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Throughout its lacklustre period, Macca's never lost sight of the need to stay fast. In fact,Macca's has always been the fastest restaurant company in the fast food business. The new McCafé strategy marks a departure from that (McDonald's is positioning itself against Starbucks as the customer's 'third place' of choice, besides home and work or school), but for now the company still prides itself on being seriously fast!

As I said, to achieve competitive advantage, to have the best market share and the best profitability in your market segment, like McDonald's has done, you have to lead the league on at least one of fast, good and cheap, and be industry standard in the others. What McDonald's has successfully done is come up to standard as consumers' definition of 'goo?' changed, while still remaining fast enough and cheap enough.

Another example of an industry constantly hammered by the need to be faster, better and cheaper is the automotive fuel industry, especially in the context of dramatic changes in automotive technology. Traditionally the petrol station was also a service station, which sought extra profit margin and brand loyalty by offering car maintenance and repairs as well as petrol. But today's cars are more reliable than older cars, and they're filled with computer chips for diagnostics and vehicle systems control that the average service station can't fix.

In other words, the service station business is obsolete, or quickly becoming so. That has led to a new business model in which petrol stations are linked with convenience stores or other retail operations that sell drinks, snacks and basic grocery and impulse items. The profit margin on convenience store items is much greater than that on petrol. According to AC Nielsen, 25 per cent of household grocery purchases are 'convenience' purchases and are not price driven.

In Australia, for example, Shell put franchised Circle K stores behind many of its petrol pumps, and the other major petrol brands made similar moves. The popularity of petrol stations in combination with convenience stores inevitably attracted the interest of Australian retailers that had never sold petrol. The 7-Eleven chain added petrol sales at some of its locations outside central business districts, for example. And Woolworths entered the new market competition in a big way. At sites usually established near existing Woolworths stores, they sold heavily discounted fuel, sourced from Chinese oil refineries rather than domestically, and then discounted this offering a further four cents per litre for those with a docket representing $30 or more purchased from either a Woolworths or BiLo store. In effect fuel sales, although modestly profitable in themselves, served as a 'loss leader' to drive higher margin retail sales. For the same reason, there are now petrol pumps at many Wal-Mart locations in the US and many Carrefours locations in France.

Well-established retailers such as Woolworths, Wal-Mart and Carrefours can make low-priced fuel sales profitable both because the petrol-buying driver who stops to fill up at a Woolworths,Wal-Mart or Carrefours petrol station is likely to buy other things at their stores, and because they are big and powerful enough to negotiate favourable pricing from petrol wholesalers and refineries. For Woolworths in Australia, as for Wal-Mart in the US and Carrefours in France, discount petrol prices complement their existing reputation for delivering good value to customers.

Woolworths pumped up its retail sales so impressively with the addition of petrol stations that it made a deal to set up Woolworths convenience stores at Caltex (the Australian subsidiary of Texaco) stations. Before that, Coles did its own deal to take over the lease on more than 580 Shell service stations. And not just the lease on the retail operation, but on the entire operation, fuel and all, leaving Shell as landlord, petrol wholesaler and – not insignificantly – responsible for the petrol brand. At these Coles-run Shell petrol stations, completely redesigned stores branded Coles Express are perfectly positioned to grab a share of a multi-billion dollar market, the 25 per cent of grocery purchases that – remember the AC Nielsen statistic above – are made on the basis of convenience rather than price.

Another demonstration of the power of combining petrol stations with convenience stores came when Independent Grocers Australia rolled out a four cents per litre discount on petrol sales at 180-plus stores in Queensland. Going Woolworths one better, IGA discounted petrol prices another four cents per litre if the customer spent $30 or more on nonpetrol purchases in the IGA store.

