibility, however, I inevitably receive comments about the dangers of making decisions and acting too quickly.  The comments often include examples where efforts to increase speed have resulted in major quality or safety problems.

In my view, however, "fast" does not mean cutting corners or operating out of control - since dealing with quality or safety issues does little to improve speed or the ability to adapt to changes int he environment.  Being faster and more flexible actually requires improving focus and perfecting processes on a continual basis.

Successfully streamlining processes and systems requires understanding and continually improving the activities that add value to customers while reducing or eliminating any activities that do not.  And when the focus is on customer value, cutting corners on safety or quality is not an option.

Speed Requires Stability

When driving, the more stable the car, the safer it is to drive at high speed.  In business, the more stable the organization - in terms of purpose, values, leadership styles, employee turnover, and focus - the safer it is to increase speed.

The loss of control, along with the increased variability in processes and results caused by impatience and short-term thinking can quickly throw an organization off-course.  These are the behaviors that drive people to think that being faster means cutting corners instead of strengthening and improving processes.

Focusing on value for the customer can speed up decision-making and processes while prventing the haphazard cost-cutting measures that too often lead to financial trouble, industrial accidents, encvironmental disasters, and deaths.

Keep the Focus Clear

Speeding up an operation requires constant vigilance for anything that interferes with processes operating perfectly every time.  Interference in processes can result from design, handoffs between people, or a variety of other technical, organizational, or cultural issues.  Because of this, it is important for a company to develop the ability to honestly and objectively assess itself for those things that slow it down.

When leaders maintain stability in the organization's basics, and focus attention on improving speed and flexibility, remarkable things can happen.  The improvements in agility will be accompanied by reduced costs, increased customer satisfaction, and a safer operation.

Does Size Matter?

Tweet

Is There a "Best" Size for a Company?

I had coffee with a colleague awhile back and we got into a discussion on whether there is a "best" size for an organization.  Small companies are fast and flexible but often lack the capital needed to grow.  Although large companies tend to be slow and unable to deal with change effectively, they have the capital and geographic reach that small companies lack.  A large company also has the ability to crush or acquire a smaller competitor that is seen as a threat, if the threat is recognized early enough.

An interesting observation about this subject is, as a company grows, it tends to become slower and less able to do many of the things that made it successful in the first place.  Additional layers of management and more formalized systems can slow the decision-making process to the point where it becomes unable to respond quickly to changes in its environment.  Another common characteristic of companies as they grow is a tendency to become more risk averse in an effort to meet conservative financial targets or protect share price.

Does it Matter?

So what is the optimum size for a company?  Does it depend on industry?  There are obviously some industries like consumer electronics where, no matter how large a company is, it can't survive without the ability to quickly adapt to, or drive, changes in the market.

These are interesting questions to debate, but I wonder if they really have answers.  What if an organization can remain fast and flexible as it grows?  Think about how successful a company could be if it could continue to be as fast and flexible as it was when it was small and growing.  There are not many examples of large, fast-moving companies, but that does not mean that it is not possible (or important).

A Matter of Survival?

Like most aspects of leadership, it's an issue of focus.  When leaders of an organization determine that speed and flexibility are competitive issues, they will give it the focus they need to make them happen.

I believe that success in the years ahead will require the ability to drive and adapt to changes quickly and effectively.  The world is changing at such a rapid pace that the organizations that are unable to adapt will not be competitive.  Developing the capability will require addressing areas like speed of new product development, flexibility of processes, implementing and upgrading information systems, etc.

Increasing speed and flexibility for many organizations will require transformation.  For too long, we have become obsessed with the idea of growth as the focus of a business.  Investors tend to lose confidence in companies that experience slowing growth [refer to Fortune magazine articles on Google and 100 Fastest-Growing Companies] which can cause problems when, in an attempt to appease the financial community, a company shifts its focus toward growth through acquisitions that are not necessarily strategic or sensible.

If the focus is on developing the ability to drive change through innovation, and respond to change by increasing flexibility, the growth can occur organically through increased competitiveness.  Although organic growth in revenues does not tend to match the growth that can occur through acquisition, it can be much more profitable and less destructive to the company and its culture.

Innovation and speed do not need to be limited only to companies like Samsung, Apple, and Facebook.  Every company has the ability to improve flexibility and adapt to changes in its environment.  Size does not need to be a deterrent to change.  It is a company's characteristics and capabilities, not its size, that determines its flexibility.  All it takes is recognizing the need, being sensitive to the friction created as the company grows, and continually addressing the elements that interfere with the ability to change.

The World of Fashion Evolves

Tweet

Designs Aren't the Only Thing That's Changing in the Apparel Industry

According to a story in the July 16 Wall Street Journal (link), the apparel industry is facing a number of challenges that are affecting the entire supply chain.  After three years of excess inventories and idle labor, companies throughout the industry are taking steps to reduce the risk of similar exposure in the future.  Instead of reinventing themselves, though, it appears that the companies are dealing with the changes by attempting to push the risk to their customers and/or suppliers.

When industries face a changing environment, companies throughout the supply chain need to work together to respond to the change in a positive manner.  The immediate reaction to drive risks to customers or suppliers has effects that, although not immediately visible, have longer-term effects that are destructive to everyone involved.  It does not help a company to improve its own profitability at the expense of its suppliers or customers.

