How to become a Fast Cycle Time Competitor

"Customers use our time up until their decision to buy, after that we are using their time. Therefore, we must deliver immediately. The key, then, is the shortening of the elapsed interval between the customer's identified need and his, her or its fulfillment."

The ongoing ability to deliver a quality product or service quicker than the competition yields a sustainable competitive advantage. At the expense of the U.S. Postal Service, Federal Express created an entire business based on this principle. Citibank has become the leader in home mortgage originations in part because it offers loan commitments within fifteen minutes! Compaq Computer established itself as more than a quality IBM clone manufacturer by bringing its 386 and 486 machines to market before IBM. The bottom line is that when customers decide they want to buy, the first supplier who can fill that need with a quality product or service will flourish. These companies operate in Fast Cycle Time (FCT).

The benefits for FCT competitors are substantial. The first entrant into a market typically dominates that market in both share and profit margins. Pricing pressure does not exist when there is no competition. FCT leaders reinforce their position because they set the standards which others must follow. They secure the prime distribution channels which create additional entry barriers for the competition.

FCT is the ongoing ability to identify, satisfy and be paid for meeting customer needs faster than anyone else. There are several key words in this definition. The first one is ongoing. Although useful, single shot cycle time reductions do not provide a sustainable competitive advantage. In a competitive environment, the race is never over. Competitors who improve continuously will pass those who pause to relax. The next key word is identify. FCT is the responsibility of all organization functions from the start of the business cycle through the end. Some incorrectly consider cycle time an exclusively manufacturing or engineering issue. The firm that identifies the customer's need first, has a head start in filling that need. Satisfy means that one cannot sacrifice quality for time. The old rule was that if you required a product or service quickly, it would cost more and the quality couldn't be guaranteed. That thinking is dead. World-class competitors such as Toyota have clearly demonstrated that speed does not have to sacrifice quality or cost. Paid refers to the attention FCT companies place on completing the business cycle. For example, while Toyota was able to reduce its manufacturing cycle time to 2 days, it still took 17 days to sell and deliver its cars. FCT companies view their organization as a value delivery system. As a system, the slowest sub-cycle limits the overall system's total cycle time. Meeting customer needs declares that products or services which do not meet customer needs are not acceptable. And last, faster than anyone else reflects the reality of increasing competition. If there is a foreign or domestic competitor who is faster, it is only a matter of time before they will dominate that market. Detroit and the semiconductor industry have both learned the hard lesson of ignoring international competition.

FCT is a systemic strategy. FCT leaders structure and manage the entire organization as a value delivery system focused on adding value for their customers. This paper defines the six key steps to becoming a FCT competitor and outlines how to implement them:

1. Understand what your end customer(s) regard as added value and reflect that in every job and level within the organization.

2. Focus every organization element on the work which adds value to the end customer(s).

3. Re-design your organization so that it is flat and multi-functional team-based with blurred boundaries: inside and out.

6. Create an environment which stimulates and rewards continuous learning and action.

Understand what your end customer(s) regard as added value and reflect that in every job and level within the organization.

In a nutshell, the FCT strategy focuses the entire organization on work which adds value to the end customer while concurrently trying to eliminate anything that doesn't. In order to do this, all employees must know who the end customer(s) are and what is added value to them.

Only people who pay for the product or service are end customers. There may be more than one end customer. For example consumer products, have several end customers along the distribution chain starting with the distributor and ending at the consumer. Value added such as packaging for the distributor may not be value added for the consumer. There are no hard and fast limits beyond common sense for the number of end customers one might have. The point is to understand what is value added for each customer you serve.

The end customer view contrasts with the notion of internal customers popularized by quality programs. The internal customer concept suggests that each job has an upstream supplier and a downstream customer. For example, manufacturing is the customer of engineering's designs. While this approach improves understanding of mutual dependencies, calling internal groups customers can cause people to incorrectly equate internal definitions of value added with those of the end customer. The difference is critical: end customers generate revenue while internal customers generate cost. For example, internal customers create 99% of the paperwork in organizations. Paperwork rarely adds value to end customers. Using the end customer's definition of value added exposes non-value added time and activities. Motorola, for example, no longer encourages the internal customer perspective.

