Businesses in the U.S. and Europe face the same challenge: compete with emerging economies that have a fraction of the labor costs and minimal health and retirement obligations.
In a world of interconnectedness and global supply chains, how can U.S. businesses stay competitive without moving jobs abroad? How can anyone even create jobs in the U.S. and export to other countries? How can you compete with low-cost countries AND achieve high profitability in high cost environments?
In my opinion two outstanding models to examine are Switzerland and Toyota. Here’s what makes them exemplary — there are three shared reasons for their success. Your business can start applying these principles today for your own success.
How are they outstanding?
Switzerland is one of the biggest beneficiaries of the globalization. Despite increased global competition Switzerland consistently generates a positive trade balance by exporting about 10 percent more than it imports.
Switzerland’s machine, chemical and food industries manage to export their high quality products all over the globe (about 10 percent of all Swiss exports come to the U.S.) and the unemployment rate was just 3.1 percent at the end January 2012.
Toyota temporarily became the biggest automaker in the aftermath of the 2008 economic crisis. While two domestic car manufacturers went bankrupt and struggled to shift from the production of gas guzzling pickup trucks and SUV’s to more fuel-efficient vehicles, Toyota, the leader in fuel-efficient vehicles, did something astonishing.
In 2007, Toyota they built a plant for full-size pickup trucks in San Antonio, — yes, the one in Texas, not somewhere in Mexico. Toyota’s total investment in the plant amounted to $1.2 billion. What is noteworthy is that the initially planned simple assembly plant grew into an automotive production site including several on-site suppliers.
So instead of moving production and jobs abroad, Toyota continued its history of creating jobs in the U.S..
This raises a number of questions: How can they afford to create jobs? What makes them outstanding? What is the secret of their success? What can your business learn from them?
Grow your people and invest in them
Switzerland and Toyota both invest hugely in their people. In fact, their people are their key advantage.
Switzerland is a country with a very highly educated workforce. Key pillars of the educational system are a vocational training system (where private business and public education cooperate to educate about 50 percent of all youth) and a widely accessible quality public university system.
Toyota’s key strategy is to grow their people and use their ideas and skills to continuously improve. I paraphrase the VP of Lexus (the luxury brand of Toyota): “The most important thing for Toyota is not the next hybrid car, the next sales plan … The most important thing is teaching and training the people. It’s building a culture of continuous improvement. It’s fundamental to everything we do.”
Toyota offers intensive training of new employees for a month before they even go to the shop floor. And that is only the beginning of the internal training. They also motivate and support line workers to go to college. Layoffs are very rare.
Try to be the best, not the cheapest
Most Swiss businesses pursue a quality strategy. They seldom try to compete on price. Even the fairly cheap Swatch watches are of superior quality in their segment.
Furthermore, innovative manufacturing and a highly productive and motivated workforce keep the cost comparatively low. The value added per labor hour in Switzerland is amongst the highest in the world.
Likewise, Toyota strives to offer the product with the highest quality. Toyota early on realized that quality in the long run is the most profitable strategy, because it creates fewer cost down the road (no pun intended), highly satisfied repeat customers, and generates the best advertisement for any brand: word-of-mouth referrals of happy customers.
Strive for perfection and innovation
The Swiss are famous for pursuing perfection, innovation, and improvement — be it the clean streets, high-precision watches, or CERN, the world’s largest particle physics laboratory. Employees in the chemical, food, and manufacturing industries are constantly innovating and improving so that their products are unique and can compete globally.
Did you know that Switzerland is the biggest exporter of coffee in the world? One contributing factor is Nestlé’s invention of the Nespresso capsule system. Yes, Switzerland actually exports more coffee than cheese or chocolate.
Toyota’s key strategies are respect for people and continuous improvement. The employees of Toyota are constantly pursuing the ideal of perfection and try to improve their customers’ lives every day, while respecting our natural environment. That is, why in the first place they were ahead of the curve (again, no pun intended) and developed the hybrid system.