Does competition create the leanest products and services?

The Western democracies have long valued the effects of competition in their markets, whereas historically the command and control economies have tended to favour state ownership and managerial control to ensure employment and efficiencies of scale.

Whilst there has been much evidence based analysis of the merits of both systems, speaking from the UK, I have only been exposed, in business, to the operation of a competitive market where my business success relies on me winning business from potential customers in a competitive arena. To do so, I have to demonstrate, to that customer, that my product or service is of better value, greater utility, to them, than those of my competition or from the ultimate competition which we all face, the decision of the client to do nothing.

Competition ensures that the features and benefits and the ways of working of individuals and companies is refined and homed, reacting to the activities of competitors and, pro-acting to our expectation of their reaction to our changes. Competition has ensured that price is reflective both of costs and value given, and competition ensures that levels of professionalism and customer service are also taken into account by potential clients.

Command and control management of businesses

 Although I have no direct experience of the command and control style management of manufacturing it is clear since that the borders began to open to countries in the east and they have adopted more democratic processes took hold that although their manufacturing industries had failed to innovate and develop as fast as those in the West, they are in a strong position to do so quickly (when exposed to competition from the opening market).

The addition of a low cost and a highly mobile labour has also enabled those countries to begin to complete extremely effectively with the West. That creates an environment which reinforces the impact of competition on innovation and, interestingly, has resulted in some Western countries seeking to protect their own market through import controls and minimum standards.

If it’s so good…

If competition is so effective at driving efficiencies and driving innovation within business then we would expect that additional competition should be welcomed by the community as a whole, although it may, perhaps, be less welcome in individual companies. Competition in some areas appears to be deliberately suppressed by those who have a controlling interest, for example the discussions about the hold of the supermarkets, over the production and distribution of food, will continue to rage for sometime to come.

In manufacturing the effect of competition has been to develop a number of tools and techniques for driving both innovation and cost saving. One example is the combination to form the process improvement strategy delivered through Lean Six Sigma. Those same  prime drivers in the manufacturing industry have also spread into the National Health service and other services around the UK, delivering benefits and savings in all those areas. It's not universal though, and it slips when competition falls away.

It appears to me that the greatest opportunities exist where competition is fiercest.