After defining the end customer(s), one has to define what is value added to them. A rule of thumb for determining value added is whether or not the end customer(s) is willing to pay for the product, service or feature. If they are not willing to pay for it, then it is probably not value added. The information to make this determination comes from one place: the customer.

Traditionally, we've relied on sales and marketing to channel the customer's definition of value added into the organization. While efficient in the use of people, this approach
limits the direct contact other functions have with the customer. It is increasingly evident that expanding the breadth of organization contact with the end customer sharpens all employees understanding of what is value added as well as their motivation to deliver it.

For example, a leading manufacturer of electronic test equipment conducted a focus group in which customers compared their equipment to a competitor's. Invited to the focus group were several young engineers from the development team. Standing behind a one-way mirror, the engineers saw that most of the customers were attracted to the engineer's product before it was turned on. Once turned on, the customers drifted en masse to the competitor's product. Why? Simply because the display of the competitor's product was easier to read. Since the display readability was not an issue for the engineer's young eyes, they had dismissed customer complaints. Seeing their competitor's "inferior" product surrounded by customers quickly changed their mind.

In another example, it was a Dupont technicians' visit to Reebok that generated a competitive response to Nike's "air cushion" heel. The technicians were there for another purpose yet when they heard of this problem they devised a solution made from implanted rubber tubes; of course made by Dupont. The point is making customer needs visible at every job pairs a customer need with a potential resource to meet that need quickly.

While end customer(s) are the ultimate source of defining what is or is not value added, top management is responsible for defining their organization's value added focus and allocating resources accordingly. They do this by defining a value proposition for their organization. The value proposition is unique to each organization and defines that organization's value adding strategy. For example, Domino's Pizza focuses on good pizza delivered hot to your door. Sun Microsystems adds value as a computer workstation manufacturer by designing "open" systems while incorporating the performance of proprietary technologies. Each of these companies competitor's have chosen their own value propositions within the same market. For example, Roundtable Pizza offers good pizza in a family dinning atmosphere. The value proposition focuses behavior and resources.

SAS Airlines provides a good example of how a clear value proposition guides behavior. Jan Carlzon, President of SAS, led that company's revival by defining SAS' value proposition as being the airline of the business traveler. SAS tuned its schedule, route structure and service to the needs of the business traveler. Since there are few business travelers on the weekends, SAS limits flights on Saturday and Sunday. During the initial implementation of this value proposition, employees frequently suggested ways to increase weekend aircraft utilization. Since aircraft utilization is a traditional measure of performance, this behavior was easily understandable. Under the new value proposition, however, weekend flights did not add value to the business traveler. Carlzon rejected these ideas and used weekends for maintenance and training to improve service during the week. A good value proposition clarifies what isn't value added as well as what is.

As simple as this may appear, many organization's value proposition is not clearly stated. Management assumes the value proposition is obvious and understood by all. Therefore, they concentrate on managing operations. Each element of the organization may have their own operating definition of the value proposition and act accordingly. The net result is that value adding efforts do not build on or actually subvert one another. Ultimately, the customer becomes confused.

Consider the arrows below. When an organization is not aligned around it's value proposition, people may be working hard but the net force of their collective efforts is significantly less than one aligned to its value proposition. Alignment is more than a function of common understanding. Structural elements such as reward systems, policies, cultural norms and organization design must be in alignment as well.

To foster alignment, management should continuously communicate and test if the value proposition is incorporated into each job. Just like management, each employee has their own mental model of where they should add value for the customer. Without ongoing education efforts, employees may use outdated or conflicting models. Education efforts minimally include exposing all employees to the corporate mission and values on a regular basis. Additional methods include:

1. One-way briefings such as corporate video newscasts, All Hands meetings, annual reports and internal newsletters.

2. Staff meetings where senior managers explicitly employ the value proposition as a criteria for decisions.

3. Special meetings to describe and test the value proposition with key constituencies including project reviews, new employee orientation, buzz groups, brown bag lunches, etc.

4. Company symbols and give-aways such as desk accessories, t-shirts, coffee cups, etc.

Focus the entire organization on that work which adds value to the end customer(s).

