NEMA's electroindustry January 2010 - 16

electroindustry news › Creating Sustainable Competitive Advantage in a Challenging Economic Environment Robert L. Wayne, Managing Director, The Delta Group To say that business leaders work under a cloud of uncertainty in the current economic environment is, well, an understatement. Growing a company was enough of a challenge before the financial calamity of last year; competitors could spring up from anywhere in the world through proliferation of digital technology, which also has contributed to an intensifying pace of change. The nature of both competition and of the value required to sustain a competitive advantage has dramatically changed. The factors that continue to contribute to the uncertainty would likely include unprecedented monetary stimulus, government guarantees, and injections of capital. Another is the difficulty of comprehending the information available on unfolding economic events. Yet another is the very nature of the economic shifts still under way. But fortunately, signs of stabilization and potential economic recovery are beginning to emerge. These economic and market conditions have put considerable pressure on leaders to focus on short-term tactics and cost cuts. As one leader put it, “right now we are too busy doing tactics to worry much about the long-run.” But perceptive executives know that given the speed of change in today’s environment, shortsightedness is the path to disappointing outcomes, or much worse. There are still constants in a world of change: the strength of a company’s buying proposition is a function of the level of value perceived by its individual customers. And if the plans to deliver that value cannot be converted into reality, those plans will be mere wishful thinking. The good news is that decades of research have brought to light clear principles that can be put to use to overcome these challenges and the change in how value is created—without great cost or risk. Prior to the nineteenth century, chemists pursued science simply by taking measurements, before and after a chemical reaction. This was an external approach, like the one most people take with their cars. They know something is happening under the hood, but they don’t know what interactions take place to produce the power. With the evolution of atomic theory, chemistry became much more clearly defined: for the first time, chemists understood that the materials with which they worked were interacting on a level much too small to see. The effects could be seen, but the activities involved the interactions of atoms in molecules. Just as the atom is the most basic particle of an element, the molecule is the most basic particle of a compound. In a sense, many business executives and managers are in a similar circumstance as that in which the early chemists found themselves. The traditional budget process often takes measures before and after the “reaction” from planning; traditional tools of management (financial measures) do not enable them to “see” the most basic units and how their interaction creates the “reactions.” Michael Porter, Harvard researcher, author, and leader in the strategy field, argued that strategy is about selecting a set of activities in which an organization will excel to create a sustainable difference in the marketplace. He concluded that activities were the basic unit of competitive advantage; in effect, they were the “atoms” within the chemistry of the business organization. Bill Boehm, chairman, founder, and CEO of Connector Manufacturing Company and a recipient of NEMA’s Bernard H. Falk award, recently related a story about the early days of his company. At the time, it was manufacturing a basic connector unit that secured wires and allowed electricity to flow through the connection. The base of the connector was simply flat metal. Bill conceived the idea of boring grooves into the base of the connector so it could secure the wire more firmly, and at the same time enable greater current flow. It turned out that that adaptation made possible transfer of 11 percent more electricity, while reducing the amount of metal required to make the product. Inasmuch as metal was the major cost factor, costs of production were cut Just as understanding how basic atoms interacted removed the uncertainty for the pioneers in chemistry, a similar understanding can help to address the uncertainty and challenges business executives now confront. NEMA electroindustry • January 2010

NEMA's electroindustry January 2010

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