Cost effectiveness, monopoly matter in business
With all the talk going on today about downsizing, isn't it time to think about upsizing?
In my experience, you either grow or die. If you continue conducting your business as you have always done, the world will pass you by, at an ever-increasing rate.
Dr. Noriaki Kano in his Oct. 17, 1994 paper titled, "Attractive Quality Creation", stated, "To survive, a company must win against competition in the world market.
"Needless to say, it must strengthen its cost competitiveness by perfecting its quality improvement efforts, downsizing and differentiating its existing products and services....
"It is obvious, however, that the path of continuous downsizing eventually would lead to a company with no employees....
"Therefore, to continue to survive and prosper, a company also needs to develop new products and services, create new markets, secure employment, and upsize the organization."
We have moved from the Industrial Revolution to the Digital Revolution in which we are experiencing dynamic changes in communication and management techniques.
It is, without a doubt, the most exciting period in all of the history of mankind. If we can learn how to be the masters of our own destiny through proactive efforts on our part, we can be the benefactors of the change instead of the debris.
A professor emeritus from the University of Minnesota in economics, Dr. Tor Dahl, has said that there are only two things that really matter in business - cost effectiveness and a monopolistic advantage.
Cost effectiveness is attained by first identifying and charting work processes and then removing waste and rework from them. Finding the niche that will provide a monopolistic advantage is another challenge.
Some years ago, most consumers had very nice manual 35 mm cameras that took great pictures if everything was set right. The problem was that most were not professional photographers and occasionally erred with the settings.
The manufacturers were busy refining to the nth degree the perfection of these cameras.
Konica Camera could not grow by competing with the major manufacturers and decided on a radical move. They took their engineers out of their labs and sent them to photo development shops where film was being processed and asked them to collect data on problems with photos the consumers were experiencing.
This data showed some high reoccurrences of out-of-focus, underdevelopment, and a surprising find, blank film. Many people were loading their film incorrectly and were surprised when they found nothing on their film.
All those wonderful photo opportunities were missed!
Armed with this data, the engineers went back to their labs and designed the automatic camera. Perhaps the photos were not quite as sharp as they were with the old cameras but at least the consumers could rely on getting pictures.
Konica did not find a long-lasting monopolistic advantage as the other manufacturers quickly followed suit, but they did create a whole new market that could be shared. They did this by using a process to collect data on the unmet needs and even the unarticulated needs of the customers.
As stated earlier, the world does not stand still and now the digital camera has created another revolution.
It is obvious that we will need to continue our efforts to increase cost effectiveness forever, but equal efforts need to be made continually to increase volume for our business by developing an advantage, which will result in upsizing.
We are, in effect, downsizing our existing business as products/services become mature or stale with the cost effectiveness techniques.
At the same time we are upsizing our new business to give us the needed monopolistic edge and thus constantly reinventing our business.
Louis Schultz, managing director of Process Management LLC, has assisted organizations worldwide with performance improvement. E-mail him with questions or comments at email@example.com.