There are two types of work: value added and non-value added. Value added work is work the customer is willing to pay for. For example, painting a car a specific color is value added work. Arranging and delivering flowers is value added. Designing a custom circuit and fabricating a chip is value added. Non-value added work is work that the customer is not willing to pay for even though the production or service delivery process may require it. For example, testing a car's paint job for durability is not something a customer is willing to pay for. Surprised? Many might argue that not testing the paint could cause it to fade quickly, thus upsetting the customer. No question about that, but consider this. What would be your reaction to a car's window sticker if you saw below the $699 for optional leather seats a $45 charge for paint testing?

Non-value added practices such as testing are required because we do not fully trust the process being tested. This may be because the process is immature or maybe due to poor practices. In either case, testing is a patch until the process is made stable. In the language of quality experts, testing quality into the product is inferior to designing it in. While one may argue when a process is stable enough to remove testing, the goal of doing so should always be present.

The only way to identify which work adds value is to study the organization's value delivery system. To do this, first construct a high level map which provides a macro overview of the entire organization's value delivery system. Figure 2 is a generic example of such a map.

By limiting the amount of detail, it is easier to identify which are the most important value adding processes. For some, it may be the new product development process while for others it could be manufacturing or distribution. Once identified, pick one of the critical processes and map that process in greater detail. Do this using a multi-functional process map as illustrated in Figure 3. The process map should minimally identify the critical players, key tasks and the time required to complete them. It is also useful to specify the inputs and outputs of critical steps. The map should accurately reflect how the process works today. During the mapping, there is a strong urge to incorporate how the process ought to look or be changed. It's important to resist defer these discussions until the map is completed. Until there is agreement on how the work flows today such discussions can become irrelevant.

Getting such agreement is not necessarily easy. Each person has their mental model of how the delivery system works. These models are defined by personal experience which is different for each individual. Senior management's models are frequently built on past experience which may no longer be valid. For example, a high technology company wanted to reduce new product development time and therefore mapped the entire development process. Management was shocked when they discovered the product definition phase often took as long as twelve months. Their mental model was based on experience gained when the company was much smaller and products were simpler. They had lost contact with the impact of many small process changes made over time.

The agreement need not cover each and every step. Rather, strive for general agreement that the map accurately reflects the critical process steps. Once this is achieved, review the map and identify value added and non value added steps. Test each non-value added task to eliminate or compress it. First efforts typically result in a "shrink" of the current process. A shrink has the same basic structure as the current process with many non-value activities removed. Shrinks will often yield a 50% or greater cycle time improvement. But one should not stop here. Shrinks are the result of picking the low hanging fruit. These are efficiency improvements which do not fundamentally re-structure the value delivery process or yield a substantial competitive advantage. Major breakthroughs come from insights which fundamentally re-structure the core elements of the value delivery process. Clearly understanding the current delivery process combined with seriously questioning and entertaining creative alternatives generates such insights.

To become a FCT competitor one must understand the value delivery process sufficiently to define and focus everyone's attention on value added work. It is curious that American business leaders love to invoke sports metaphors as competitive models yet rarely include the attention sports professionals pay towards process analysis and improvement. Specifically, a world champion such as the San Francisco 49ers spend a hundred hours off the field for every hour played. They use non-game time to analyze films about their value delivery process or for training. Yet in an informal survey I conducted during a series of California Institute of Technology FCT seminars, I've never found more than two executives per class who spend more than a day a month examining their organization's work processes. One cannot expect dramatic breakthroughs without putting in more time.

Re-design your organization so that it is flat and multi-functional team-based with blurred boundaries: inside and out.

By definition, large, hierarchical organizations can never be quick. Every time an approval is required, there is a delay as the request is communicated, considered and responded to. The further the approval level is from the point of origination, the greater the time delay.

When functionally organized, organizations divide customer problems into pieces and channel each piece to the appropriate functional group. Inevitably, some needs fall in the cracks between functional specialties while others are miscast. In any event, internal functions never experience the complete problem or its ramifications as the customer does. Instead, all they see and attempt to remedy is a sub-set of the problem.

A further difficulty with this process is how solutions are defined. For the most part, solutions are internally defined within each function. To wit, engineering has its own design standards just as manufacturing has its quality standards. These standards are isolated from each other and most importantly, the customer. The customer is concerned about the total product or service while the functional units are primarily focused on their limited responsibilities. The functional paradigm practically ignores the inherent interdependence between functions. The responsibility for cross-functional integration is usually shouldered by a single individual – the boss.

