|
Chief
executives are often frustrated by their organization's
enthusiastic endorsement of improvement iniatives turning into
half-hearted disinterest when reality sets in: the need for
hard work, continued commitment, and unwavering focus despite
the inevitable early set backs. Part of the problem can be
that life, the day-to-day business, gets in the way as
priorities pile up and compete for limited time and effort.
The work force will often keep doing something the way they
always have just because they know how to pace themselves,
rather than because of a genuine belief that it is a better
way. The reasoning being, I guess, that when you're up to your
you-know-what in alligators, it doesn't matter which one you
go after first. It is not unusual to find people in an
organization with differing ideas about what is important when
dealing with day-to-day issues.
To
be fair, most management teams know better. What they don't
know is how to help everyone be willing to handle the pressure
of day-to-day issues and consciously work to make things
better at the same time. So they turn to something laid out
and straightforward to guide them such as Lean and/or Six
Sigma programs. These programs help create a systematic and
effective approach to incremental improvements that warm the
hearts of training managers, black belts, and work teams
galore. Everyone feels better, that is, except the CFO and
ultimately, the stockholder. Why? Because these programs don't
always produce measurable, bottom-line results nor do they
protect the organization from the ravages of the tectonic
shifts caused by really big changes in market focus.
A
case in point is the impact Wal-Mart is having on domestic
manufacturing. CNBC recently had a two-hour documentary that
provided a reasonably even-handed look at Wal-Mart. It gave
plenty of time to those who blame Wal-Mart for destroying
small town businesses, changing the face of Middle America,
and forcing American jobs overseas. PBS followed with a more
critical "Frontline" program asking the question: Is
Wal-Mart good for America? Those interviewed ranged from small
town mayors and displaced machine operators to economists who,
as one would expect, seemed evenly divided between those
answering "yes" and those answering "no".
One
of the arguments is that Wal-Mart uses many suppliers in
places like China (who, it is claimed, are subsidized by the
government or pay low wages, and thereby have an advantage
over more costly domestic manufacturers) so that Wal-Mart can
make greater profits.
Both
documentaries provided a clear view of Wal-Mart's mantra, "The
Customer is # 1", and demonstrated, perhaps unwittingly,
who is to blame: Wal-Mart's satisfied customers. Satisfied
customers have built Wal-Mart into the largest retailer in the
world. Wal-Mart isn't the tectonic shift upsetting these
folks; it's customers of Wal-Mart.
The
customer has become increasingly vocal in their expectations
and Wal-Mart, perhaps better than anyone else, listens. Their
response is to give them what they ask for: good value at low
prices. Wal-Mart carries that message to every supplier it
has. When a supplier doesn't listen, Wal-Mart willing to go
somewhere else, including China, to ensure their customers get
what they want.
It
is too easy for politicians and unprepared manufacturers to
blame Wal-Mart instead of recognizing there has been a
fundamental change in the way American manufacturers have to
operate in order to thrive in the twenty-first century. Giving
the customer what they want, when they want it, and at a price
they are willing to pay has gotten tougher in the last five
years and, I predict, will get even tougher in the next five.
It won't be because of Wal-Mart and low cost Chinese labor as
much as it will customers expecting even better products at
better prices faster than ever.
For
American manufacturers to be competitive they must (not
should, must) leverage their one remaining differentiator:
proximity to market. An example can be found in the domestic
furniture industry where manufacturers are competing with low
cost furniture from China by offering custom made furniture in
two weeks or less. An article in the Nov. 18, 2004 issue of
The Wall Street Journal highlighted several domestic
manufacturers including Century, Berkline, Rowe, and Bassett
who are dramatically lowering their speed-to-market times in
an effort to successfully compete with Chinese competitors.
It
is possible to give the customer what they want, at a price
that reflects the value the customer places on it, faster than
a competitor twelve thousand miles away. However, for many of
you, it will require a fundamental change in how you build and
distribute product. The most viable way is through a business
model based on rapid, low cost build-to-order. Are you
listening to your customers? Wal-Mart does and is very
profitable as a result. Some in the furniture business are
too. So can you.
|
