When someone neatly encapsulates the cycle organisations pass through, there’s not much more you can add…
From the Fast Company Now blog :
First, he said, you concentrate on making something cheaper than anybody else. And when you can no longer make something cheaper than anybody else, you concentrate on making something better than anybody else. And when you can no longer make something better than anybody else, you concentrate on making something different than anybody else.
This comment reminds me of that old saying
“If you can’t make it better make it bigger. If you can’t make it bigger. Make it red.
I think that the quote has the wrong order of priority.
US companies can forget about making something cheaper. Labor rates in the US average $16.50 per hour and are $65.00 per hour with benefits on average for a factory worker inDetroit. They are 50 cents to one dollar per hour in China where people often work 16 hours a day seven days a week. You can buy a good car or truck in China for $3,000 and soon they will be selling them in the US.
Most US products are simply resyled commodities where the real innovation was done 50 years ago and they are are not substantially different from other products. That is why no one wants to buy GM products any more. They lack differentiation and are too expensive.
The US’s only hope is to make products better and different than other products. Germans realized this some time ago. That is why they make Daimlers not Chevs because no one would buy a $50,000 Chev unless it is better like perhaps a Corvette or afew of the more differentiated GM brands.
This Change in approach involves considerably more investment in Research and Development and a long term strategy for deveopment and differentaition. It involves an increase of allocation to R+D from less than 1% of company turnover to 5 to 9% of company turnover. Some companies like Apple already have a relatively higher investment in innovation and design. At many comapnies this change of appraoch also needs a change in upper management away from the suite and Toupe business as usual types like GM to risk takers who are willing to ivest like Steve Jobs. The alternative is that US comapnies will go away like Humber, Morris and Austin in the UK. Many US companies will find it easier to disappear than to innovate.