In simpler times, the boss might have been able to make all the integration choices wisely. Today's complex technologies and business conditions contain too many unknowns to expect any one person know all the answers. The functional organization creates expectations that the boss should provide the answer when in fact, he or she may be the least qualified to do so.

Task forces and other cross-functional vehicles are used to mitigate these problems but the underlying functional structure constrains their usefulness. When caught between conflicting demands, a person will follow the path of least resistance. "Who writes your performance review?" defines the path of least resistance. Is it any wonder functional organizations generate engineering designs which manufacturing cannot mass produce.

Hewlett Packard is a classic case of a company whose business grew more complex than its organization could support. Renowned for its divisional structure, H-P grew from exclusively building stand-alone, test equipment to also being a major computer systems supplier. The level of complexity and interdependence required for building large computer systems dwarfs that required for stand-alone test equipment. While the division
structure worked well for test equipment, it has not for computers. Accordingly, management has altered the structure several times in the last ten years. Each adjustment attempts to further integrate specialities such as hardware, operating systems, peripherals, software, manufacturing, marketing, etc.

A new alternative is the multi-functional, team-based organization. The most visible element is the team itself. Composed of people from different functional disciplines, the teams have responsibility for the core value-added work processes of the business. This means they do not operate as a coordinating body on top of the existing functional organization. The delivery of the organization's value proposition is the focus of the team's work and is resourced accordingly. Teams are typically segmented by major product or market groupings. They have sub-teams as well as individual contributors supporting them.

Figure 4 depicts the multi-functional team. The team includes all within the box. The core group includes representatives from each function and manages the team. Minimally teams include product development, marketing and operations and may include finance, quality, and human resources.

In contrast to the team itself, the team-based organization resists easy depiction. The supporting cast and connections to other teams are in constant flux. The teams are nodes in an organic network which continually adjusts itself in response to new customer demands. The functions role is to support the teams in the value-adding processes as defined by the teams.

Business teams are different than a classical matrix organization primarily in the breadth and scope of their responsibility. Theoretically, a matrix divides the power equally between project and functional bosses. In practice, the functional bosses wield more than 50% of the power. Because the core value adding process is within the team, the team-based organization keeps at least 51% of the power in the team. Overly simplified, the teams become the line organization and the functions become staff.

To work effectively, senior management must ensure clear goals and chartered accountabilities are part of the team's design. This is management's control mechanism. Within these defined parameters, teams have the power to take whatever actions are necessary to serve customers. Since the team contains the functional expertise required, there are few cracks for issues to fall into.

Placing the core value delivery process into teams requires a fundamental shift in the organization's power structure. If management allows the traditional functional dominance to continue, employees will accurately perceive the teams as nice but not essential. The success of a multi-functional, team-based organization depends on creating a new organization architecture. The worst thing one could do would be to throw a group of people from engineering, operations, and marketing together and call them a multi-functional team. They would find themselves struggling to define their role as they simultaneously tried to shift the organization's functional mindset about their role. Well-designed, team-based structures define the roles and responsibilities for those off the team as well as those on the team. Issues to be considered in the architecture include:

Effective implementation requires a carefully planned transition with mechanisms to identify and rapidly address problems as they occur. Regardless of the amount of planning, unexpected issues will arise. Resolving these issues should involve the team in conjunction with the re-design's objectives.

Implementing the newly defined architecture is senior management's responsibility. They must demonstrate through their behavior the importance of the teams. During implementation, the reality of the power shift becomes palatable as teams struggle to take control while some functional elements inevitably resist. Old habits will continue to dominate if senior management fails to publicly support the teams during the transition.

In the same way that multi-functional teams blur boundaries within the organization, FCT competitors attempt to do the same thing between suppliers and customers. FCT companies consider suppliers and customers as partners in the value delivery effort. The fewer boundaries which exist in space or time, the more effective the value delivery process can be.

For example, Quantum Corporation, a leading maker of winchester disk drives, designs application specific integrated circuits (ASIC) which a chip vendor manufactures. Quantum now includes FCT in its vendor selection criteria. The net result is that a recent supplier placed two engineers plus their own engineering workstations at Quantum to speed the design of an ASIC. The cost to Quantum – nothing.

