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"Panasonic tells how a typical Japanese multinational learned to restructure itself according to this flexible "American" approach while preserving some essential Japanese attributes. Panasonic is the main brand name for Matsushita Electric Industrial Company; author Francis McInerney consulted for Matsushita's American subsidiary in the late 1990s—when the firm's troubles became most apparent."
Corporate Culture: FastCompany.com blog
Fast Company.com, April 04, 2004
Francis McInerney serves as managing director of North River Ventures.
This is a partial transcript of his talk at WTF 2004
Francis McInerney: I came up with a notion back in 1967 that the survivability of all organizations was based on their velocities of information. Those organizations, even countries, that can process information within themselves relatively better than others will survive more than those that do not. My thinking then moved to the next step: How do you measure information velocity within organizations? How do you track that? Over the years, I struggled with this. In addition, I spent decades working with C-level management in a whole host of big telecommunications companies. I also work in a large number of consumer electronics companies. I've got a global perspective as well as a telecom perspective.
One of the things that has always stunned me is that the closer I'm able to get to measuring the velocity of information within an organization, the amount of value created, and the risks of not becoming a high-velocity organization, there is still resistance to becoming high velocity. I use two simple measures. One is the efficiency of the use of cash. If you can convert a sale quickly, you must be very fast. I also look at the efficiency of operational capital. When Compaq bought DEC, it must be that a core group within that organization made the decision despite any due diligence that would indicate that they could not survive the acquisition of DEC. People within organizations can make decisions that kill them.
The same could be said for Hewlett-Packard buying Compaq. It's an almost existential crisis. We have to ask ourselves how it is that otherwise perfectly selfish human beings can make decisions that are suicidal. We have a situation in corporate culture where there's a gene that turns companies off. What interests me most is not the failures, but the much more subtle question of how the truly great survive.
An excellent example is Dell. Dell has a very simple situation. Dell converts a sale into cash in -42 days. That means it converts a sale into cash before it incurs any expense. That's all they do. If you look at their entire structure, nothing does anything but that. By having your hands on all of the touchpoints of the sales chain, you end up with a proprietary perspective of customer behavior. Then there's Hewlett-Packard. Six or seven years ago it took 120 days to convert a sale into cash. Now it's maybe 35 years. They're getting better, but they're still 75 days behind.
There is a different time dimension when you look at a company like Dell than there is when you look at Hewlett-Packard. I call it Moore's Time. This is where we start to have the existential crisis. You see winners and losers. Wal-Mart has excellent numbers. So does IBM. But the losers, the consequences of an information velocity lag of 70-odd days, translates to at least a 10-year competitive disadvantage.
All the time, executives are asked to make a decision to improve something by two or three months. The consequence of failure is stupefying. A 10-year lag is terminal. You don't come back from that. There are a lot of companies that have slow information velocity but still have high shareholder value. The market is making a mistake here. Your position on the information velocity curve will not hold forever. My favorite example of falling off the curve is Japan. I've not yet met a Japanese company that can deal with the logistics of what a Dell does.
