Can business be explained in terms of biology? Massachusetts Institute of Technology Professor Charles H. Fine does exactly that in his book, Clockspeed: Winning Industry Control in the Age of Temporary Advantage. Fine draws interesting parallelisms between rapidly-evolving industries and organisms like fruit flies that have a very short life span. Fine noted that prolific fruit flies are studied by scientists “because their genetic structure is similar to that of humans, because hundreds of them can be kept in a small milk bottle and because, despite their genetic complexity, they evolve rapidly” (Fine, 1999, p. 3).
Fine pointed out that today’s business leaders and decision-makers may adopt the thinking of scientists to discern just what traits and approaches will steer their companies to growth and market dominance. As printed before the start of the book’s first chapter, “In the natural world, species evolve – that is, they change to meet new challenges – or die. The same genetic imperative operates in business” (Fine, 1999, p. 3)
The book presented recommendations and challenges that modern-day companies may take on, in the race for survival of the fittest and preservation of market dominance. The way to do this, as Fine expressed, is through supply chain design. A company’s competitive edge, he posited, may be secured or obliterated based on how well it is able to manages the dynamic web of relationships that run throughout its chain of suppliers, distributors, and alliance partners, or the supply chain. The supply chain design, in effect, emerges as an important aspect or strategic tool for companies and industries to survive and thrive.
Fine made use of special terminologies to illustrate his points, beginning with the fact that every industry has its own evolving life cycle. “Fruit flies are what I call a fast clockspeed species. That is, they have an extremely brief life cycle. Mammals, such as elephants and humans, live by much slower clockspeeds” (Fine, 1999, p. 4).
Fine recounted how, in seeking to understand the various rates of evolution of various industries, he came to think of those rates as clockspeeds. “Each industry evolved at a different rate, depending in some way in some way on its product clockspeed, process clockspeed, and organization clockspeed.” The info-entertainment industry, for instance, is one of the fastest clockspeed fruit flies of the business world. The computer industry is a component of it (Fine, 1999, p. 6).
It is the fast clockspeed companies that get special focus in Fine’s book. Turning his sights to the modern business world, Fine made special mention of companies that offer Internet services, personal computers, and multimedia world, or `industrial fruit flies’ as he calls them, which create products and services for targeted publics at lightning speed.
Drawing much insight from companies he has come in contact with as consultant, Fine acknowledged the tendency and drive of many firms in the contemporary world to utilize business strategies not only to outpace competition and be a cut above the rest, but also to transform itself from mediocre to great. Not all succeed, though, mainly because, as Fine also pointed out, “All advantage is temporary… no kingdom is unbreachable” (Fine, 1999, p. 11).
Fine mentioned in his book how certain companies that could have maintained its market dominance but faltered. On the other hand, it served as models for others to learn valuable lessons from. In writing “Clockspeedbased Strategies for Supply Chain Design,” Charles Fine cited the events that led to the rise and fall of IBM, in particular, since it launched in the early 1980s its first personal computer. At that time, IBM lorded it over the entire computer industry. Fine’s recollection of the what transpired next served as stirring example of the temporary advantage that big and seemingly unassailable firms actually possess. In ““Clockspeedbased Strategies for Supply Chain Design,” he recounted:
IBM was a technologically deep organization that designed and produced its supersophisticated mainframe products almost exclusively with internal capabilities. But the PC presented IBM with a special `threedimensional concurrent engineering’ challenge: The company needed to create a new product, a new process to manufacture it, and a new supply chain to feed that process and distribute the product. To keep costs low and increase speed to market, IBM chose a modular product design with a modular supply chain design, built around major components furnished by two virtually unknown companies: Intel and Microsoft.
By 1998, the fastevolving personal computer had gone through seven microprocessor generations: 8088, 286, 386, 486, and Pentium I, II, and III. Still a powerful, profitable, and influential company by the standards of the computer industry, IBM had nonetheless been far outdistanced by its two handpicked suppliers, who had taken the lion’s share of the profits and industry clout that flowed from IBM’s standardsetting product. The power in the chain had shifted, as had the financial rewards.