At the other end of the spectrum, customers are being included in the design phase of the value delivery process. Conner Peripherals, another disk drive manufacturer, represents the extreme with their philosophy of "sell, design, build". Connor claims to begin a product development effort only after they have a customer commitment for that product. Their senior technologist spends much of his time on the road meeting and selling customers.

The message is clear – to become fast, re-design your organization for speed. Just as one should not try to turn an oil tanker into a ski boat, one should not try to speed up a large,
hierarchical organization. Overcoming the inherent structural limitations of centralized control and specialization is not possible. Flat, multi-functional, team-based organizations provide the architecture that enables locally informed, quick decision making.

Process improvements provide tremendous leverage. A single process improvement ripples across the entire service delivery or production process. Consider the competitive advantage Frito-Lay has achieved through its cutting edge use of hand-held computers. Every day, 10,000 route salespeople feed supermarket sales information into corporate, area and division offices.[1] Frito-Lay uses this information to manage inventories and provide early warning of any competitive attack. Likewise, Texas Instruments has employed Design for Manufacturability (DFM) in its engineering design process with significant success. Assembly time was reduced 85%, part count by 75%, assembly steps by 78% and metal fabrication by 71%. These efforts treat organization process development as a competitive weapon.

Why don't more organizations pay attention to process? Three reasons stand out. First, because significant process improvements take time to design and implement; instant results are rare. In fact, while the process is being re-designed and implemented, productivity often declines. For example, when a group of manufacturing employees attends training, they are not producing units. In addition, it may take them time to learn the new process. This "worse before better" performance pattern conflicts with the short term mentality of American business. Management often neglects underlying process problems while attending to symptoms.

The second reason is embodied in the old management axiom that what you measure is what people pay attention to. The vast majority of organization performance measures are end results. While these measures tell us what we've accomplished, they provide little insight into how we did it. Since we don't measure the process itself, people don't pay much attention to improving it.

The third reason builds off the second. We focus whatever measures we do use on those items which are easiest to measure. The dilemma created is similar to the drunk who only looks for his keys under the lamp post because that is where the light shines. Most organizations limit their process measures to the tangible, linear work processes such as those found in manufacturing. These processes are much easier to measure precisely than the non-linear work process found in design engineering, marketing or sales. Non-linear work process measures are not as precise, nor do they need be. What is most important is to develop measures which aid cycle time improvement efforts. Relative measures which compare current cycle time to past are sufficient.

Process improvement begins with allocating time to it in conjunction with the establishment of performance measures. Simple as this sounds, focusing on the "what" is so familiar that it takes effort to shift attention to the "how." Making process improvement routine requires improvement goals, dedicated time, appropriate rewards, forums for process improvement work and skills to do it. This starts with top management since people take their cues from them.

An excellent starting point for the top team is to develop the earlier described macro map (Figure 1) of the value delivery system. For each critical process, select a process champion from the top team. The process champion is responsible for ensuring the continuous improvement of that process. This includes developing improvement goals and performance measures. Incorporating these goals into each executive's personal objectives and performance review, makes process improvement very real.

Process champions do not work alone. They must involve those intimately familiar with the process in the diagnostic and improvement effort. A favorite tactic uses this enlarged group to create two additional maps. The first is the detailed map of the targeted process (Figure 2) and the second proposes a new process architecture. The new architecture map becomes the foundation of the process improvement plan.

The mapping process creates one forum for process improvement discussions. Some firms find it useful to continue to segregate process improvement work from the mainstream in order to gain momentum. Others devote time to process improvement within their existing meetings. The point is that one must create, communicate and use clear forums for process discussions.

There is not space in this article to detail the numerous skills and process development methodologies. Experience shows that using a professional process facilitator for the map building jump starts people's process thinking. People know quite a bit about process development but devote so little time to it that they get rusty. Additionally, there are numerous seminars which detail specific process improvement processes such as Quality Function Deployment, Designing for Manufacturability and Total Quality Management.

Initial FCT goals should seek a minimum 50% improvement in cycle time. Setting goals lower than this does not achieve the cycle time reduction available or required to compete. Merely working harder within the existing process can reduce cycle time by 20-30%. When management sets a more aggressive goal, it signals the organization that everyone must consider new ways of working in order to achieve the goal. This in turn stimulates learning.

