The Man Who Proved Speed Kills Slow Companies | George Stalk Jr.

KEYPOINTS

• 01

  Business is a continuous fight, and winners play hardball without apologizing.

  Stalk wrote Hardball out of frustration with business press that told MBA students and middle managers business could be played nicely. He calls 'co-opetition' close to collusion. His clients were either defending a lead or fighting to survive: Boeing vs. Airbus, Komatsu vs. Caterpillar, Toyota vs. Ford. Komatsu's internal slogan translates as 'Encircle Caterpillar', and Bezos says 'your margin is my opportunity'. One rule always works: know your costs better than competitors know theirs. Averages hide the truth, and a customer who looks unprofitable may be the high-volume account that produces your scale economies.

• 02

  Compete on time: give customers what they want, when and where they want it, faster than anyone else.

  That's the one-line definition from Competing Against Time, which Stalk says is the one book Tim Cook has every Apple executive read. A company that delivers two to three times faster than rivals usually grows two to three times faster and is about twice as profitable, as Walmart did against Kmart and Toyota against most of the auto industry. Time isn't instead of cost, it's alongside cost and quality. Rework always costs time, so a fast operation has to be a high-quality one. As one Motorola CEO put it, 'We sell the organization on quality but we're actually taking time out.'

• 03

  In most processes, value is added only 0.5% to 5% of the time, and batching causes much of the waste.

  Speed isn't walking faster, it's removing dead time. Roughly a third of the wasted time goes to sitting in a batch, a third to waiting in a scheduled batch, and a third to managing the batches. Before Stalk went to Tokyo for BCG around 1980, founder Bruce Henderson showed him a Ford study: a Japanese factory a third the size, with three times the product variety, was twice as productive, and product moved through it 10 times faster. People credited Japanese culture, but the advantage was overhead, about a tenth of Ford's, thanks to small batches, short setups and scheduling on the factory floor.

• 04

  Speeding a process up fourfold typically cuts costs about 20%, because overhead slows things down.

  Overhead comes out because management is smarter, not because it's slashed. Toyota pushes scheduling down to the floor instead of keeping a big central department. Sometimes you deliberately add cost to buy time. Focus helps too: making a 10-product-line factory twice as fast is far easier than a 50-line one. That's why time-based turnarounds start by choosing what to focus on.

• 05

  Study anomalies instead of explaining them away. They often reveal a new business model.

  Wausau Paper had an unusually high share with one Chicago merchant. The sales manager credited 'a great relationship'. The merchant said: 'If there's a truck at my dock tomorrow morning, we're friends.' Other cases: an office-products customer that insisted on service between midnight and 6 a.m. so production wasn't interrupted, and a European medical-device rival that kept a service rep on site. It looked costly, but uptime and new-business share were higher.

• 06

  Culture is the hardest thing to change, and you change it to lock in a strategy, not as the starting point.

  Stalk has seen cases where he knew technically how to beat the market leader but the culture couldn't do it, so the CEO sold. Fixing Wausau took about 20% strategy and 80% implementation. A logistics manager measured on full trucks refused to send part-loads and had to be retired, and a new CEO and sales manager came in. At a hospital-bed factory, 80% of management turned over because they couldn't run smaller batches. Claims to be 'customer-first' need numbers: competitive comparisons are the fastest wake-up call.

• 07

  Family companies win over full cycles by being more risk-averse, not by having longer horizons.

  BCG compared publicly traded family firms (Rogers, Nestlé) with public rivals over two business cycles. Family firms earned less in upturns but fell much less in downturns, so the area under their curve was larger. They 'keep their powder dry' for good and bad contingencies, and many keep wealth in the business rather than living on dividends. Putting non-family managers on a phantom-stock plan, Stalk warns, can make a family firm behave like a quarterly-driven public one. Families grow exponentially while businesses rarely do, so the business must grow about 50% faster than the family to keep each share whole.

• 08

  Time-based supply chains cut variance, and that lets you turn a supply crisis against competitors.

  When a complex system is disrupted it oscillates (the bullwhip effect), and longer chains swing more. A two-week supply chain has about an eighth of the output variability of an eight-week one. You can't fix the crisis, but you can make your chain better than your rivals'. Order more often, ship partly full containers, pay to be first off the ship, and use non-stop trains. Ocean freight for a TV is about 5% of cost and air about 12%, while a stockout can cost 50% of margin. Stalk calls managing variance 'the next big wave', but a head of Grainger Canada told him: 'I know it's right. I can't do it.'