Let's see what sense 'Fast, Good, Cheap – Pick 3' can make of this. Filling up the tank takes the same amount of time wherever you do it.Maybe you save a little time by stopping at the first station you see, or maybe you lose a little time by looking for a favoured brand or a cheaper price. If you have a favourite brand, it's unlikely to be because of the petrol. For the vast majority of drivers, there is no quality difference between different brands of petrol. Assuming equivalent octane ratings, one brand is as functionally good as any other brand in the customer's eyes.

So if you're in the business of selling petrol to drivers, how are you going to differentiate your brand from other brands, when one petrol-buying experience is more or less as fast, good and cheap as another? As these examples show, you 'Think AND, Not OR'. You combine two previously distinct retail sales categories into a new value proposition that offers customers who feel intense time and opportunity pressure throughout their lives a faster, better, cheaper way to buy petrol and other daily essentials at one go. It's a value proposition tailored to increasingly affluent customers who rate the low petrol price per litre and time savings plus extra cost per item of quickly buying a few necessities and impulse items as better overall than taking the time to drive to a major grocery store, park in a large parking lot, walk from the car and through the aisles to find what they want, pay for their purchases and walk back to their car.

The companies selling petrol to drivers in Australia have to meet the challenge of 'Fast, Good, Cheap – Pick 3' on two levels: the petrol itself and the petrol in combination with a higher margin sales channel. Within this mix, they can emphasise fast, good or cheap, but to stay in the game they also have to be industry standard on the other two. Woolworths and IGA may emphasise cheap, but they must also be fast and good enough to keep attracting a profitable share of customers. Likewise Coles Express may emphasise the good grocery store attributes that customers associate with Coles major grocery stores, but if they stop being fast and cheap enough they won't be able to sustain and increase their market share.

But remember that 'Fast, Good, Cheap – Pick 3' is both a moving target and table stakes, the price of entry into any market. To build significant competitive advantage, you've got to offer something else, an X-factor that will really differentiate you positively in customers' eyes. That's the subject of the next chapter, 'Superficial is Anything But.'

As both the McDonald's and consumer petrol examples show, fast today is not fast enough for tomorrow, good today is not good enough for tomorrow, and cheap today is not cheap enough for tomorrow. Three areas where we can see that are fashion, cars and telecommunications.

FAST IS NOT FAST ENOUGH

We have always noticed when products and services take an increasing share of our wallet. The increasing time pressure we all feel today makes us increasingly sensitive to the time that products and services take. And we have less and less patience for anything less than instant delivery of those products and services. We repetitively hit the 'close' button on elevators, when no one is racing to join us inside, because the five seconds it takes for the average elevator door to close is unbearably, excruciatingly long. We do this even though we know that the elevator system will not respond any quicker, no matter how many times we press the button.

We do it because technology is speeding up the world and making just about everything but the closing of elevator doors happen faster and faster all the time. The result is that, especially for the youngest customers (and the youngest staff, too, when it comes to the pace of their careers), no demand on speed of delivery feels unrealistic or exorbitant.

Few industries operate at as rapid a pace as the retail clothing business.As fashions constantly change, profit goes to those who can quickly and efficiently provide styles, colours and fabrics that appeal to the key demographic of young customers, who in turn set the trends for other demographic groups. Three retail clothing chains – Zara, H&M and Uniqlo – now perform that fast, good, cheap hat-trick better than any others, and Zara is perhaps first among equals in delivering fresh, exciting apparel to young consumers.

The Zara chain is owned by the Spanish company Inditex, which has 70,000 employees and counting (they added 11,000 employees in 2006), 3131 stores in 64 countries and counting (they added 439 stores in 2006), and net 2006 sales of 8.1 billion euros (A$13 billion; an increase of 22 per cent over the prior year). Practising what it calls a 'fast fashion' system, Zara can design and distribute a fashion forward garment in fifteen days. Some Zara styles resemble the latest couture offerings, albeit in less expensive fabrics. Others beat the luxury fashion houses to market with Zara designers' fresh takes on the clothing trends of urban youth around the world.

