If an organization wants to lower transportation costs, for instance, then it needs to recognize that certain elements are beyond its control, such as the price of gas. "You couldn't really measure transportation costs per se, because you can't control the price of gas." In this case, Taylor suggested that an organization measure things that can be controlled, such as more effective routes, delivery consolidations, and manufacturing strategies and locations.
The key is to focus on one or two strategic objectives that will have a high payoff for the organization. This involves evaluating the competitive landscape and identifying elements of the business that can be changed in order to move/stay ahead of competitors.
A U.S.-based manufacturing company, for example, discovered one of its competitors was making a similar product for significantly less by manufacturing it overseas, said Taylor. Moving operations abroad was not feasible; and at the same time, the manufacturing company knew it could not lower its production costs enough to compete with its overseas counterparts. Faced with these challenges, the company decided to reinvent its business approach. "In this case," said Taylor, "the company was operating in a commodity type market, and it ended up getting out of the commodity business and getting into a more customized business."
The manufacturing company changed its business approach, and as a result, profitability soared dramatically. Taylor said, "If this company had just focused on lowering costs and prices to try and match its competitors, not only would it have failed, but it would have missed an opportunity to reinvent the business."
About the Author: Stephanie Carlin is a freelance writer based in Oshkosh, Wisc.
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