Economies of speed is the economic effect that can bring economic benefits by speeding up the business and its management.
Specifically, it will increase the speed of product development, production, and sales, speed up information acquisition, work speed, product development speed, and product turnover speed, and companies will enjoy the benefits of increasing effectiveness and efficiency. I will.
For companies, by quickly developing their businesses and operations, it is possible to quickly identify top-selling products and dead-selling products, and to secure profits by quickly adding top-selling products to the field.
- Advantage of starting lineup
- Increased investment efficiency such as inventory turnover and improved return on investment
- Reduction of unsold items and waste loss
- Easy product development / sales test
- Smooth product switching
- Advantage of latecomers
- Precisely constructed information system and management mechanism
- Identify where to increase speed
Economic benefits of speed
Advantage of starting lineup
The advantage of the starting lineup is the advantage obtained by building the economic efficiency of speed and the advantage in time-based competition, and includes the following.
- You can build a barrier to entry by being known to consumers
- It becomes easier to gain an advantage due to the experience curve effect
- It will be easier to reflect the opinions of consumers in products / products
- You can anticipate proper positioning
- Easy to determine market standards
- Switching costs can be incurred by becoming a market standard
- Resources can be preempted
- We can sell products and services ahead of other companies
The effect is that the speed itself benefits the customer,
For example, improving the speed at which products purchased through online shopping can be delivered faster leads to improved customer satisfaction. In addition, if you can execute and succeed in a management strategy that expands the scale in an electric shock such as Blitz scaling , you can gain a first-mover advantage by bringing the product to market earlier than other companies.
Increased investment efficiency such as inventory turnover and improved return on investment
It is also possible to improve the profitability of companies, and even if the inventory of top-selling products at the sales floor is low, it is possible to improve the profit margin and reduce opportunity loss by increasing the rotation speed of the products. ..
In addition, it is possible to quickly identify products that sell and products that are deadly, reducing unnecessary costs and investment. Convenience stores are a typical example of this mechanism, which allows you to reduce inventory without reducing sales if you have information about top-selling products.
Reduction of unsold items and waste loss
The effect of reducing losses by increasing the turnover rate is to shorten the lead time from production to sales, and reduce unsold loss and opportunity loss.
By increasing the speed from ordering to production, delivery, and sales, unsold losses can be reduced, and by creating a mechanism to rotate products frequently, this loss can be reduced.
It is the reduction of unsold goods and waste loss by improving the turnover rate of products in the ordering process and the process from production to sales. In apparel businesses like UNIQLO and in the sale of fresh foods in supermarkets, this loss reduction has a great effect .
Easy product development / sales test
In a rapidly changing market environment, it is difficult to aim in advance and make a hit product, and it is necessary to think that the hit product was successful from the experiment. If we can build a mechanism that can reduce losses, it will have the effect of reducing experimental costs , and it will be possible to easily carry out product development and sales tests. Currently, IT can be used to accurately grasp customer needs and actual sales conditions. You can also quickly perform market research as you bring your products to market. Therefore, it is possible to develop top-selling products with a high success angle.
Smooth product switching
The final advantage is that product switching is smooth. The price of a new product drops because the old product is left behind. If the rotation speed of products can be increased by reducing the distribution inventory, it will be easier to switch products, and when the product life cycle is short, the reduction of distribution inventory due to high rotation will be even more important. This is because increasing the rotation speed causes a loss of opportunity in the early stages due to the slow rotation speed, and when you are ready, you may have already suffered a large loss of opportunity.
Economic disadvantages of speed
Advantage of latecomers
While starting pitchers are generally considered to be advantageous, latecomers may be advantageous because they can avoid risks, which are as follows.
- Uncertainty in demand can be identified
- Saving promotion costs
- Imitation can save R & D costs
- Easy to respond to changes in customers
- Can handle technical uncertainties
This is becoming more common in the business world, especially in this era of IT development, where easy-to-copy programs are becoming more commonplace to win supremacy in other countries. These products are just a few improvements to the original products.
Precisely constructed information system and management mechanism
The economy of speed is made possible by increasing the speed of businesses and information systems, which is often underpinned by well-constructed management systems.
For example, in order to quickly deliver products ordered through online shopping to customers, it is necessary to process ordering information using an information system and deliver products with a high act rate using a distribution network.
Identify where to increase speed
In order to increase the speed of business and operations, it is necessary to discover and analyze the points to increase the speed. For example, in the case of McDonald’s, it is “the time from receiving an order to delivering it.” These areas are often bottlenecks for related companies, so discover these bottlenecks to enjoy the economic benefits of speed.
Example of representative company of speed economy
Since 2001, McDonald’s Japan has reduced food loss and improved customer satisfaction by introducing a mechanism that can provide one-order hamburgers in about 50 seconds.
At the same time, this not only caused food waste to become a phenomenon, but also reduced CO2 emissions.
The key to a successful speed economy
The key to enjoying the benefits of the speed economy, or the review of the parts of your product or service that can benefit from the speed economy, can take into account the following:
- What speed do customers want for their products and services?
- Are there any parts of your product or service that are clearly hampering speed?
- Do you quickly confirm your needs when developing and selling new products?
- Is there a system already in place to enjoy the economic benefits of speed?