Rapid innovation in the face of change can be one critical indicator of companies that dominate and become market leaders.
Markets change at lightning speed. Companies today must learn to respond quickly. Those that develop a rapid response mindset will have an edge, and are more likely to be very successful.
One way of developing a rapid response approach is to closely monitor local areas or regions to spot trends before others do.
Zara , a Spanish fashion company, and Korean electronics giant Samsung both rely on regional strategies to increase the pace at which they can respond to changes in their markets – and thereby gain advantage.
Zara employs a “home region” strategy to closely watch customer’s fashion tastes during a given season. Most fashion companies’ design, manufacturing, and distribution operations are located at great distances – which requires them to commit to fashions, styles, and colors long before the actual season begins and trends emerge.
Zara’s design and manufacturing operations are close to their hub in western Spain, enabling them to design, produce, and transport fashions to European markets within two to four weeks. This rapid system allows Zara to produce what is selling during a fashion season – meaning fewer markdowns and greater profitability.
This home-base strategy may become less effective as Zara expands into more global markets, and as currency and trade issues affect its production costs compared to Asian manufacturers. The single region approach is most favorable for industries in which the economics of concentration (shorter time and distance) outweigh the economics of dispersion (cheaper overseas manufacturing).
Samsung uses a home base hub approach by concentrating most R&D and production at one site in South Korea. This dual-capability enables rapid interaction between R&D and production – resulting in faster development of new memory chips.
Because transportation expenses are low relative to the chips’ cost, this geographic concentration makes sense. Samsung further leverages its vast worldwide sales distribution systems to rapidly deploy the new products into global markets.
Nowhere is the effect of rapid response and innovative business development more apparent than on the Internet.
Epinions, an early 2nd generation Internet start up (which still exists today as a service of shopping.com) assembled its core management team, received $8 million in venture capital, wrote a marketing plan, rented offices, hired 31 employees, and launched its shopping information website – all within 12 weeks.
In the past, it typically took a year or more for a company to get past conception and receive its first round of funding. If everything went well, it could go public in five to seven years.
In today’s accelerated markets, if you want to be a market leader – especially with an online-based business – you have a significantly shorter window within which to make your move. There are also a number of new entities that support this shortened timeframe – including venture capital funds and business consultancies with significant Internet focus and presence – to help entrepreneurs get their e-businesses up and running faster.
Bottom line for leaders
Staying ahead of markets and competition is harder than ever. Whether you’re a start up or an established business, developing the ability to adapt to changing environments and rapidly respond to customers and markets is critical to market leadership and long-term profitability.
with Lindsay Haskell*
*Lindsay Haskell is a student at Great Valley High School and contributed the concept and research for this article as part of a summer internship with Envisian.
Re-posted from our archive. First posted in 2008.