The IBM-Intel-Microsoft saga provides a rich set of lessons from the fruit flies. Furthermore, understand that make vs. buy decisions should not be made primarily on which supply option is a little bit cheaper or a little bit faster to market. Rather, supply chain design needs to be recognized as a strategic activity that can determine the fates of companies and industries and of profits and power. Finally, we observe that the element of the supply chain that controls the chain can shift over time.
From the recollection on what happened to IBM, it becomes imperative for other firms to realize the value of choosing which components and capabilities to make, or keep in-house, and which to buy or outsource with the intent of hastening development cycles or improving performance. Indeed, the repercussions of faulty decisions can be corporate life-altering. The IBM case also illustrated how any weak link in an organization’s economic chain – can break an entire business conglomerate or entity.
As also reiterated in his online paper, “Clockspeedbased Strategies for Supply Chain Design” and based on his book, Charles Fine stressed that the most important lesson from the industrial fruit flies is one that should prove heartening to the supply chain community. The ultimate core competency of an organization, as he phrased it, is “supply chain design.” He defines the latter as “choosing what capabilities along the value chain to invest in and develop internally and which to allocate for development by suppliers.”
In a fast clockspeed world, he continued, that means “designing and redesigning the firm’s chain of capabilities for a series of competitive advantages (often quite temporary) in a rapidly evolving world.” In the same paper, Fine articulated, “Competition keeps the players highly focused on their survival. However, over time, a shakeout typically occurs, and stronger players those that manage to develop an edge in costs, quality, technology, or service, for example drive out weaker ones.”
Charles Fine also discussed in his book that the best things to outsource are those that are modular and that also represent only a need for capacity but not expertise. He mentioned a need for a technology chain, to discern which ones are dependent on which critical technologies. By determining the core capabilities within one’s organization, it is able to see just what it ought to outsource.
In effect, more power in the chain emanates from those who control Another phrase, three-dimensional concurrent engineering, is mentioned in Fine’s book, Clockspeed: Winning Industry Control in the Age of Temporary Advantage. It involves manufacturing engineers, design engineers, and engineers from suppliers and key partners, all of whom ensure that the product design will dovetail with the constraints and needs of the total supply chain.
In a complementary article, “Are you modular or integral? Be sure your supply chain knows,” Fine cited mismatched architectures (he defined architecture as the arrangement of components and the ways they interrelate) as “the hidden source of business model malaise.” When key systems are outsourced — in either a modular or an integral fashion — it is critical to bring supply chain experts together at the initial stages of product development.
As the product architecture evolves during the design process, the supply chain architecture evolves along with it. For product subsystems with complex interfaces and interactions, close supplier relations must be designed into the supply chain. For supplied components that are standard with well-defined interfaces, modular relationships can be fashioned at arm’s length.
The success of Toyota, Dell, Nokia, and Cisco can be attributed to a well-executed alignment strategy. The difficulties of DaimlerChrysler, Polaroid, Nortel, and Lucent illustrate how challenging it can be to cope with separate product and supply chain architectures that are shoehorned together after each of them has evolved in a distinctly different way. Alignment comes across as crucial, then, as it allows companies to be resilient while maintaining a coherent business model (Fine 2005).
The company where I am currently employed, EMBARQ Corp., which is part of the dynamic information and communications industry, is characterized by `fast clockspeed.’ In the words of Charles Fine, it is a “fast clockspeed fruit fly.” The organization has been contributing to the supply chains of other allied industries, since its humble beginnings in the late 1800s. EMBARQ’s corporate history will show, however, that it has vestiges of the slow clockspeed species, back when the telephone was still new.
In fact, the company has a 107-year history that has exhibited ups and downs, and corporate restructurings. Pundits say communications history was made when EMBARQ re-emerged on the business scene with its new corporate name sometime in May 2006. A month later, when Sprint announced its merger with Nextel and revealed plans to separate its traditional local business into a standalone company, the stage was set for EMBARQ to officially begin a trailblazing journey.
