Stalk and Hout's classic work, Competing Against Time, was one of the first to identify the importance of time to the competitive edge. In the book, Stalk and Hout set out four "rules of response" which are provocative rules of thumb, but apparently based on research by the Boston Consulting Group.
- The 0.05 to 5 rule, states that, across many industries, value is actually being added for between 0.05% and 5% of total time. (This is no longer a surprise, see for instance the earlier section on Lean Thinking).
- The 3/3 rule, states that the wait time, during which no value is added, is split 3 ways, each accounting for approximately one third of time. The three ways are waiting for completion of batches, waiting for "physical and intellectual rework", and waiting for management decisions to send the batch forward.
- The 1/4-2-20 rule, which states that for every quartering of total completion time, there will be a doubling of productivity and a 20% cost reduction.
- The 3 x 2 rule, states that time based competitors enjoy growth rates of three times the average, and twice the profit margin, for their industry.
Cooper has pointed out the three major payoffs to bringing products to market faster:
- Speed yields competitive advantage through being first to market - provided it is not an ill-conceived product.
- Speed yields higher profitability because revenue is realised earlier, and discounted cash flow teaches that money today is worth more than money tomorrow. Getting on the learning curve earlier means cost advantages.
- Speed means fewer surprises, since the time for market conditions and for customer preferences to change is reduced
Note that there may be good reasons for emphasising speed or reduction in lead-time even though customers may not be interested in reduced lead times.
Becoming a time-based competitor is really what this book is all about. Like Womack and Jones, Stalk and Hout recommend process mapping. They talk about the "Golden Rule of Time Based Competitiveness" which is never to delay a customer value adding step by a non-value adding step. Instead, seek to do such steps in parallel.
Further reading:
George Stalk and Thomas Hout, Competing Against Time, The Free Press, New York, 1990, ISBN 0-02-915291-7
Robert Cooper, Winning at New Products: Accelerating the Process from Idea to Launch, (Second ed.), Perseus Books, Reading, MA, 1993