Are You on Digital Time?

In an award-winning Harvard Business Review article ("Time -- The Next Source of Competitive Advantage," July 1988), George Stalk Jr. wrote, "Like competition itself, competitive advantage is a constantly moving target. For any company in any industry, the key is not to get stuck with a single simple notion of its source of advantage. The best competitors, the most successful ones, know how to keep moving and always stay on the cutting edge. Today, time is on the cutting edge. . . . In fact, as a strategic weapon, time is the equivalent of money, productivity, quality, even innovation."

In that article, and in a subsequent book, "Competing Against Time: How Time-Based Competition Is Reshaping Global Markets" (with Thomas M. Hout, Free Press, 1990), Stalk, 48, now a senior vice president at the Boston Consulting Group (BCG), launched the concept of time-based competition -- a way of doing business that he had witnessed in Japan. The main idea: An organization that eliminates wasted time in manufacturing, services, new-product development, and sales and distribution will cut costs, serve customers better, reduce inventories, and enhance innovation. In many respects, that insight prefigured the reengineering movement: Both concepts looked at a company's operations as a horizontal, end-to-end system and sought to eliminate unnecessary slack. Yet it was an insight that needed the digital revolution to reach its full potential.

"In the 1950s, MIT's Jay Forrester showed how time delays in a simple business system would produce huge distortions in the system's response to changes in demand," Stalk says. "That was a big 'aha!' When I wrote my article, in the late 1980s, I believed that you could take a large chunk of time out of any system, without using computers and networks. You could rearrange the factory floor, reduce equipment-setup times, use Japanese-style kanban to cut inventory, and substitute shipments of less-than-full truckloads for full truckloads in your distribution system. You could change your business practices to cut waste and not have to wait for computer systems to catch up with you." In fact, Stalk says, companies made enormous improvements in the 1990s, reinventing whole industries and closing the gap between U.S. and Japanese companies -- all without waiting to make major IT investments.

But now, Stalk acknowledges, work redesign and the digital revolution have combined to meet the competitive imperative of speed: "We've reached the point where the two need to go together. In fact," Stalk says, "today you can't be fast without IT. Simply faxing production schedules back and forth between manufacturers and suppliers isn't enough. People in every part of the production system need to be able to peer into one another's production schedules to share information and to make decisions in real time." To find out more about how digitization has supercharged time-based competition, Fast Company interviewed George Stalk in his office in Toronto. Here are his six principles for digital companies that want to compete on speed.

Digital speed casts a stark shadow.

There's no doubt that, in the past, competing on time created performance differentials. But as real as those differentials were, they usually improved things only 20% or 30%. When you move into the digital world, you attach a supercharger to speed as a competitive weapon. The difference between those who get it and those who don't is no longer incremental -- it's a quantum leap. And once that disparity becomes apparent to some consumers, word spreads to others.

It can be as simple as a computer-aided automotive-service center that repairs your brakes, rotates your tires, and changes your muffler in one day instead of the standard time frame, which may be two or three days. It can be a Web-based retailer that lets you effortlessly order something on the Net and receive it the next day -- compared with the old retail experience of searching stores for the goods you want. The digital experience is faster, easier, smoother -- and the difference is stark. Once you've experienced digital speed, you ask yourself, "Why should I tolerate an inferior experience from a traditional supplier?" And if that's your reaction, you know that a lot of other people have the same feeling.

Digital speed appeals to a company's most profitable customers first.

Most financial institutions share a common misbelief: Because only about 35% of all households own personal computers with modems, they assume that there's no problem. These institutions don't think that there's enough market penetration for self-service banking and financial services to threaten them. What they don't understand is that consumers who use PCs for personal banking today used to be those institutions' most profitable customers. In this case, the cream really does rise to the top -- and if traditional financial institutions don't perform for those cream-of-the-crop customers, those customers will go elsewhere. It's simple: If you don't make the leap to digital speed, you end up with a customer base that spends the least and costs the most to serve.