In the past, cycle time reductions were confined to manufacturing and considered incremental cost or efficiency improvements rather than a competitive strategy. White collar or knowledge work, has received little attention yet this is where the greatest leverage is. For example, the average design cycle of U.S. auto makers is six years while production cycle time is less than a day. Until international competition in the auto industry made it clear that U.S. development cycles were double the Japanese, managers didn't realize that breakthroughs in excess of 50-200% were achievable. The reality is such improvements are now the minimum required merely to catch up!

When communicating stretch goals, expect people to respond with skepticism. Their response is entirely rational since they are being asked to make dramatic improvements without knowing exactly how they'll do it. For this reason, it's absolutely essential that management have a strong FCT improvement vision which they agree to. Hewlett Packard's CEO John Young asked all employees to cut in half the time it takes to break even on a new product. This vision provides a picture of the future to sustain people along the hard journey of getting there. Since the vision is only as effective as management's belief and enthusiasm in it, people will test it for holes as soon as it's communicated.

Defining the beginning and end of the cycle and sub-cycles is the first step for developing measures. This can be more difficult than it appears since defining when a customer's need first exists is not easy or precise. Recognize that beginning and end points are inherently arbitrary choices. One can always mount a rational argument for other points. Select points that make sense for your industry and organization. If there are any sub-cycles that you will be focusing on such as new product development, define that cycle as well. Once completed, establish the organization's initial FCT goal by benchmarking total current cycle time against your best competitor worldwide. Recognize that their current capability is the minimum target you can set since they won't be standing still. Only if the gap between you and them is enormous should an interim goal be selected.

Hewlett Packard starts the new product development cycle when applicable technology exists within H-P Labs. The end of the cycle is when the profits from the product equal the total investment in the product. They call this break even time. The primary reason for using break even time is to discourage quick introduction of products which fail to meet customer's needs. Quantum begins their new product development cycle with the first approved specification and ends at the passage of a process maturity test. Pick what works for your business.

Defining the cycle and sub-cycles enables internal comparison to past efforts and external comparison to competitors. For example, pick the last three products in a given area and see how long they took to develop. In doing so, it's quite easy to examine what contributed to FCT and what impeded it. This can also occur with key components required to build those products. Quantum has analyzed the time it has taken them to develop firmware on every disk drive they've made. The beauty of this approach is that it quickly moves FCT conversation to the operating level and stimulates improvement discussions.

Distribute and display cycle time measures. Limiting knowledge of results effectively constrains the set of resources that might initiate improvements. Research demonstrates that major breakthroughs frequently result from people who are less familiar with the process. As functions and teams develop their own FCT goals, display these. Graphics are far superior to tables and words.

One cannot understate the importance of aggressive FCT goals and publicly displayed measurements. Perhaps a colleague of mine describes this best using what he calls Management's Apparent Interest Index. Employees throughout an organization take action based on what they believe interests management. If management frequently discusses FCT, sets clear goals and consistently updates public measures, employees will recognize and act on management's attention. Without these factors, management's apparent interest will not be visible.

Create an environment which stimulates and rewards continuous learning and action.

"It's not what you don't know that hurts you, it's what you know that just ain't so."

Increasing the rate of organizational learning is the heart of FCT competitive strategy. As a relatively new area, organizational learning deserves special attention. This is particularly true for knowledge work since its output is nothing more than structured ideas. Engineers, marketing managers, and designers transform ideas and data into knowledge which others then reproduce or use. Consider the following chart. For the moment, assume that in any industry, a firm's stock of applied knowledge is a relative measure of their ability to compete. Firm A currently has a larger stock of applied knowledge than Firm B, but it learns at a slower rate. Although B's knowledge stock is lower than A's it quickly catches up, passes A and continues to extend its stock of applied knowledge. One might argue that this is exactly what Japan did in consumer electronics, semiconductors and automobiles.

To become a FCT competitor, it is essential that senior management embrace organizational learning as a strategic objective. The executive's job is to define a strategy and system architecture which increases the speed of learning throughout the firm.

Organizational learning is the creation of knowledge that is accessible and used throughout the entire organization to accomplish its mission. One creates knowledge by transforming raw data to answer the question "so what?" Creating knowledge is necessary but not sufficient. Learning is complete only when others use the created knowledge. Knowing what caused a problem is useful only when someone takes action to prevent its reoccurrence. Furthermore, when new knowledge is put into action, it stimulates additional learning.

