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How high velocity organizations get ahead and stay ahead
A selection of talks on Strategy
Hi, my name is Steve Spear. I'm a senior lecturer at MIT, a senior fellow at the Institute for Healthcare Improvement, and author of the book, The High-Velocity Edge. Today, we'll be talking about how high-velocity organizations make the leap, getting ahead and staying ahead of their rivals and competition.
We worry about high velocity in terms of getting ahead and staying ahead for the very simple reason that when one looks at different sectors, different industries, and again, it's simply doesn't matter which; it could be civilian or military, high-tech or heavy industry, manufacturing, or design. The difference is between the best and the average and we're not even talking the best and worse, just best and average. The difference is the gaps can be simply extraordinary. Differences in quality can measure anywhere between 100-1,000 fold. Differences in productivity, the effort required to create the same amount of value, those differences in productivity can be two times, three times, or even four times. Differences in ramp speed, bringing new technology, new products, new service to market; those differences also can be somewhere between two, three and four times in speed between the best and the average and then the same thing is true for the workplace: safety, agility, time to market, efficiency, and so forth. Long and short, issues of speed and getting ahead and staying ahead are of profound importance no matter what you do and with whom you compete.
This issue of 'get ahead and stay ahead' is of great relevance. It would be one thing if we just sat on the sidelines watching the competitors on the field and marvel at how these high-velocity organizations race ahead of the competition and win untouched and unmolested. But the thing is, we're not spectators, we're competitors ourselves and we have to be on the field and figure out how our own organizations get ahead and stay ahead of our rivals. Now the good news is that this is not a spectator sport that organizations have accelerated themselves to the front of the pack. I'll work through three examples and in doing so, give a sense of the breath with which some of these ideas apply. In the first instance, we've got an Intel 'Fab', a factory that makes microprocessors. Now the problem this factory encountered is that they were using a trailing edge technology. Everyone in that industry is moving to the new technology and they were trying to squeak out what was left of the old technology. By many measures, they weren't in a competitive position, and by many estimates, they were going to be closed down sometime around 2009, 2010. Now, the folks in that factory recognized this was quite a burning platform predicament, and by accelerating the pace at which they were making improvements, accelerating the pace at which they were making innovation and bringing those great new ideas into practice, they did some marvelous things. One of the things you measure in that industry, of course, is how quickly can you turn blank silicon wafers into usable chips? They were able to compress that time by some 70 percent. As you all know, every time Apple or some other manufacturer introduces a new product in the lines that are upfront, there's an enormous premium for a new product, an enormous penalty for a product that's slow or late to market. Being able to offer manufacturers the ability to get the product to market in 30 percent of the time that was typical throughout the industry, led to a huge interest in having products run through that facility. The good news was they were able to take on that new demand because by the same efforts of discovering new ideas and bringing them into practice, they added capacity, literally without spending another dime on equipment. Yield loss disappeared out of the plant. Inventory disappeared because the material was moving so quickly through the facility and per-unit cost dropped by some half. The combination of a huge increase in top-line revenue and a huge decrease in bottom line cost lead to a gain in profitability that ran into the millions of dollars per month, and a two billion dollar facility which was slated for closure sometime around 2010 is up running and still taking on new orders through 2014 and 2015. Really, not a bad return on investment.