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Taking on China . . . and Everyone Else
You've said that it is necessary to reduce costs by 30 to 40 percent to compete with China, with its negligible wages and undervalued currency. But how can you prevent the Chinese from then copying whatever method you come up with to achieve your goal?
—Newcastle upon Tyne, England
You can't! You can't prevent the Chinese from copying any of your efficiency-boosting processes, and guess what, you can't prevent the Romanians, Mexicans, or the Americans, either. In fact, you have to assume that every one of your competitors, from Indonesia to Ireland, is eager and able to imitate your best practices. And that they will.
Which is why your question is worrisome. It sounds as if you might be getting that no-option-but-surrender feeling about today's competitive environment. But such defeatism kills companies. Instead, you have to get yourself energized by the challenge of finding breakthrough ideas and processes. Today's competitive dynamic has to make you want to run faster, think bigger, and work smarter.
And to what end? The answer is simple: innovation. There are, of course, other ways to compete, but without doubt, innovation is the most sustainable in today's global marketplace.
Luckily, there are two ways to innovate, and together they can deliver a real knockout punch.
The first form of innovation is exactly what you would expect: the discovery of something original and useful—a new molecule, a breakthrough piece of software, a game-changing technology. This kind of classic innovation, of course, can happen by accident (in a garage, say), but far more often, it occurs when companies actively build a culture where new ideas are celebrated and rewarded. It happens, in fact, when companies basically define themselves as laboratories for new products or services. Think of Procter & Gamble and Apple. Both epitomize the innovation culture—and its competitive advantages.
But there is a second, less glorified way of innovation that is just as effective. It is the continuous, aggressive improvement of what you already sell or how you already do business. Yes, people must innovate by discovering totally new concepts, as we've just described. But companies can (and must!) also innovate by searching for best practices, adapting them, and continuously improving them. It is that activity, in particular around costs, quality, and service, which will most effectively drive the 30 to 40 percent cost reductions required in today's competitive environment.
The process of continuous improvement really has no boundaries or limits. It is an R & D team finding a new way to make a long-established molecule do something different, and a software engineer finding new applications for an upgraded piece of old software. It is people throughout the organization pushing relentlessly to take established products and services to the next level, blowing up the status quo of "that's how it's done around here," and replacing it with a mind-set that shouts, "We are never done looking for a better way."
A best-practices culture, in other words, has no endpoint. Once a company thinks it has left the competition somewhere in the dust, it needs to start searching again for the "new and improved," always staying one or two steps ahead. If the search is continuous, it also has to be as wide as you can make it. Don't just seek out best practices hiding under a rock in your own backyard, that is, down the hall in another department or a hundred miles away in another division. Look at other companies in your industry—and outside too. GE learned the nitty-gritty of lean manufacturing by visiting Toyota factories around the world. It learned the art and science of improving inventory turns by studying best practices at American Standard, a plumbing and air-conditioning company. In fact, if there is one thing you can be sure of, it is that companies—if they are not direct competitors, of course—love to share success stories. They are proud to showcase what they are doing well. All you have to do is ask. And ask is what people in best-practices cultures do—all the time.
At this point, perhaps, you are thinking that it is easy to extol the virtues of a best-practices culture but much harder to put one in place. You are absolutely right. Too often, companies resort to sloganeering on this front. They give best practices the old motherhood and apple pie treatment. Best practices are good, they say, we believe in best practices, and so on. Of course, this kind of generic cheerleading results in . . . nothing.
In real best-practices cultures, the fanatic pursuit of new ideas is baked into the mission of the company. Moreover, searching for best practices and the desire to continuously learn and improve are behaviors that are evaluated in every performance appraisal and rewarded financially. In best-practices cultures, leaders hire and promote only people who have a thirst for continuous learning.
Without doubt, putting an innovation culture in place is hard. But doing so is not one of those choices you can sit around and debate. Either you buy into discovery plus continuous, never-ending improvement as a way of life in your company, or you can wave at your competitors—as they pass you by.The foregoing is excerpted from Winning: The Answers by Jack Welch, and Suzy Welch. All rights reserved. No part of this book may be used or reproduced without written permission from HarperCollins Publishers, 10 East 53rd Street, New York, NY 10022