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Interview with
Charles Fine on "Clockspeed"


Book Beat   Interview: Charles Fine on "Clockspeed"
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Our interview with Charles Fine. Charlie is one of the leading authorities on technology management. The industrial world is changing rapidly and Mr. Fine does a wonderful job in his new book "Clockspeed" showing the reader how and why. The book itself reads like a novel examining most of the leading industrial sectors in our global market......

Please provide a brief synopsis of your book's main concept- "clockspeed" your innovative term for an evolutionary life cycle!

Clockspeed refers to the rates at which companies and industries evolve.
The information-technology sector of our economy is full of fast-clockspeed firms -- what I call the industrial fruit flies. On the other end of the spectrum, heavy manufacturing and mining companies, as examples, exhibit much slower clockspeeds -- I call these the dinosaurs. Industry clockspeed is measured by the rates of change in product development, process creation, and organization renewal. By studying industrial fruit flies, I have found principles of industrial evolution that seem to apply to all industries --just as biologists glean insights from the tiny drosophila to aid in understanding all animal species.

After spending nearly a decade observing the dynamic evolution of a number of industrial fruit flies, I concluded that some of the most important lessons these dynamos have to offer relate to supply chain design. Let me give an example. We all know the story of one noteworthy fruit fly -- the personal computer industry. Two decades ago, at the dawn of the PC age, IBM controlled a vast fraction of the computer industry and was in a position to set the standards for the next generation computer -- the personal computer. Well, the supply chain design IBM chose resulted in handing those standards -- the keys to power and profit in the industry -- over to their chosen suppliers, two once-tiny companies, named Intel and Microsoft. Going beyond the conventional conception of a supply chain, I discuss what I call the capability chain -- the collection of business competencies that underlie the organizations in the supply chain. I interpret supply chain design as the process of choosing which capabilities in the chain a given firm will try to control and which it will outsource. Thus supply chain design is the "ultimate core capability," because it is the capability of choosing all other capabilities. In a fast-clockspeed environment, these capabilities may have very short half-lives, so this ultimate capability of supply chain design -- one of the keys to competitive advantage -- must be exercised vigorously and regularly.

Fruit flies (the biological ones -- drosophila) evolve so rapidly (about ten days per generation), that biologists can learn a great deal about their evolution in a relatively short period of time. The lessons learned are then ported over to slower-evolving species, like humans. If a biologist were to try to observe human evolution directly, she would observe two or three generations at most before expiring of old age herself. When I began my research on supply chain dynamics, I was studying industrial dinosaurs. For all of the dynamics on display, I might as well have been watching glaciers melt. Once I hit on the idea to study the fastest-evolving industrial sectors, my rate of learning took off -- the same effect experienced by the biologists.

I subtitled the book "the Age of Temporary Advantage" because fast-clockspeeds shorten the expected duration of any competitive advantage. For business leaders, the most important message is that they must hone their corporate skills in supply chain design. No company is an island. All are interdependent within a complex web of relationships. Designing one's place in this web is absolutely key to success and survival. And fast-clockspeeds prevent resting on one's laurels for even a moment. I believe that companies must invest in learning the principles and skills of continual supply chain assessment and design. For government leaders, the message is a bit different. In this age of fast clockspeeds, many public sector institutions have been left far behind in their abilities to respond to a changing economic and social landscape. The message is to be aware of this mismatch of clockspeeds and probably to try to increase the clockspeeds in the public sector rather than try to govern rates of innovation in the private sector.

Let me mention here two laws that govern supply chain dynamics. The first is the law of volatility amplification, better known to the supply chain management community as the "bullwhip effect" or the "beer game effect." This law dictates a phenomenon whereby the volatility of demand and inventories in the supply chain tend to be amplified as one looks farther "upstream" -- that is, away from the end-user. Any manager in a machine tool or semiconductor company can expound at length on this effect. I focus on some of the strategic supply chain design issues that arise from this phenomenon. The second law I call clockspeed amplification, whereby clockspeeds tend to be amplified as one looks farther "downstream" -- that is, toward the final customer. For example, web site developers experience faster clockspeeds than their hardware suppliers (the computer companies) who, in turn, experience faster clockspeeds than their suppliers, like the semiconductor companies, who in turn, evolve faster than their equipment suppliers. I use this law to explain how to find slow-clockspeed niches in fast-clockspeed industries and to explain the drivers of clockspeeds across our economy.

I borrowed the "double helix" term from the biologists to underline the genetics analogy and because the diagram of the infinite double loop diagram used in the book looks like the biologists' double helix. "Clockspeed's" double helix illustrates how industries oscillate between a highly vertically integrated industry structure with highly integral product architectures (like the IBM mainframe days) and horizontal (disintegrated) industry structures with highly modular products (like a common personal computer). Many observers had noted the migration from vertical/integral to horizontal/modular structures experienced by the computer industry as it moved from mainframes to PC's. But the double helix suggests an eventual, inevitable swing back the other way, toward a more vertical structure as we see Microsoft trying to accomplish around its operating system.

One of my academic heroes is Kim Clark, Professor of Technology and Operations Management at Harvard and currently the business school dean there. Professor Clark's work on product development on the auto industry was the research exemplar for me when I started this project almost ten years ago. I perceived his project (with Professor Takahiro Fujimoto) to be both academically rigorous and extremely influential in changing management practice. Although I do not know him personally, from a distance, Steve Jobs of Apple Computer is a hero. Why? He symbolizes to me someone of my own generation who has dared to insist on excellence, even in the face of long odds and many doubters. The Macintosh is a great machine. I am grateful to him for it and I respect him for the commitment he has shown to it.

Clearly, the internet has been a key driver of clockspeed acceleration across a wide range of industries. So many functions can be streamlined with its use. For me personally, the clockspeed.com website provides a way to communicate directly with people interested in my work. At this point, I have barely begun to exploit the medium. I have not been a lead user of internet technology, but I hope to enrich the site continually.

As for concrete actions, I lay out in Part III of the book a methodology I call three-dimensional concurrent engineering - the integration of supply chain design and development with the traditional processes of concurrent engineering of products and their production and delivery processes. I hope this methodology will ease the integration of supply chain design into companies' existing sets of tools.

A final thought: All advantage is temporary and no one can guarantee their future success. However, fortune favors the well-prepared. One can be ready when opportunity knocks or disaster strikes and exploit random events to the fullest. I believe that the concepts and tools in "Clockspeed" help to prepare to make the best of whatever hand fortune deals.




Check out Charles Fine's new book:

Clockspeed
Winning Industry Control in the Age of Temporary Advantage
By Charles Fine


Or his web site - www.clockspeed.com




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