General Motors had come to own the manufacturers of 70 percent of everything that went into its automobiles—and had become by far the world’s most integrated large business. It was this prototype keiretsu that gave General Motors the decisive advantage, both in cost and in speed, which made it within a few short years both the world’s largest and t

The foundations have to be customer values and customer decisions on the distribution of their disposable income. It is with those that management policy and management strategy increasingly will have to start.

Before Ford changed the whole labor economy of the United States with one announcement, labor turnover at the Ford Motor Company had been so high that, in 1912, sixty thousand men had to be hired to retain ten thousand workers. With the new wage, turnover almost disappeared. The resulting savings were so great that despite sharply rising costs for

The famous distinction between fixed and variable costs, on which traditional cost accounting is based, does not make much sense in services. Neither does another basic assumption of traditional cost accounting: that capital can be substituted for labor. In fact, in knowledge-based work especially, additional capital investment will likely require

Except for the rare monopoly situation, the only thing that differentiates one business from another in any given field is the quality of its management on all levels. The first measurement of this crucial factor is productivity, that is, the degree to which resources are utilized and their yield.

The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.

Again and again in business history, an unknown company has come from nowhere and in a few short years overtaken the established leaders without apparently even breathing hard. The explanation always given is superior strategy, superior technology, superior marketing, or lean manufacturing. But in every single case, the newcomer also enjoys a treme

In every case, beginning with General Motors, the keiretsu—that is, the integration into one management system of enterprises that are linked economically rather than controlled legally—has given a cost advantage of at least 25 percent and more often 30 percent. In every case, it has given dominance in the industry and in the marketplace.

There are essentially three kinds of innovation in every business: innovation in product or service; innovation in the marketplace and consumer behavior and values; and innovation in the various skills and activities needed to make the products and services and to bring them to market. They might be called respectively product innovation, social in