The New World of Fashion

Among the issues faced by the apparel industry include:

• Smaller orders placed by retailers to test demand before committing to larger runs;
   
• Increased material, freight, and labor costs;
   
• Delays in ramping up production capacity because of a lack of confidence in long-term demand.

If smaller runs and increased costs sound familiar, it's because these are issues that have been faced by many industries over the last 30 years.  Change happens in every industry, and those companies that are flexible and able to adapt to (or drive) the changes quickly will be the most successful in the years ahead.

The Focus Still Needs to be the Customer

One of the problems I noticed from the information in the article is that the impetus for change within the industry is profitability rather than the consumer.  As has been proven over and over again in business, changes made without regard to the end customer can have devastating effects.  While a focus on value can increase profits for the company, a focus on profitability will not lead to increased value for the customer.

Two key areas that companies in the apparel industry need to investigate in order to survive and grow in the years ahead include:

1. Lean Manufacturing  Smaller production runs require improvements in quality, setups, and changeovers.  Lean (when done correctly) gets everyone focused on eliminating the waste that forces longer leadtimes and larger lot sizes.  Lean will also address the issue of increased labor costs;
    
2. Closer Factories  Increased freight costs and leadtimes will force retailers to have production capabilities closer to the point of sale.  Although oil prices have leveled out since the initial drop at the start of the recession, it is only a matter of time before they start rising again.  As a result, the benefits of having factories in areas with low labor costs will be offset by increased freight costs.

In an industry that thrives on change at the consumer level, one would think that the fashion retailers and producers would have no problem adapting to changes themselves.  Unfortunately, this does not appear to be the case.  The environment has changed and, as has been the case in so many industries over the years, it's time for a new business model.  The sooner the apparel companies realize this and make the necessary changes to adapt, the sooner they can once again turn their designs into financial success.

Saturn Crashes

Tweet

It was very disappointing to hear the news about Roger Penske pulling out of the deal to acquire GM's Saturn division. Of all American automakers, I believe Saturn had the best chance of transforming into the type of organization that could compete with Toyota, Honda, and Hyundai, and it's really too bad to watch it go down without a fight.

At one time, Saturn was a very interesting company. It started in the mid-1980s completely isolated from the poisonous culture of General Motors as a way for the company to compete with Toyota and Honda. They utilized a separate dealer network, built a new factory in Tennessee, and hired a completely new "non-auto industry" workforce. The division also focused on creating a positive customer experience - something for which GM has never been known.

It Should Have Worked

The idea was good; the implementation was mediocre; and the strategy over the last 15 or so years was extremely poor. At some point, the infinite wisdom of GM executives kicked in and interfered with the development of the company. GM management decided to virtually stop the division's development of new vehicles and bring it into the company's fold. As a result, Saturn lost any of the benefits it once had and entered a death spiral from which it had no chance of escaping. The interesting experiment quickly became the stepchild of the company, and was strategically lost among the other GM divisions.

My disappointment with the latest news is that I don't believe the bad habits that Saturn has most assuredly developed since being rolled into GM's culture have been around long enough to be ingrained into the Saturn culture. It probably would not take very long to move the company back to its roots and create the type of culture that is necessary to compete with other automakers.

To survive in today's market, an automaker must be able to quickly develop new models that people want to buy while improving quality and lowering costs on a continual basis. Given the decisions and actions over the last several years, however, I don't believe that this is possible at GM because there are just too many cultural barriers in the way. The people at Saturn should know what it's like to be a small, flexible company, though, and separating it from the mother ship would give it the opportunity to rebuild without the interference of GM management.

To succeed, Saturn would need to have a flat organization structure that is light on management and heavy on leadership, innovation, and teamwork. It is not rocket science, but is only possible if the people in charge have the vision of what a customer-focused, flexible organization looks like, and the attention span to stick with it through good times and bad. I don't think GM has such a vision - but I was hoping that the Penske Group did.

When I hear people within GM say that Saturn was never viable or necessary, I can't help but think about the parallels with Hyundai Motor Company. Originally created to build cars for Ford, company management decided in the 1970s to design and build their own cars. In the mid-1980s, the Excel became the company's first car sold in the U.S. - a small, fuel-efficient model that, to be honest, was very poor quality. But the company stuck to its vision and continually improved its product offering and quality and is now a serious competitor in the global market. This could have been Saturn had GM management been patient enough to not interfere.

Just Make It Quick

The senior leaders at GM have failed in their ultimate responsibility as stewards of the company. General Motors has a colorful and interesting history that has been a major part of Americana for more than 100 years. The company that employed hundreds of thousands of Americans (and affected exponentially more), and includes the likes of William Durant and Alfred Sloan, has steadily declined through arrogance, greed and poor decision-making. As a native of Detroit, the situation makes me very sad and very angry.

Company officials announced that, with the collapse of the Penske deal, Saturn will close its doors by October, 2010. As sad as the news is for the U.S. auto industry, a quick exit may actually be better than the type of slow, lingering death that Oldsmobile and Pontiac have experienced. As we look to the future, though, I have to wonder whether a similar fate awaits Chevrolet, Cadillac, GMC, and Buick.