Companies are said to be caught up in a race to the bottom when they begin to compete solely on price. In this race, the brand with the cheapest price and lowest quality product usually wins. The reality, however, is that in this race nobody wins. The reason no one wins is that rather than lose manufacturing contracts, company leaders seek to lower costs by reducing wages, using cheaper materials and reducing the number of product features. In order to stay competitive, some factories move their entire production to China, India, and other parts of the world where labor is cheap. As a result, workers lose their jobs, product innovation suffers, and consumer options are limited.
Apple is an excellent example of a company that has avoided this race. Instead of competing with other companies and cheapening their existing products, they have consistently improved them while simultaneously developing entirely new classes of devices. Instead of steadfastly focusing on manufacturing computers, they have shifted their product lines to include iPods, music downloading, iPhones, tablets, and most recently, wristwatches. Rather than angering their customers by communicating as cheaply as possible solely via website and telephone communication, they have opened stores that are conveniently located in shopping malls and staffed them with highly knowledgeable customer focused personnel who are prepared to answer all of your questions. Their ability to avoid the race to the bottom by thinking differently has made them one of the world’s most successful companies.
The race to the bottom does not just affect manufacturers. Service companies can also be caught in this race. In their efforts to reduce costs, they cut salaries and reduce staffing to the lowest possible number of people. As a result, customers who attempt to telephone their Cable Company, bank, or internet provider become frustrated when they have to listen to endless recordings and push multiple buttons before they are finally able to speak with a live person who might understand the nature of their problem. Many service companies further reduce costs by outsourcing their help desks to other countries.
Although we are not in the business of manufacturing products, most biomedical department heads that I talk to feel that they are under intense pressure to reduce costs. They feel that they are caught in a downward spiral whereby if they do not cut costs, they run the risk of being outsourced to lower priced third party servicers. Some third party service providers also feel that they must lower their costs in order to remain competitive. If we all follow this path, our profession runs the risk of becoming solely focused on cost reduction with “cookie cutter” departments providing the minimal services of equipment repair and testing.
The best way to avoid this race is to educate senior management and other decision makers on the relationship between price and quality. When you are asked to reduce costs, explain the consequences of being caught up in a race to the bottom. Ask those who are pressuring you if they are comfortable taking their car to the cheapest mechanic when it needs repairs. Ask them if their child needed surgery would they shop around to find the least expensive surgeon. Help them to understand that by providing high quality work using high quality replacement parts you are insuring patient safety and maximizing equipment longevity. Remind them that nobody ever wins the race to the bottom.
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