Better, Simpler Strategy

13

When Big Is Beautiful

Whenever I examine productivity data, I can scarcely believe the dramatic differences between companies in the same industry.* On average, a US company at the 90th percentile of productivity creates twice as much output as a company at the 10th percentile—with identical inputs!1 The dispersion is even more pronounced in China and in India, where we often see 90–10 ratios of 5:1.2 Nor are these fleeting differences. Gaps in productivity tend to persist over long periods.3

Advances in productivity lower both cost and willingness-to-sell (WTS) at the same time (figure 13-1). Recall that value sticks are drawn for one unit of a specific product or service. If a company becomes more efficient, it procures fewer inputs, thus ...