There are two critical differences between organizational and individual learning. First, organizations have a collective purpose. To be useful, learning in an organization must be in line with that purpose. Second, organizations are social systems. While individual learning can be entirely personal, organizational learning requires that employees at large have access to the learning process and understand the new knowledge created.

Learning in public presents major dilemmas. Consider the following. Organizations reward competence which drives people to speak out when they know the right answer. By definition learning is the process of gaining competence. If the behavioral norms of our organizations reward these people who demonstrate competence, it would be wise to be quiet if one didn't know something. If people cannot be public about what they don't know, how can we expect them to learn? The logic of this model is as frightening as it is clear. FCT organizations and leaders begin by rewarding the right questions as much as they do the right answer.

A further dilemma is the knowledge we have gained to date blocks the path to organizational learning. These established mental models are deeply entrenched and act as walls: they support what we are doing today and they act as barriers to thinking and doing differently. The older our organization is, the more we must "unlearn" in order to learn. The process of learning requires letting go of existing beliefs about current organization practices, technologies and existing power relationships.

The first wall to destroy is the belief that learning is not work. Shoshana Zuboff describes this new order best:

Learning is no longer a separate activity that occurs either before one enters the work-place or in remote classroom settings. Nor is it an activity preserved for a managerial group. The behaviors that define learning and the behaviors that define productivity are one and the same. Learning is not something that requires time out from being engaged in productive activity; learning is the heart of productive activity. To put it simply learning is the new form of labor.[2]

Designing an organizational learning system starts with identifying the core competencies[3] the enterprise must have in order to compete in fast cycle time. This includes coordinating diverse production skills and integrating multiple streams of technology. Once identified, compare the core competencies to current capabilities. The resulting gaps should become the focus of the learning system. For each gap, set an aggressive target. When the gap between current conditions and goals is sufficiently large, it stimulates learning. As noted earlier, this is why setting aggressive FCT goals is important. Goals of 50% improvement are not achievable without doing something significantly different.

Since organizational learning is a social activity, it requires an architecture which creates forums where ideas and experience can be exchanged. The multi-functional team creates such a forum for task-related interactions between people of diverse background and experience. When combined with a clear team goal and rewards, individuals enthusiastically engage in intense discussions of differences that functional organizations evade or ignore. Learning inevitably results from these interactions plus team members gain invaluable experience in the process of organizational learning.

Another forum is an FCT Steering Committee. During FCT implementation a steering committee is often used to oversee implementation. For example, Quantum Corporation's FCT steering committee has as part of its charter:

Develop and continually refine Quantum's new product development cycle by capturing the learning from each new product development effort and assimilating it into the next.

Quantum's FCT steering committee has initiated cycle time reviews for new product teams, defined FCT internal measurements, re-defined the development process and reviewed competitors' product development techniques. Appointment to the steering committee is prestigious since several executives sit on the committee.

In summary, organization learning is a new area of strategic focus for corporations. While often discussed as essential in academic publications, it is rarely defined or provided a focus for management attention. There are no hard and fast templates to follow. Leading FCT competitors are writing the rules right now by defining both a strategy and an architecture which supports learning in their organizations.

Developing a FCT capability does not come easily. FCT requires a systemic integration of new values, structures, and rewards into the core work process. One can not simply accelerate the work pace without negative impact. First, people will make the same mistakes they always have, only quicker. Second, management will rapidly burn out the organization's most important resource: people. An image employees often have when they first hear about reduced cycle time is a cardiac stress test. They equate reducing cycle time to speeding up the organizational treadmill. Regrettably, they are often correct.

The shift to a process sensitive, learning organization requires time and effort. New values and structures take hold only as old ones are retired. FCT yields a sustainable competitive advantage because it is woven into the cultural fabric of the entire organization's value delivery process.

World-class quality has become the "ante" required to be a global competitor, but it does not ensure leadership. Any organization which couples world-class quality with a FCT capability will have a competitive edge.

[1]Fortune, 9/24/90

[2]Zuboff, Shoshana, In the Age of the Smart Machine: The Future of Work and Power, Basic Books, 1988.

[3]Prahalad, C.K. & Hamel, Gary, "The Core Competence of the Corporation," Harvard Business Review, May-June, 1990.