Measuring the Impact of Speed

This is a follow-up to my last blog post that suggested looking at time-to-market as an effective tactic in competing for capital investment.  This post looks at four speed metrics (including time-to-market) that companies consider when internally calculating the value of the projects in their investment portfolio.  An RFP response package that helps improve one or more of these speed metrics could provide your community with a competitive point of difference that results in an increased number of RFP responses converted into capital investments and new jobs for residents.

From a big picture perspective, it is important to note when a CEO and CFO look at a potential capital investment ROI, they are really concerned about payback.  They want to understand how and when the investment will pay off for the company.  They need to analyze the tradeoffs between one investment and another.  There are only so many resources a company has and only so many investments they can feasibly make.  They want to know how much money will come back and when.

There are four measures of speed that are of interest to companies making a capital investment.   Each offers an opportunity for economic development professionals to differentiate their RFP packages.

Time-to-market is all about getting the product to the market faster by eliminating project delays.  Shovel ready sites as well as elimination of back-end process slow downs and roadblocks through simplification and transparency help.  Anything that helps meet or beat project milestones contributes to reducing time-to-market and improving contribution to ROI.

Time-to-Revenue is all about accelerating sales uptake.  To impact this metric you need to think about ways to help the company convert leads into billed sales as quickly as possible.  For example, rapid distribution to customers is a key enabler of improving this metric.  Telecommunication and transportation infrastructure capabilities help reduce time-to-revenue and improve company cash flow, as per resources like ATS.

Time-to-Value is about raising customer satisfaction to best in class levels.  It is about reducing product/service defects and getting it done right the first time.  Key to maximizing time-to-value is ensuring robust manufacturing/work processes and skilled people who know what they need to do and how to do it.  Programs and policies that enable companies to trim costs and improve operational reliance help reduce time-to-value and increase profit margin.

Time-to-Profit is all about maximizing workforce retention and productivity.  This measure focuses on efficiency and effectiveness.  It includes getting access to the right labor force and having them trained with the right skill sets to accomplish the task.  Training programs, alliances with educational institutions, ready availability of knowledgeable/reliable suppliers all contribute to improving shareholder return.

In many cases, your challenge is to reframe the programs you can offer a potential capital investor based on the impact it can have on one or more of the above speed metrics.  Rather than simply offer a training tax credit to ensure job retention, offer it as a tactic for the company to improve their time-to-profit metric.  Rather than explaining that your location is within a certain distance of the U.S. population, inform the company that your location will help them improve their time-to-revenue metric by making it easy and cost effective to reach their target consumers.

In some cases, you may need to create a special program or unique industry/academic collaboration that will help improve one or more of the company’s speed metrics.   For example, establishing a specialized field of study at a local University or College to help meet the labor requirements of a potential capital investor also helps improve the company time-to-profit and time-to-value metrics.  As another example, creating true shovel ready sites reduces the company time-to-market metric.

Speak the language of the CEO and CFO, and your RFP responses will be better received and will stand out from the competition.

I would appreciate hearing about your experience and thoughts on the subject.  If you have additional examples of programs and services that could be tied to one of these speed metrics, please share them.  The more we collectively understand how to deliver services that are valued by companies, the better we will be able to meet their business needs and the less reliant we may become on tax incentives.

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5 Comments so far

  1. Marco Monfils

    September 14, 2010

    Hi Ed, thanks for this latest article.

    I like the distinction you make between time to market, time to revenue, time to value and time to profit. Makes good sense.

    However, I wonder whether time to value is too vague a statement…

    Is this about 0 defects or 0 consumer complaints, competitive benchmarking or ?

    Marco

  2. Douglas van den Berghe

    September 15, 2010

    Good article. In general and based on our experience I think IPA staff should be much more familiar with business concepts that are relevant for CEOs or CFOs and use this in their pitch for foreign investment. In the end a company always looks at the bottom line. For instance talking about clusters may be relevant from an IPA and economic development perspective. In most cases a CFO or CEO does not really know what is meant with a cluster or how it can support its investment. Using the right terminology and concepts is crucial and facilitates the communication.

  3. Peter Eisinger

    September 27, 2010

    Let;s stipulate that various monetary incentives that states and cities offer to business firms to relocate or expand are both expensive to taxpayers and of dubious effectiveness. Thus, public officials who want to encourage investment in particular places should consider other strategies. Helping to reduce time-tomarket is an interesting alternative.

    The question is: How can public policy help to reduce time to market for firms? I can think of several ways, though it’s not clear exactly how much advantage these initiatives provide.

    1) single stop permitting. Many states and cities already do this. It’s not expensive; it can really save time when new construction is at stake.

    2) improving transportation infrastructure. This is a no brainer for reducing travel time for shipping raw materials and finished products, but the gains to firms may be measured in hours or days, not weeks or months.

    3) investing in product development and commercialization consortia. Here states in particular can bring together industry and universities and venture capital to hasten product development and commercialization. Consortia like these are widespread. We still need more systematic studies to determine whether they’re effective.

  4. Nancy Rose

    July 4, 2011

    While the metrics are valuable and the higher echelon makes their decisions based on these metrics, I’m curious as to the information provided to come up with the metrics. Do most companies go back and re-evaluate their assumptions on what they’ve decided to fund, to ensure that they really are getting what they signed for? Or to be able to learn from their mistakes and keep improving their metrics? I haven’t seen alot of followup.

  5. […] see some of the concepts I have blogged on previously were central to the conversation (examples: Measuring the Impact of Speed  and How to Win: Time-to-Market or Incentives? ). Here are my take-aways from this […]

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