In 2007, while it posted lower revenues, it is a company which cannot help but be swept by the winds of technological change. Despite the upheavals that are part and parcel of sustaining momentum in the highly competitive information and communications world, EMBARQ embodies one of the main themes in Charles Fine’s book: species evolve – that is, they change to meet new challenges – or die (Fine, 1999, p. 3).
Continuous evolution is something EMBARQ has managed to do the past years. “There’s always something new on the horizon,” like its channel program, which got off the ground when EMBARQ spun off in June 2006 from Sprint Nextel. “Rather than take a template from competitors, the company is taking its cues from an innovative service portfolio and feedback from its partners” (Seals, 2007).
Based on Charles Fine’s management theories using the biological standpoint, it can be seen that fast evolving technology is serving as EMBARQ’s “clockspeed accelerator.” The more complex the system or innovation being churned out, though, the higher the tendency to decelerate. On the other hand, the simpler the subsystems of the company’s innovation, the faster the development pace.
EMBARQ’s key decision-makers, notably Dan Hesse who was named chairperson and CEO in December 2004, and his successor Tom Gerke, may well personify geneticists who study past cycles not only to learn from mistakes made, but to set the direction for future product and service innovations and take hold of emerging opportunities aimed at putting the company in the forefront of the industry.
As Tara Seals wrote in her article, EMBARQing on the Channel” which pronounced a brand new era for the wire line carrier in terms of its revamp and repositioning of sales strategy in recent years, “Along the way, the company started to realize the need for value-added partners… and now the company is looking to bring in more diverse partners.” EMBARQ executives’ main thrust now is to grow its business – whether it is the landline local-phone service, which it has assumed from Sprint, or new innovations, like the new eGo cordless phone for home users that provides visual voice mail, news and information, as well as personal and local-area phone directories.
In much the same way Charles Fine explained it in his book, EMBARQ epitomizes the rationale behind internal development, niches and outsourcing. It clearly utilizes the supply chain design, the main topic of Clockspeed: Winning Industry Control in the Age of Temporary Advantage, as a functional catalyst in optimizing business strategy and evolution.
By leveraging opportunities pertaining to technology and product convergence, EMBARQ shows that instead of destiny and fate taking control of it, it can move fast to keep itself in the race or survival of the fittest. By coming out with revolutionary products recognized as firsts in the industry, such as a simplified high-speed Internet pricing that remains constant for as long as the customer has the service, EMBARQ shows that it is a truly evolving fruit fly with fast clockspeed. Rather than go extinct, it continually adopts strategic management techniques and creative collaboration.
EMBARQ also mirrors the company that knows what its core capabilities are, and it develops these core competencies to stay competitive. Key decision-makers proclaim, for instance, that data is the single most important product in its portfolio, and the plan is to accelerate this in the coming years as voice and business applications move to the data network. This despite the general view that voice still represents the lion’s share of revenue for most wireline carriers in the present age
On the core services side, agents are having the most success with business bundles. “A big part of maximizing the agent strategy is giving partners access to the entire EMBARQ service portfolio” (Seals, 2007). This is how the company hopes to gain profits.
Just as Charles Fine illustrated how competitive advantage is lost or gained by how well a company manages its dynamic web of relationships that run throughout its chain of suppliers, distributors, and alliance partners, EMB.ARQ shows that it recognizes its supply chain design as a strategic business tool or activity that will largely determine its future.
One will also be able to draw contrasts between the ideas of Charles Fine and organizations like EMBARQ. In Charles Fine’s thinking, leaders have the tendency to become bureaucratic and arrogant and fail to see the new wave of competition coming. The opposite has been shown by the key executives of EMBARQ, because they are keeping one alert eye on the future and the other eye on competition in the battle to get every customer within its reach. To ensure that there are no glitches as it rolls out new products, EMBARQ relies on engineering forces to help. Today, after numerous innovations, EMBARQ is operating at fast clockspeed, especially with its newfound autonomy following the 2005 merger between Sprint and Nextel.
