Competing for the Future by Hamel Gary.;Prahalad C. K.; & C.K. Prahalad

Author:Hamel, Gary.;Prahalad, C. K.; & C.K. Prahalad [HAMEL, GARY]
Language: eng
Format: epub
ISBN: 9780875847160
Publisher: LightningSource
Published: 1996-03-21T05:00:00+00:00

Strategy as Leverage

Together Figures 7-1 through 7-5 tell a story. In Figure 7-1 we see evidence of the astounding employee productivity gains made by Japan’s manufacturing firms. Nothing new here. Now look at Figure 7-2. Here we see that Japanese manufacturing companies not only possess a labor productivity advantage, their overhead costs have also been less, as a percentage of total costs, than is typical in the United States or Germanic countries. This is not labor productivity, but management and systems productivity. Go on. Figures 7-3 through 7-5 suggest that there is often little direct correlation between R&D spending and R&D output.1 How is it that GM can spend more than four times as much as Honda on R&D and not be the undisputed world leader in powertrain chassis technology—at least as far as the customer is concerned? Where is the evidence that Philips’s research budget, which in many years has been substantially larger than Sony’s, has produced a proportionately higher number of new product winners? In these figures we see crude measures of research productivity. What does all this add up to? Here is a group of firms, Japan’s leading manufacturers, that have demonstrated that it is possible to do more with less. That is the essence of resource leverage. It springs not from the sacred soil of Japan, but from an aspiration that takes little notice of current resource constraints. This isn’t just lean manufacturing, it’s lean everything!

Stretch and leverage are blood relations. We begin this chapter by exploring the relationship between stretch and leverage by way of a not-so-hypothetical example. Imagine two firms competing in the same industry: Alpha has a wealth of resources of every kind—human talent, technical skills, distribution access, brands, manufacturing facilities, and cash flow. These resources, accumulated over decades, are the rewards of past and current industry leadership, not the guarantors of future leadership. Alpha has no particular aspiration other than to remain atop its present perch. This goal has been expressed by Alpha’s senior management as “growing as fast as the industry.” Alpha’s resources can thus be described as substantial, and its aspiration as modest.

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