Zara can take fashion ideas from the drawing board to the store shelf in 10 to 15 days. It does that by using systems that effectively link customers to the company's manufacturing and distribution divisions. Store employees gather consumers' comments on designs and colors and then report back electronically to Zara's designers -- who, meanwhile, are constantly patrolling public places and looking for new trends. Within days, new designs are distributed to a network of small, contracted workshops in northern Spain. Because Zara doesn't have to wait for garments to be sewn in the Far East and assembled in different countries, it can replenish its store merchandise often.
Bovet: It's important to be fast, but it's also important to be fast for the right customers. You have to do enough research to know not only what customers want but also how profitable different customers are for you. You don't want to provide a beautiful business design that delivers products fast if customers aren't willing to pay for speed. However, once you do find customers who are willing to pay for quick delivery, you can do something really special.
Weyerhaeuser offers a great example. We studied one of its businesses, a Marshfield, Wisconsin-based company that builds doors. A few years ago, the company was in serious trouble -- on the verge of being shut down. Then Weyerhaeuser launched DoorBuilder, a Net-based choiceboard that lets dealers order precisely the doors that they need, choosing from 2 million possible configurations. A process that used to take 3 or 4 weeks now takes as little as 15 minutes and involves nothing but a few mouse clicks.
DoorBuilder was a serious investment. But it has created a premium service that its best customers are happy to pay for. One reason for DoorBuilder's success is that Weyerhaeuser began by focusing on its 200 most profitable dealers -- the ones that would define the future of the plant.
Martha: We have some rules of thumb about outsourcing: Control customer touch points (ordering, service, and delivery); own the information, the knowledge, and the relationships, but not the transactions; and maintain control of analytical, relationship-building, and partner-management skills. Everything else is fair game for outsourcing.
Bovet: And you have to be sure that you're outsourcing for the right reasons. In the past, companies would often decide to outsource manufacturing after doing a cost analysis. Today, outsourcing has a lot to do with speed: Does the outsourced company have the ability to get products to market very quickly? We're talking about driving value, rather than about lowering costs.
In 1994, the biotech-research company Biogen thought that it had discovered a very powerful drug for multiple-sclerosis patients. It decided to use its new patent to become an operating company, rather than just a lab. But how to do that? It could license manufacturing to a big pharmaceuticals company, or it could build its own factory and its own distribution network.
But Biogen was wary of giving up control of its customer relationships to a big pharmaceuticals company. And it knew that if it built its own factory and then didn't win FDA approval, it would be stuck with that plant. So, instead, Biogen created a value net of related companies whose expertise it could use to get its product out very quickly once it received FDA approval.
To ensure high-quality outreach, Biogen kept customer support in-house. And it worked closely with its partners to make sure that all of its processes were top-notch. It created a network that got the new drug, Avonex, on pharmacists' shelves within days of FDA approval -- a record-breaking launch.
Martha: In the past, companies were reluctant to share information with suppliers. Sometimes, they even had adversarial relationships with partners: If suppliers tried to raise prices by five cents, buyers would try to cut them off at the knees. In a value net, companies need relationships that last, and broadly shared information is the key to making that happen. You can't build a great company if you treat partners like adversaries.
Bovet: There's a great example of that in the United Kingdom. Vauxhall, the General Motors brand in the UK, became one of the first automakers to sell cars directly to consumers through its company Web site. It did so by working very closely with dealers, rather than treating dealers as part of the problem. Vauxhall created five regional distribution centers and stocked each one with a relatively narrow range of cars that best represented local customer demand. That took stock off of dealers' lots. In return, dealers agreed to visit customers after they had made a selection online and to bring along a similar car for a test-drive. During the visit, dealers would also assess the value of any trade-in, and they would complete all documentation. Then, within seven days, they would deliver the car.
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