|I write regular Strategic Snippets because I care about the success of your business. If you care about the success of someone else's business click "Send this page to a friend". Ask them to let me know that you were involved.|
|mob+6421 620 456|
In organisations, power is moving from the slow to the fast. This is a natural law of the universe whether in species, nations or organisations. The old categories of Capitalist and Communist, North and South are increasingly obsolete, today all that matters is fast and slow.
In a study of the high-tech industry, Mc Kinsey & Co found that products that come to market six months late, but on budget, will earn approximately 33% less profit over five years. In contrast, products that come out on time with a 50% budget overrun, see a decline in profits of only 4%.
I've heard traditional managers argue that greater speed means higher costs, just as they argued that higher quality meant higher costs. This is just NOT true.
They also say, "It's not a problem to us". Studies by Stalk and Hout show that products typically only have value added to them for less than 5% of the time they are in the systems of the business.
"Yes it's important to manufacturers but we are in banking/insurance/government and it doesn't matter to us". Wrong again! The studies show that in Insurance, the industry average time to process a policy application was 10 days, however the productive time (when value was added) was only 7 minutes and the unproductive wait time was 4793 minutes.
"But hang on, we all know about insurance companies! I manage a bank". Bad news I'm afraid: the industry average time to process a consumer loan was 2 days, the productive time (when value was added) was only 34 minutes and the unproductive wait time was 1886 minutes.
The study shows the same pattern through industry after industry. And whether it has a six-month cycle or a cycle measured in terms of hours, if you can do it in half the time you can demonstrate that this is far superior in terms of cost.
It is not just a matter of how quickly you do things, but how quickly you do them in relation to your competitors.
Time-based competing is not about making the machines run faster or whipping people to make them work faster, which is the typical Western mind set: automation and robotics and all of that stuff, It is about fundamental changes of thinking. The traditional organisation chart seldom reveals what is being done with the customer. A line should be traced from the customer back through the organisation to see how the product is brought to the customer. Unless it comes out to be a relatively short line, you are probably looking at an organisation that is focused on costs rather than speed. More typically, it comes out as a spaghetti chart, which is really bad if you are trying to be fast and competitive.
If you'd like to know more about how to make your business faster, or if you see the logic but it all seems too hard, give me a call. This is what I do. It's what I am good at.
Helps large organisations be focussed, fast and flexible. Places where people have more meaning, depth and connection.
Expert in Strategy, Structure, Culture and Leadership Development.
One of NZ's most experienced change agents.