vol. XV no. 2

				Throwing out the rules According to Harris, the strategic paradigm of yesterday called for businesses to know their customers, to strive to perform a little better each year and to follow a long-term plan in a stable environment. Businesses sought to exploit core competencies, to develop a sustainable advantage and to aim for sustained dominance. When manufacturing drove the U.S. economy, these companies found it easier to exploit core competencies. These days, by contrast, businesses manufacture wherever and whenever they can exploit cost advantages. In doing so, they take manufacturing to locations around the globe where advantages exist. Faster adjustments to change require throwing out routines and clearly defined procedures, which could be a fundamental change in mindset for some companies. "It's not so simple anymore," Harris said. "We now have changing customer values and shorter product lifecycles." For example, phone manufacturer Kyocera introduced a new product in 2001 at $399 and saw the price drop to $99 just six months later. "From a manufacturing standpoint, companies have to gear up constantly to bring down costs because the price to consumers will go down," Harris explained. "And in six months, if they want to keep the market, they'll have to come out with a new product." The complexities created by a multi-centric world where companies must continually adjust products to changing markets are having an effect on business strategies. "In the area of customer relations, firms are no longer content with a single transaction but rather are looking for ways to establish long-term, even lifetime, relationships with consumers," said Harris. The Home Depot, for example, has adapted this service delivery model by partnering with companies in the home services specialty areas. Customers can buy tools for "do-it-yourself" projects or they can purchase a service agreement to have the work done by someone else. Through their relationship with The Home Depot, customers gain access to experts who can till their soil or replace their water heater or install a new deck. "In other words, The Home Depot is reconfiguring what they offer as a value proposition," Harris explained. Businesses also are being forced to rethink which channels they use to reach customers. One obvious impact on channel relationships is the very significant influence of e-commerce, according to Harris. Scores of retailers have had to develop an online complement to their bricks-and-mortar stores. The acquisition of Land's End by Sears, for example, enabled the icon of American retail to bring a strong online presence to its popular brand name. Airlines such as Delta now offer online ticket sales as an alternative to traditional ticket purchases at their own retail outlets or through travel agencies. The trend to cut distribution costs began in 1994 when airlines began reducing commissions to travel agents. By last year, commissions for domestic bookings were capped at $20, and this spring Delta eliminated domestic commissions entirely. The airline's web site has become a powerful one-stop shopping experience for travelers, forging a direct relationship between the company and the customer. "The new channel is made possible by technology but driven by price," said Harris. "When other costs are going up and you can't raise your price, you need to control costs wherever you can." Travel agents in turn have had to develop their own agility to find ways that their services add value for customers. Most agents now charge a service fee to clients, and many specialize in certain kinds of travel arrangements, helping travelers find less expensive means of travel, organizing tour groups and even suggesting restaurants and other local resources for a complete tour package. The third critical area Harris identified in the agility triangle is product characteristics and configurations. In order to succeed today, products need distinctive features, fast-paced introductions and greater variety and scope. "To be competitive," Harris said, "firms have to produce the right product at the right facility ready to ship at the right time so they don't have to store the inventory. They can't look through one lens anymore. They must adapt products to be in sync with local markets." The Coca-Cola Company in Japan has done just this with a popular drink called Georgia Coffee, which is not offered in its domestic market. Likewise, Starbucks customers in Singapore can purchase an orange-flavored coffee not found on U.S. menus. In Asia, McDonald's offers foods prepared with spices and sauces that please local palates. Walmart, too, displays agility in the items it offers in its stores, reflecting the differing needs of customers in an urban environment such as San Francisco or in a small town such as Albany, Georgia. "Companies that are agile keep an outside focus," Harris said. "They are always trying to better understand how customers are changing." Top | Next Page

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