Strategies to surge ahead in business
M. S. S. VARADAN
THE BREAKTHROUGH IMPERATIVE — How the Best Managers Get Outstanding Results: Mark Gottfredson & Steve Schaubert; Collins, an Imprint of HarperCollins Publishers, A-53, Sector 57, Noida-201301, Uttar Pradesh. Rs. 495.
This book is all about getting breakthroughs when faced with formidable odds. Interestingly the authors’ statement that globalisation and geo-politics have added risk and complexity to basic decisions has come true.
The authors have framed, based on research, four “laws” operating in business: costs and prices always decline; competitive positions determine your options; customers and profit pools don’t stand still, and simplicity gets results. Coincidentally, the first law is the one now recommended by the government in the face of falling demand! The other key to the success path is going from “point of departure” in terms of clearly diagnosed improvement areas to the “point of arrival” where the key metrics are achieved in these areas.
Cost reduction
The experience curve in any industry reflects a wide variety of cost reducing efforts. Valid data has been presented to prove this. Relatively steep slopes are to be found in electronics and telecommunications, moderate slopes in computers and airlines, and relatively less slope in cars, TVs and plastics. As costs decline, quality also improves contrary to what one would expect! A powerful argument has been presented that market leaders are really “experience curve leaders” and the common key to success is to reduce costs and prices relentlessly and systematically, using the experience curve. The second law requires mapping one’s position in the market place. A measurement has been suggested called Relative Market Share (RMS), which is the ratio of an organisation’s market share to its closest competitor’s market share. If this ratio is high, a correlation has been presented that market leaders earn high Returns on Assets (ROA). To achieve this, an organisation should start with its own position charted on the ROA/RMS graph. The successful case of the British retail chain Tesco is presented to prove this point. The third law suggests looking at profits from the entire set of players including the suppliers and distributors. Auto companies regularly demand steep price cuts from the suppliers. Distribution channels in marketing are pressurised to effect better logistics and use of information technology to cut costs. The current war going on between airlines and travel agents is but a reflection of this struggle.
Simplicity
The fourth, “simplicity gets results”, is substantiated with a quote of Albert Einstein: “Any intelligent fool can make things bigger, more complex and more violent. It takes a touch of genius and lot of courage to move in the opposite directions.” One hint given in this direction is to postpone customisation until later in the value chain. Relying on common platforms and parts Toyota lowered its costs. Right emphasis has been laid on capability sourcing. Captivating quotes from famous personalities appear at the beginning of each chapter. Tables with summary highlights and illustrative graphs enhance the understanding of the ideas conveyed. A special feature of the book is the presentation of the research methodology in the appendices, which clearly gives the templates used for every step of data gathering, analysis and findings. Industry can perhaps derive some needed inspiration from the examples presented in the book to cut costs and prices faced with the current global meltdown.
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