Order out of Chaos III

This has created difficult-to-replicate resources...

Paccar's strategy--its design--is its way of dealing with these three obstacles to being a quality leader.    The first element of its strategy is a subtle shift away form seeing quality purely in terms of operating cost.  Instead, Paccar views quality through the eyes of the owner-driver.  Owner-drivers increase their wages by pushing themselves harder driving sixteen hours a day or more.  Owner-drivers care about efficiency but also look beyond cost per mile, because the truck is their home, office, lounge, and TV room on the road.

Second, owner-drivers buy Kenworth and Peterbilt trucks from experienced dealers who use 3-D computer displays to select from hundred of customizing option.   Third, Paccar builds each truck to order, keeping inventories low and using a network of suppliers for its main components and parts.  The trucks are designed with as many parts in common as practicable.

Paccar's strategy is based on doing something well and consistently over a long period of time. This has created difficult-to-replicate resources:  it's image, its network of experienced dealers, its loyal customers, and the knowledge embedded in its staff of designers and engineers.  This position and these kinds of slow-build resources are simply not available to companies, mesmerized by the stock market, who want big results in twelve months.

A flexible approach to manufacturing makes Paccar's variable costs higher than competitor's but provides stability for its designers and engineers.  In addition, its higher margins create a loyal, more dedicated network of dealers.  All of this works, in part, because it is not in a high-growth industry that would attract large new investments from outside.  To attack it directly, a rival would have to create new brands and new designs, and, quite possibly, sign up new dealers.  This high-end market isn't big enough to warrant that kind of investment.

ACTION POINT: Focus on doing things well and consistently over a long period of time.