The Value of Speed
The other day I was wrapped in a conversation about speed and it reminded me of a very interesting blog post in the Harvard Business Review I read last year about General Electric applying concepts of Lean Startups to appliance design. The part that resonated with me is the emphasis on speed.
Having worked in several startup situations I cannot overemphasize how important speed is. Speed is not just important in creating, producing and launching products. Speed is important in our ability to pivot from one approach to the next. Speed is important in delivering service to the customer. Speed is important in your marketing approach.
When you are competing to become a player in a new market, or as a competitor trying to take share from a dominant player in a market, you don’t have the luxury of deliberation. You need to make decisions quickly, make changes quickly and, yes, make mistakes quickly.
If you do it right, you will implement what you have learned while your competitor is still figuring out what to do. If you do it right, when your competitor reacts you will have moved on to the next important business cycle.
Today we place a lot of emphasis on risk and cost. So much so we forget the value of speed. Brad Power says it well in the blog post:
“Traditional financial systems are risk mitigation tools, and there is typically no weighting on speed. These systems often don’t calculate how much money is wasted because you don’t get products in front of customers soon enough, or the risk of going out of business.”
It isn’t just product design and delivery that benefit from speed. Our supply chain systems are the same way. With global sourcing and long lead times many supply chains are unable to rapidly sense, pivot and deal with demand and supply variability.
We design these supply chains based on the tradeoffs between risk, cost and speed. I would wager that during these tradeoff decisions we often overstate the cost of risk and understate the value of speed. Every minute a product is in our supply chain the clock is ticking. We are accumulating cost and risk and not taking advantage of market opportunities.
I’ll give you an example:
I worked with an agricultural equipment manufacturers that promises 18 month delivery to their dealers. This means the end users, the farmers and governments that buy these rigs, would wait almost 2 years if they placed an order for a new unit that wasn’t already in the supply chain.
What happens? The dealers try to guess what is going to sell and place orders ahead of demand. This causes a constant flow of change orders as demand consumes forecast in different quantities, configurations and timing. The supply chain is disrupted-cost and service are a mess.
Why is no one asking the important questions? What would happen if we could deliver a unique unit in, let’s say, 6 months? What would that do to the dynamics of the competitive environment? What would that do to cost and risk?
What if you could deliver that tractor to that farmer in 30 days? Do you think that would create value? Do you think that would knock the whole market on its ear?
I think there is huge opportunity for traditional supply chains to become first movers and revolutionize their markets by focusing on the true value of speed instead of risk and cost. Will speed always win? No. That is not the point. The idea is to start thinking about the supply chain in new ways — not just a driver of cost or cost reduction. Planning cycles are collapsing as information cycles accelerate. If we don’t start thinking differently, who will?