By Kathleen M Eisenhardt

Competition used to be between giants like Mobil and Shell or Procter & Gamble and Unilever. Then it morphed into David and Goliath battles like Netscape and Microsoft.

Now the competition that shapes the economy is not big versus big or even big versus small, it’s quick versus slow.

It’s Cisco sprinting ahead with lots of small acquisitions versus 3COM slowing down to digest US Robotics.

It’s Target getting hip fashion to the discount racks first versus sticking with traditional merchandise.

It’s Google racing to define the meaning of “search.” And, in an economy where “snooze, you lose” can be a company value or “have lunch or be lunch” a corporate goal, speed wins.

Using tips from biology, Le Mans and jazz, today’s high-velocity companies speed up by working less, driving momentum more and clinging to the edge of chaos.

Keep it morphing

While large numbers of new life forms emerged during the Cambrian geological period, most are now extinct.

Besides luck, the key to survival was rapid evolution into viable niches. The winners scored through lots of small mutations, not with one big leap. In other words, they kept morphing.

EBay provides a great illustration. EBay speeded into new services, markets and geographies by linking together lots of small moves close to what it was already doing.

The net result is that a funky flea market rapidly morphed into the world’s largest retail bazaar. EBay flat outran the competition.

Morphing is quick because it lets managers exploit what they are already doing; focuses time and resources to excel at what is truly novel; and keeps companies limber for the occasional long jump that can dramatically shift their position.

Apple’s jump to iPod and iTunes and Cisco’s acquisition of Stratacom were a lot easier because the firms were always morphing into new markets and products.

In contrast, big changes usually mean big failures (like Apple’s Newton PDA) unless they have been morphing all along.

Polygamy with taste

Another speed secret from biology is co-evolving or routinely creating, shifting and destroying collaborative relationships within ecosystems. When species help each other, they all evolve faster. They gain speed by doing less.

The shifting partnerships of biotech leader, Genentech, are crucial for speed.

At any point in time, Genentech as a company and its scientists as individuals have numerous links to universities, government research agencies and other companies. My colleague, Woody Powell, calls it “polygamy with taste.”

Take Genentech’s link with a San Diego-based biotech, IDEC, for the lymphoma drug Retuxan.

IDEC developed the “molecule” and Genentech added its experience in biotech manufacturing, sales and marketing.

Together, the two companies slashed about 12 to 18 months off the time to market.

Walk, don’t run

Achieving speed through rhythm or “time pacing” is practiced not only by premier race car drivers, but also by high-velocity companies.

Moore’s Law of doubling microprocessor speed every 18 months set the heartbeat of Intel, driving the pace of major new microprocessor introductions.

Intel pulsated with other rhythms too, like six-month product cycles within Moore’s Law and expansion of manufacturing facilities about every nine months.

Even management meetings inside Intel had rhythm—start on the hour, end in an hour.

The result—Intel outran the competition and dictated the speed of much of the computing industry.

Time pacing creates a powerful psychology of urgency around deadlines that focuses and motivates people and counteracts managers’ natural tendency to change too little, too late.

This kind of thinking is behind rules like 3M’s 30 per cent of revenue must come from products developed within the past four years.

Fast forward

High-velocity companies practise probing—they engage in a wide variety of low-cost experiments like exploratory products, alliances into new markets, futurists and scenario planning to gain insight into the future.

Probes may last months or even years. Yet, the basics of probing—that is, lots of varied, low-cost experiments—are the same.

Take product development at Yahoo! Developers are frequently trying new services like European football updates on the Yahoo! site that take a few days to develop.

Within about two weeks, usage data make it clear whether or not the service is a winner.

The Yahoo! philosophy is probing—that is, get experiments to the Internet quickly, see what works, adjust and try again.

On the edge of chaos

Jazz musicians, who have never met each other, can walk into a room and go from zero to music in about fifteen minutes. Their secret is simplicity.

Jazz bands establish a few rules like which chords to play and who plays first. Then they play.

The rules provide just enough structure to avoid too many “trainwrecks” in jazz parlance, but don’t lock the musicians into a scripted performance that would be slow to launch and tough to adjust.

High-velocity companies do the same thing. They take basic processes like product innovation or acquisitions, and slash away the bureaucracy until there is almost chaos. What’s left are a few simple rules that set the boundaries for what people can do, but that leave plenty of room to run quickly, be innovative and take advantage of opportunities.

Miramax, known for its innovative films, is an example of this kind of speed.

A significant part of Miramax’s formula is simplicity. It’s movie picking process is guided by a couple of simple rules but beyond these, there is much room to move quickly and opportunistically to grab winning scripts.

Does it make sense to speed?

Speed is tough to achieve and tiring to maintain. It’s like playing a video game. Get up, go to the fridge and lose.

Yet, in markets ranging from women’s fashions to mobile phones, speed is an imperative, not an option. As Motorola’s Ed Zander says, “speed is everything.”

The trick to staying sane is to understand how speed really works. It’s a lot more fun to know how to speed and win than to be struggling to keep up.

Kathleen M Eisenhardt will be the guest speaker at the Arthur Lok Jack Graduate School of Business’ Distinguished Leadership Series 2006—“Strategy at the Edge of Chaos” which takes place on January 23, 2006. For further information please contact Jiang Yang at 662-9894 ext 121 or email j.yang@gsb.tt