Now, I want to talk about long-term dynamics of, capability curve. [BLANK_AUDIO] We actually, you know, said that the short-term relationship between controllability and flexibility is inverse. But I know that some people, or some of you probably have some concerns. Because, some of you might say that, well, in the real world, sometimes I observe a company, that seems improving. It's controllability and flexibility at the same time, continuously. We can think about really great companies, good companies, and such company, seems to easily improving. Its capabilities, always. And that observation, gives us some impression that, the relationship between controllability and flexibility, might be positive, not inverse. Not negative. So I want to. Focus on that observation. Which I think is not impossible. Where actually, we can observe that kind of thing, from many companies. If that is true, in other words if a company. Can improve its capabilities, continuously, without showing any signs of [INAUDIBLE] relationship. If that is true, then, the framer we talked about, you know, so far, must be force. Is that right? Or, is it possible for us to, again, compromise or encompass, the framer we talked about. And to, deal with the observation with my tab. So let me try to explain that [INAUDIBLE] observation that possible [INAUDIBLE] observation, with the framework we all ready have. Okay, so this is the graph, and as usual. We have controllability, we have controllability here and we have flexibility here. And then I show you, the dynamics of this capability curves, of one company. Let's say we, we call that as firm A. And now we have five different capability curves for, firm A. And we see that the years are all different. In other words, let's say this. Is firm As capability curve in 1970s, 1970s. And then probably the firm was able to enhance its [INAUDIBLE] capability. And therefore it has, a new capability curve. In 1980s, because of it's improved [INAUDIBLE] capability, it's capability curve shifts upward. And let's say that the, the company is really good at improving its integrating capability. Or probably the company nurtures its learning capability over time, and therefore, as time passes, the company has been able to improve its capability curve. In other words the company was able to shift or move its capability curve upward. All the time, and now, we probably mentioned, we, we, we slightly, you know, implied that the capability curve is The depiction of all the possible choices, were set over possible choices, the firm can make, in the short run. For instance, if this is the capability curve the company has. Right now, or at a particular point of time, that means that the company can chose this, can chose this point, say, this as is the choice or if the company believes that this. Is better choice, then the company might choose this one. In other words along this capability curve, the company can choose, any point, and that's the whole point, right? In other words, in the short-term you, you can. You know, move back and forth, and you can choose any point, along this capability curve, because the capability curve actually defines the possible choices, defines the set or path of a possible choices the company can make. And having said that, if the company chooses a particular point, as its you know, business goal or as it's strategy, and we call that as the firm's strategy choice. [BLANK_AUDIO] The firm decide to make the choice. The firm decided to choose that particular point. Now, come back to this dynamics of capability curves for firm A. From A in 1970s, decided that okay. This is our strategy choice. This is our strategy choice. In other words, I want to compete, by positioning myself at this particular point of time. At this level of controllability, and at this level of flexibility. And for each capability curve, the firm probably makes a strategy choice. This is the choice, this is the position the company wants to have, you know, to compete in the market. In 1980s. And then the company, chose this one, as it's position, strategic position, in 1990s. And in 2000, the company chose this one, and 2010 the company chose this one. Okay, so, now we can see the strategy choices or, I would just say that [INAUDIBLE] of the companies over the firm As capabilities. In other words, in 1970s, the company. Showed the market that it has. It will perform, this much controllability and this much flexibility. So, strategic choice is [UNKNOWN] by the external, external entities, in other words, outsiders can observe, the strategy choices, made by the company. On the other hand, the objective shape, the objective shape of capability curve is not observable, externally. In other words, internally the company may define its own capability curve, but the outsiders, or external entities, external, you know, firms, or external, you know, people, probably can not observe, the details of capability curve, of a company. The only thing the outsiders, the only thing the external entities can observe, regarding this capability curve is, the actual choice, a certain choice made by the company, so, basically what, you know, the external. External entities observe, external entities observe, these points. And this actual capability curves, may not be observed by the outsiders. So let's say, you know, I'm, I'm a manager at other company. And I'm just outsider. Outside of firm A. And now, I know that firm A, has chosen. These capabilities over time. So, what actually I can see is this strategy choices. Actually made by firm A, right? So this is the only thing I can observe. And therefore, what do you think I can conclude by observing this? My conclusion by observing this, is that okay, this seems like there is positive relationship. Right? I have to say that the relationship between controllability and flexibility is positive. That's my conclusion, by observing this phenomena. But, as I you know, discussed this so far. I reached that conclusion, by using the same framework I used, when I talked about the inverse relationship between controllability and flexibility. So my point is that, sometimes it's possible, that we can observe. A company that improves both controllability, vo, both efficiency and responsiveness at the same time, but that doesn't, but, that doesn't mean that the relationship at least the short-term relationship between those capabilities is fundamentally positive. The short-term relationship is obviously negative. It's not easy to accomplish those two, those two capabilities at the same time in order to continue spaces. But if we look at this whole thing from a long-term perspective, if we focus on the long-term dynamics. We might say that there is positive relationship. But that doesn't mean that you can actually easily obje, easily achieve these capabilities. I had a chance to interview a CEO of a, a global. Car maker. The company is a really great company. And then after interviewing the CEO, I asked the last question. The last question was. What is the most [INAUDIBLE] problem faced by you? What is the most difficult issue you want to [INAUDIBLE] and then the, the CEO paused for a while and then replied, well, I think we should improve our efficiency. And at the time, we want to have more responsive, but I find it very difficult to achieve those two things at the same time. So, basically, he was referring to. The straight up relationship between controllability and flexibility. I also had the chance to meet another, another CEO at you know, another, you know, car maker. And unfortunately, this second car makes is kind of a low quality and low end player, in one of these you know, less developed countries. So basically the. You know, brand value and confidence and, you know, using any criteria. There is a huge gap between these two companies, the company I just mentioned, you're the great, you know, and car maker that is you know, less fortunate and less competent Car maker. And now I ask this same question, to the CEO of that you know, low end company. Low end car maker. And I asked them that, what is the most assiduous and challenging thing faced by you. What is the most critical problem you want to, you want to solve, you want to observe, you want to absorb. After short, very brief polls, the CEO of that low end or less competent car maker [INAUDIBLE] were. We want to, we want to save more costs. We want to save costs more. And at the same time we want to have a more flexibility. Because, everything is uncertain. So I, I get, you know, personally I think that you gotta have a better ability to deal with the, this design objective. Can you see the point? This [INAUDIBLE] are struggling with the same problem. Are struggling with the same issue. But, one company is far better than the other, from other standard, from any criteria, there is huge gap. But, each company is concerned about the same problem. So I would juust say that the tradeoff relationship between efficiency and responsiveness, is unavoidable. You cannot escape that tradeoff relationship. Every company is a struggling within that issue, but the point is that each company is struggling with that issue at different position. Depending on the company's integrating capability, depending upon the company's learning capability, so it's very important to understand all this relationship in dynamics. If we truly develop our capability, we gotta first understand the nature of the relationship, the tradeoff relationship. And also, we have to understand how to improve all this relationship, in other words, how we shift, how we move this capability curve upward. And, what other necessary forces what are the fundamental forces that enable the, enable company to achieve that kind of shift? That's integrating capability, that's learning capability. And I have to say that learning capability, is at the center of. All this improvement, and basically learning capability, must be regarded as the, you know, major force, in determining the forms supply chain performance.