As EMBARQ divulged plans to continue its long history of technical innovation to launch more fixed mobile convergence services, explore WIMAX and continue to upgrade its infrastructure to deliver more `firsts’ (Seals, 2007), it is proving that it can, indeed, operate at hyperfast clockspeed. The arrogant trait of a leader that Charles Fine mentioned, though, is something EMBARQ leaders may find hard to dissociate from, especially because the very nature of their business predisposes them to keep harping that what they offer, for instance, is a seamless EMBARQ experience that others may not match.
The possibility of bureaucratic and arrogant tendencies, though, as opined by Charles Fine, to thwart progress as they obstruct a clearer view of what is happening, like a slump in revenues, poses real danger. EMBARQ, through the years, may have found strength as corporate restructuring came about, but while it does have proprietary solutions and power, and has been able to bundle something that has caught on with the consuming public, what it may not readily realize is that power can shift, or it cannot always possess the edge or the market dominance.
EMBARQ CEO Dan Hesse, as pointed out in the company’s website, knew that he had to be aggressive and innovative to combat competition from various fronts. He acknowledged, early on, that competition keeps growing keener, as shown in an interview posted online by the Orlando Sentinel. “There is a lot of competition, both from wireless companies as well as voice-telephony competition from the cable companies. But we believe we will be able to turn it around over time and grow the business. The EMBARQ executive at the helm of a full-service company offering voice, data, Internet, wireless and entertainment also referred to Sprint Nextel – where it originated from – as a competitor for wireless service, though they are suppliers to each other for other products and services (Cobbs, 2006).
The company knows where it is better off outsourcing to someone else in the supply chain, for quality product and profit considerations. As it moves forward, it finds that it needs to strengthen its equipment portfolio through exclusive interrelationships with other companies. In fact, EMBARQ’s top executives show signs of knowing who is dependent on which critical technologies (what Charles Fine referred to as the essential technology chain) and who is providing certain capabilities.
In a way, the company’s trailblazers seem to know that the firm’s survival is hinged on paying close attention to the supply chain dynamics, requiring them to implement changes as the need arises. Moreover, as a ranking executive expressed, “As a result of the spin-off, we’re making sure that the best processes and support are being enhanced to make it easier to do business with us” (Seals, 2007). This, in turn, further drives the company to evolve more quickly, in `fast clockspeed’ mode.
EMBARQ may be a fledgling company (with a comprehensive range of flexible and integrated services designed to help businesses of all sizes be more productive and communicate with their customers; its service portfolio includes local voice and data services, long distance, Business Class High Speed Internet, wireless, satellite TV from DIRECTV®, enhanced data network services, voice and data communication equipment and managed network services) but the lessons it has drawn from its past affiliations or roots serve it well today, especially as it claws its way to the top.
Through simultaneous product releases, process finetuning, alliances and partnerships, and organizational alignment, EMBARQ embodies the fast clockspeed concept conveyed by Charles Fine. The company’s resilience or quick turnaround, even in times of nosediving revenues, may signal deceleration, but the relentless energy and breakneck speed with which it innovates and allows itself to evolve, as a whole, shows that rather than ending up being annihilated, it can devise ways to regain business momentum and charge ahead to reclaim its piece of the action in the highly competitive business scene.
References
- Cobbs, C. (2006). Talking with Dan Hesse, CEO of Embarq Corp. Orlando Sentinel.
- Retrieved April 28, 2008, from http://www.orlandosentinel.com/business/orl-talking3006may30,0,3751621.story?coll=orl-business-headlines
- Fine, C. (2005). Are you modular or integral? Be sure your supply chain knows Retrieved April 27, 2008, from http://www.strategy-business.com/press/16635507/05205
- Fine, C. (n.d.). Clockspeedbased strategies for supply chain design Retrieved April 27, 2008, from Product Development and Management Association website: http://www.pdma.org/visions/oct00/cover1.html
- Fine, C. (1999). Clockspeed : Winning industry control in the age of temporary advantage
- Retrieved April 25, 2008, from http://www.amazon.com/Clockspeed-Winning-Industry-Temporary-Advantage/dp/0738201537
- Seals, T. (2007). EMBARQing on the channel. Retrieved April 28, from http://www.phoneplusmag.com/articles/07augshop01.html
