iStock/Getty Images
Small Fish 5e4efba5a06b7

When Small Changes Catch Small Fish

Feb. 21, 2020
Gaining a supply chain competitive advantage requires big thinking.

Everyone in an organization should consider themselves a change agent, but those in higher-level positions should be spending a higher percentage of their time looking for ways to improve or be able to eliminate existing processes.

I’ve found that high-level managers—especially executives—are very conservative, hence, resistant to change. But in my mind, the only way to gain a measureable and significant competitive advantage is by being willing to take on a level of risk.

How is change managed at the company you work at? Gaining a leg up on the competition is important to ongoing business success. How this can be achieved can take a multitude of paths.

To simplify the issue for discussion, I find it useful to classify types of competitive advantages in three main categories, as follows:

1. Short-Term

A short-term competitive advantage is usually gained by tweaking a current process.  This is the easiest approach to implement, and the least risky form of change. Some people like to refer to these incremental changes as continuous improvement.

Short-term changes also lead to the shortest-lived advantage because competitors are usually quick to recognize and reproduce them, so that the edge lasts only weeks or months.

 An example of a short-term competitive advantage is finding piece-price advantage over a competitor that purchases a similar type of part. 

Don’t get me wrong, short-term competitive advantages are important to pursue. But they should be regarded as something that is necessary but not sufficient relative to ongoing business success.

2. Medium-Term

A medium-term competitive advantage is achieved by stretching beyond incremental improvements, but only to the extent that the proposed process change can still be tied back to current practices.  As such, medium-term changes are still usually considered a natural evolution of the current state.

Medium- term competitive advantages typically have a higher impact than those delivered by tweaks, but again are relatively short-lived.  Why?  Because once again, the updated process aligns close enough with current practice so that within a few months or quarters, some competitors will be able to connect the dots between their current process and your updated state and be able to introduce process changes of the same ilk within their organization and/or systems. An example here could be a company purchasing department reducing its number of suppliers—and internal resources to support them—by consolidating buys of similarly processed parts.

3. Long-Term

A long-term competitive advantage comes from a groundbreaking change in both strategy and process that often changes the underlying rules of the game. Due to their revolutionary nature, these changes are difficult to analyze and/or reproduce and because of this deliver an extended, high impact marketplace advantage that can last years. These are definitely not the result of streamlining changes that, by the way, are usually tactical in nature. Such a long-term competitive advantage might be gained by developing a strategy of sourcing with and developing lean-performance-capable suppliers.

Short-term tweaks are a necessary component of a comprehensive process improvement program. Their weakness comes when they are used as the primary—or sole—change management strategy. For instance, sourcing based on piece-price.  Why? Because tweaking doesn’t lead to a significant or sustainable competitive advantage. Instead, at best, it helps maintain the status quo.  And it only does this if your competitors are also solely focused only on tweaking. The advantage of tweaks is that because they reflect only a slight change to current practice, their potential for success—and the amount of their impact—is highly predictable.

Read more of Paul Ericksen's supply chain management articles

On the other hand, process evolutions that lead to a medium-term marketplace advantage don’t often lead to sustainable shifts in market stature. They offer a type of insurance policy that your competitors won’t gain a jump on you.  While leading to more quantifiable impact they are still --- like tweaking --- fairly predictable in their potential for success and quantified impact since they, too, are tied to current practice.

The success and impact of changes that lead to long-term competitive advantages are less predictable. They require significant time and heavy-lifting to develop, implement and demonstrate due to their revolutionary shift from the current state.  Often though, when delivered, they result in radical marketplace shifts and because of this are highly desirable.

Due to the risk associated with their success, individual practitioner companies tend to avoid developing them on their own. For this reason they are often developed in conjunction with academics and consultancies, but usually that’s not the best approach for these three reasons:

1, Over my career I’ve had great relationships with various academics. Too often, though, they lack the business sense needed to take their idea and develop it into a commercial viable business success. Instead, they rely on you to take their idea and commercialize it which, I might add, is usually the bulk of the heavy lifting.  Consequently, there is risk involved when relying on an educational institution to deliver process innovation, especially in business.

2. Most consultancies are not based on innovation. They are based on re-packaging existing tools so they look new and improved. As a result, successful consultancies often are better at marketing than delivering actual extended competitive advantage.  In fact, if you look across the spectrum of products offered by consultancies you’ll often find that—outside of the packaging—you don’t find much difference in what they deliver, other than their fee structure!

3. People outside your organization have no skin in the game.

I don’t know about you, but whenever I’ve put my skin in the game I’ve always found it better to work with people that also have their skin in the game. Academics have tenure; i.e., no real risk there. Consultancies have other potential customers to approach, so they too, have an out. 

Start-ups live or die based on whether they have truly introduced and developed innovation that promises to leave the status quo in the dust.  And when they are not successful at this they are usually short-lived. In the end, I’ve found that most significant changes within a company are home-grown since based on them everyone will either benefit or suffer failure.

Paul Ericksen is IndustryWeek’s supply chain advisor. He has 40 years of experience in industry, primarily in supply management at two large original equipment manufacturers.

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!