Chasing the rabbit: Expert resource reveals what makes a market leader
Executives and managers at industry-leading companies often focus on operations to continuously improve enterprise performance. But Steven Spear, a senior lecturer at Cambridge, Mass.-based MIT—in his book, Chasing the Rabbit—offers up a whole new look at innovative strategies used by notable companies that have established themselves as market leaders.<br/>
In every industry, there are a few leading companies, numerous other companies, and some laggards. Competition being what it is, those other companies always want to study the leaders’ performance to determine just what makes them different.
What they’re essentially asking is why those companies are leaders.
Steven Spear, a senior lecturer at MIT , Cambridge, Mass., has studied leading manufacturing companies. His book, Chasing the Rabbit , offers up some notable companies’ innovative strategies for establishing themselves as market leaders.
“Many organizations encounter ferocious competition in the marketplace,” Spear begins. “Try as they might to set themselves apart, any static, snapshot differences are fleeting and temporary. Identify and meet some unfilled customer need in an untapped market in a novel fashion and challengers will soon flood in. Find a preferred supplier and others will quickly clamor to gain access. Employ a new scientific insight or technological approach and everyone else will quickly adopt it.
Steven Spear, author and senior lecturer at Cambridge, Mass.-based MIT, has studied high-velocity organizations that he calls “pack-leading rabbits” because they are the types of companies that others chase—but seldom seem to catch.
“The result of such market fluidity often is intense, cutthroat rivalry,” Spear continues. “Yet here and there, we see companies and organizations—in and out of the private sector—that manage to stay ahead of the pack for years or even decades. Displaying combinations of speed, agility, responsiveness, and endurance, they see and seize opportunities. And by the time rivals respond, the leaders have raced on to further opportunities, leaving competitors in their wake.”
Spear calls these high-velocity organizations “pack-leading rabbits” because they are the types of companies that others chase—but seldom seem to catch.
Consider, for example, Toyota . While scores of other manufacturers have tried to adopt the Toyota production system , Toyota continues to introduce new vehicles and technologies. It also expanded operations, so rather than remain an exporter, it now has local operations around the world—for example, producing its Tundra pickup truck in San Antonio, Texas.
“Toyota is one of these market-leading companies that’s extremely difficult for other organizations to catch up with,” Spear says.
Just like their competitors, these leading companies produce complex products or provide complex services using complicated operations that involve many people from many disciplines and a variety of equipment, Spear says. But what sets these high-velocity organizations apart is their innovative approach to managing what can be complex, unpredictable systems.
Focus on operations
For other companies, the challenge is determining how they can emulate the high-velocity organizations. There are numerous characteristics that set these companies apart, Spear says. One of the most apparent is an overall focus on operations as it relates to overall enterprise performance.
“These high-velocity organizations demonstrate an intense focus on how things are done,” says Spear. “It’s not necessarily how seats, for instance, are actually attached to an automotive frame—although that process certainly is a critical focus of the plant floor. Instead, they focus from an organizational point of view on the process of doing things to get desired results. And if processes or operations need to be revised to get those results, these organizations make the needed changes.”
For Pittsburgh-based Alcoa —a leading producer and manager of primary aluminum, fabricated aluminum, and alumina facilities—everything the company does is geared toward obtaining sought-after results, says John Marushin, director of operations management consulting. The result is that by being extremely focused on problem-solving, the company is able to achieve a higher level of performance, he says.
“At Alcoa, we focus on understanding the business case for every project,” Marushin says. “That doesn’t mean just knowing about a condition, but identifying and understanding the underlying causes producing that condition. By addressing the business case rather than just the condition, we’re able to obtain high returns on projects.”
That concept may be lost on some manufacturers. They may think they need to add another manufacturing line to keep up with demand, for example, or add another warehouse to hold inventory, Marushin says. What they need instead is to identify the actual business problem and then study it. That means they need to discover—in the first place—why they are unable to meet demand, or why they need to hold so much inventory.
Strive for improvements
Another business characteristic that separates industry leaders from other companies is they demonstrate a focus on constant innovation, Spear says. To be sure, this principle applies not just to product design, but to the company’s business practices.
Pratt & Whitney —an East Hartford, Conn.-based leader in the design, manufacture, and service of aircraft engines, space propulsion systems, and industrial gas turbines—has a formal business program in place to control product design as well as production across the enterprise. Consequently, the company gained the ability to execute flawlessly on standard product without introducing the element of risk, says Paul Adams, senior VP of engineering.
“We’re able to make very knowledgeable decisions that enable us to execute flawlessly and gain value through innovation,” Adams says.
Equally important is the fact that the company also created an organization for continuous improvement so Pratt & Whitney can change processes and operations, control that change process, and then sustain those changes. In effect, the company has a closed-loop continuous-improvement process in place for product development, but also for improving business processes to further drive enterprise performance.
“The key lesson has been to understand the need to manage and control risk in a complex environment, which enables us to execute designs extremely well,” says Adams. “Through continuous improvement, we reduced product development cycle time and cost. And by constantly striving for consistency, we’ve reduced execution variation from program to program so we can focus on technology and innovation and better address customer needs by being a leader in technology innovation.”
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2012 Salary Survey
In a year when manufacturing continued to lead the economic rebound, it makes sense that plant manager bonuses rebounded. Plant Engineering’s annual Salary Survey shows both wages and bonuses rose in 2012 after a retreat the year before.
Average salary across all job titles for plant floor management rose 3.5% to $95,446, and bonus compensation jumped to $15,162, a 4.2% increase from the 2010 level and double the 2011 total, which showed a sharp drop in bonus.