To beat back rivals, customer-?intimate companies like Cott are always having to adapt their expertise to new clients and to the changes in existing clients' basic problems. "Staying smart," write Treacy and Wiersema -- and this is the punch line -- "is their greatest challenge."
And it's the same with the other two kinds of market leaders -- operational-excellence companies that discipline themselves to deliver lowest total cost and product leaders that customers count on to have the latest and best. It's not the company with the lowest costs that wins but the one that's best at continually lowering its costs and finding more convenient ways of getting products and services to customers. Likewise with product leaders, the successful company isn't the one with the hot product but the company with the best model for continually delivering product (or service) innovation.
Treacy and Wiersema's contribution to our understanding of how companies are changing is their observation that post-industrial business competition will center less on how good companies are at "doing" and more on how good they are at improving. The winners will be the companies that can obsolete their own performance the fastest. That's just as true for small companies as it is for big ones. What the two authors don't say much about is how companies get smarter and better at what they do. Clearly, companies built on the Eiffel Tower model can't.
Some companies are reinventing themselves to deliver continual improvement -- improving not just how they get their work done, which is the professional focus of reengineers, but how they're structured, how they're managed, and how the vital juices move around inside them. "Indeed," argues James Collins in "Building Companies to Last" ( [Article link]), "the ability to create organizational innovations is more important in building a great company than the ability to create product, technology, and market innovations."
In an article in the May/June 1995 issue of the Harvard Business Review, management professors Christopher Bartlett (Harvard Business School) and Sumantra Ghoshal (London Business School) crack open a window on that change by describing the new roles that the top managers of a few large diversified corporations are taking. Bartlett and Ghoshal say those senior executives are moving beyond the three S's -- strategy, structure, and systems -- to embrace three P's -- purpose, process, and people. Moving beyond strategy to purpose means that the CEOs of companies like ABB Asea Brown Boveri, a $30-billion-plus electrical-engineering company with businesses around the globe, understand they are too far removed from individual business units to dictate business strategies, which should be left to the people running the businesses. Moving beyond structure to process means they recognize that the organization is more than its skeleton -- that it has a physiology and psychology as well. How well the company performs depends partly on the organization chart (structure) but also on the internal processes by which it continually renews its knowledge and its spirit. Finally, by observing that top management is moving beyond systems to people, Bartlett and Ghoshal suggest that financial reporting and control systems are not the only way to influence and track organizational behavior. Senior management can also work and talk directly with people -- mentoring them, influencing them, and learning from them.
Small-business owners who may be inclined to see the obvious in this conclusion would do well to remember that most big companies were once small and that many companies ossify well short of reaching the Fortune 500. There's something useful to be learned here -- even by the Staffords at Kiva Container, who are struggling every bit as hard as their counterparts at, say, GE and AT&T to adapt their companies to new kinds of competition and competitors that a generation ago they couldn't have imagined. It would be helpful to them, and to all of us, if government -- with its responsibility for shaping markets, regulating economic behavior, enforcing laws, and extracting taxes -- were likewise to reinvent itself for the post-capitalist, post-industrial, third-wave information age.
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Government Should Be Easy to Do Business With
Susan Eckerly used to compile regulatory horror stories for the Heritage Foundation, a Washington, D.C., think tank, which often published them for their shock value. Here's one:
"John McCurdy, owner of a very small herring smokehouse, recently had a run-in with the Food and Drug Administration (FDA). Despite [McCurdy's] producing over 54 million fillets over 20 years without a single reported case of food poisoning, the FDA told McCurdy he would have to change his methods. Unfortunately, that would require $75,000 in new equipment. Facing the hopeless choice between installing equipment he could not afford or fighting a legal battle with the FDA, Mr. McCurdy chose the only other alternative -- he closed his business and laid off his 22 employees."
Eckerly displays government regulation and the regulatory bureaucracy in the worst possible light. She cites estimates that put the total annual cost of regulation at $615 billion; she reports that small companies spend $100 billion annually just filling out government forms; she points out that one county government found that it would be cheaper to buy and distribute bottled water to its residents than to comply with federal water-testing requirements.
