Sunday, January 14, 2007

Sustainable Advantage

Because I am such a fan of innovation, one of my former bosses once chided me, saying: "The only sustainable competitive advantage is execution". The context of the discussion was about Apple Computer's innovations, and whether they were innovating or simply producing ... well .. art. This quote from inspired the conversation:
If your cool new thing doesn't generate enough money to cover costs and make a profit, it isn't innovation. It's art.
That article, written in January 2004, may have to eat its words because Apple has proven to be an impressive execution engine. Two incredible examples in my opinion are completely switching over to Intel ahead of schedule, with great quality, and changing the way music is distributed and sold. These are really hard things to do, and they executed amazingly well. It didn't hurt that the products are world-class cool, but what gets lost is how those great ideas could have been simply ideas. The difference is they set audacious goals and then they executed.

That's a long introduction to what I want to talk about, which is taking a fresh look at your business from the standpoint of execution. We complain about how offshoring is making things so difficult, how technology and open source and infrastructure has enabled a lot of competition. Yet we rarely take a disciplined, open, introspective look at our value chain and ask "why" at each step. If we did so regularly, as part of strategic reviews, we could deliver better products faster to customers, increasing customer satisfaction and our brand's reputation. In the process we can literally crush the competition, and then we get to call the shots instead of constantly reacting.

You can use tools from six sigma and lean, to evaluate what you are doing today, where your value is created, where effort is expended for little or no value, and where inventory queues (not necessarily physical inventory) prevent faster flow of value creation. The objective is to get objects through the value creating engine faster, spending enough administrative oversight to ensure the process is working in terms of quality. To do this, you have to start measuring, and that might be difficult if your organization doesn't want to do that extra work. I advocate you start by creating a value chain map so that at least you know what you want to measure and have enough information to make a compelling case for why the organization should do the work to collect the data.

I want to mention, you don't have to fear six sigma. You can use the tools without making the whole organization embrace it as a normal part of their operations.

If you can get that far, and can ensure the integrity of the data, the rest should go a lot easier. You'll still need to involve stakeholders every step of the way, who may feel threatened if something they currently do is no longer necessary. In the end though, you should be able to bring everyone together if the improvements fit into your overall strategy. Using the data, the tools, strategy, communication, and change management, your company too can be a world class value producer.

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