David Bosshart in his fantastic book “Cheap” talks about the dilemma facing the business world.
He talks about the equations
Faster, Better,Cheaper and the interrelationship of these three. As I studied in Physics class in my college days, the Heizenberg’s principal.
According to it, the momentum and position of an atomic particle cannot be determined at the same time. That mean you can either know one or the other at any instant of time and not both.
Bosshart’s theory has interesting analogy to this principal. He says that a business cannot do all three things at a time .
1. Be Faster
2. Be Better
3. Be cheaper
To have at least two, you have to sacrifice third one. Even if a business is able to achieve all the three, it will be more of an anomaly and not a norm and sooner or later , one factor needs to be dropped.
He cites examples of Walmart. Walmart has been increasingly successful in delivering on all three of the factors. Due to its enormours supply chain muscle, it is able to deliver an outstanding value to the customer.
Behind the scenes Walmart is plagued by lower employee satisfaction( as a result of lower salaries as a result of cost cuts at every stage), too many of product categories leading to customer confusion and the opposition at every place it opens up a shop and many others.
Faster, better and cheaper leads to anomalies such as ever growing meal size in McDonald’s leading to almost an obesity epidemic. Another example could be over exploited Asian workers to produce goods at much lower wages and illegal time schedules.
To create sustainable businesses with positive consequences on the world, it is very important that a business should concentrate on only two factors at a time.
There are three parts to the equation
Faster + better = More expensive
Better + cheaper = Slower
Faster + cheaper = Horrible.
So where do you think your business lies in w.r.t. these equations ( 1, 2 or 3)?