Chapter 2. How Can an Organization Become and Stay Competitive?
Methods normally taken to improve performance 12
Management techniques developed to improve performance 12
The packaged software solution to performance problems 13
Using management consultants 15
How effective are performance improvement projects? 17
Are you just tinkering with the systems? 19
Although some of them were loath to accept it, the governments of virtually every country in the world now acknowledge that they cannot create wealth for their citizens – that has to be done by the business community and in particular the entrepreneurs. The importance of being competitive is nevertheless recognized by most governments and many of them now attempt to provide direct help and advice on the subject for their business communities.
In some countries entrepreneurs can still base their schemes on the availability of raw materials and or cheap labour. Given such circumstances the entrepreneur may not initially need to put too much emphasis on controlling costs and improving service.
In most of the developed world, however, any competitive edge must be found via knowledge, skills and creativity improvements. Sadly, not all these benefits continue over the long term, because modern technology has a habit of distributing most of the knowledge and skills developments around the competition, quite quickly.
In the period following World War II, the solution to the competitiveness problem appeared to many people to be quite straightforward. They argued that organizations had to keep extending their customer base until they were operating in as wide an international arena as possible. Continuous expansion in this way met the pressure of competition by spreading costs and revenue on a global scale. Many large corporations have achieved an ongoing competitiveness by deliberately positioning themselves on a global basis. Nevertheless, it is not a solution that all organizations can aspire to and it can only be a part solution to the giants of commerce because eventually they must run out of new territory to conquer. Coca-Cola has a global image but can never relax its efforts because Pepsi and other competitors have also obtained a global or near global status.
Competitiveness will normally involve some mixture of quality, continuous service improvement, speed of performance and cost reduction. The exact mix will depend upon the nature of the organization. Globalization by itself can therefore never be a complete answer even for the larger organizations. For every organization that has attempted to solve the competitive problem by globalization there must be hundreds who just rely on cutting costs. Organizations that lurch from one cost-cutting exercise to another are usually hoping that if they keep reducing costs then eventually they will gain access to a creative breakthrough that solves their problem.
competitiveness will normally involve some mixture of quality, continuous service improvement, speed of performance and cost reduction
The trouble with this line of reasoning is that real creative breakthroughs, although happening faster than ever before, are not a daily occurrence. For most of the time, therefore, executives who are constantly under pressure to make ’savings’ can only contribute to the competitive situation by looking for cost reductions and consequently spend less than the necessary time on much needed service improvements. Such savings are frequently made from within a function and without knowledge of the situation facing the entire organization. As a result this action may, in some circumstances, be counter-productive.
To return to the question raised at the beginning of this chapter – how can an organization find or create the resources necessary to be competitive in everything it does? The important second part of this question is: If an organization manages to achieve a suitably improved level of performance in all functions, how long would it be reasonable to expect all of these functions to remain competitive?