"We are facing worldwide and chronic overcapacity in just about
every industry," says
Michael Hammer,
author of The Agenda: What
Every Business Must Do to Dominate the Decade and a management
consultant who originated the concept of re-engineering. "We've got
more cars,
steel, computers, movie seats, optical fiber … than
anyone knows what to do with."
In the practical language of business, excess supply means that
customers will be calling the shots for the foreseeable future.
Many customers will continue buying by price so some companies will
need to become even more aggressive in slashing costs. Because
heavy emphasis was placed on reducing production costs during the
1990s, the cost-cutting measures holding the most promise today may
be along the periphery (e.g., in the way business is conducted with
customers and suppliers).
But Hammer warns that competing on price won't be for everyone. "If
you compete on price alone, it's very hard to be profitable. How
easy we make life for customers will be more critical than ever. If
we can solve all their problems, many customers will pay more."
Hammer says attention to customers goes far beyond friendly
service. Businesses must evaluate all aspects of their customer
interface - for instance, can ordering be made simpler, is the
packaging easy to deal with, are the invoices simple, are the
instructions accurate and easy, do customer questions get answered
quickly? "In a customer economy it pays to solve all headaches,"
says Hammer.
Meanwhile,
Faith Popcorn feels consumers are seriously suspicious
of corporate motives, sales pitches, and corporate bigwigs and that
many purchasing decisions in the age of oversupply will be linked
to the moral code of the companies producing goods and services.
Investors may want to be making decisions along these lines as well
because corporations that do the right thing
environmentally/socially, that deliver what they promise, and that
rise above avarice will win customer loyalty.