Equally significant is the number of styles and variations that Zara retails every year. Three teams of designers for women's, men's and children's lines generate 40,000 or more designs a year, and about 10,000 of these make it into actual production of five to seven sizes and five to six colours per garment. That means Zara's supply chain management must smoothly handle around 300,000 new stock-keeping units (SKUs) per year.

The final flip, or should I say wrinkle, in Zara's unusual strategy is that it produces each garment in very limited quantities. Most clothing companies try to milk the most popular styles and sell them in high volume, which inevitably creates lags in inventory supply and turnover, and at the end of most selling seasons triggers unprofitable discounting to move inventory that no longer excites customers. Instead, Zara says, so to speak, 'We love stock-outs' (the retail term for being out of stock on a requested item).

The speed with which Zara changes garment styles and colours encourages impulse buying and more frequent store visits. Customers know that if they see something they like at Zara, they'd better buy it right then and there, because it won't be available later. They also know that whenever they enter a Zara store, they're going to see new things. Thus, for example, Zara's London stores attract an average of seventeen store visits per unique customer per year, whereas their competitors attract an average of only four visits per unique customers per year. Zara's strategy makes its customers so curious to know what new clothes are on the racks that the company spends only 0.3 per cent of sales on advertising versus 3 to 4 per cent for most of the competition.

Everything about Zara's organisation expresses the belief that they can never be fast enough, and that there is also no excuse for forgetting good and cheap while they're at it. Instead of isolating design, production and marketing staff in separate silos, Zara's offices, stores and other facilities are laid out to encourage the fast, free flow of information, with designers working in the midst of production and marketing so that feedback on new styles, production glitches, quality problems and customer behaviour becomes virtually immediate. This also sends a message to Zara's staff that no one is 'cooler' than anyone else or, to put it another way, that everybody in the company is as cool as the design team.

Likewise, design and production move quickly thanks to an intensive use of computer-aided design (CAD) and just-intime supply chain management. The stores themselves are integrated into this blindingly fast feedback loop through daily PDA and weekly telephone communication on how customers are reacting to different offerings. The result is that whereas most competitors are hard-pressed to vary 20 per cent of the order mix in any one selling season in response to customer behaviour and other factors, Zara can adjust 40 to 50 per cent of the order mix without strain.
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Zara's 'fast fashion' system would break down if customers didn't think the clothes were of high enough quality or affordable enough, and the company could easily serve as an example of 'good is not good enough' or 'cheap is not cheap enough'. The same could be said of both H&M, which is based in Sweden and has 1300 stores in twenty-nine countries, and Uniqlo, which is based in Japan and has more than 730 stores in Japan, China, South Korea,Hong Kong, the UK and the US.

In the 'Fast, Good, Cheap – Pick 3' mix, H&M might be said to emphasise good. It delivers what the company website calls 'discount high-end fashion' through special one-seasononly collections from prominent designers such as Karl Lagerfeld and Stella McCartney, or in association with trendsetting personalities such as Madonna and Kylie Minogue.

Uniqlo (a name formed from the words 'unique' and 'clothes') might be said to emphasise cheap. Despite a persistent economic downturn, between 1999 and 2002 Uniqlo opened 200 new stores in Japan, selling 'recession chi?' so cheaply that some Japanese business commentators and many competitors accused it of causing deflation. (Sounds like sour grapes to me.)

All the same, 'fast is not fast enough' rules the fashion industry.H&M's namebrand designer- and celebrity-connected offerings deliver up-to-the-minute, trend-setting quality at a discount price. And Uniqlo's business DNA derives from its parent company, which is named Fast Retailing Company, because young customers would never buy clothing that is not fashion-forward, no matter how cheap it might be.

GOOD IS NOT GOOD ENOUGH

One of the great flipstars of modern business is Toyota. The only car maker that is consistently gaining market share in all product categories in all market regions, Toyota has an enviable reputation for product quality. Scores of articles and several books have been written about the efficiency and speed of the Toyota Production System, which made just-in-time inventories a global business fashion.