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Category Archives: Management

A five-stage framework on “How the Mighty Fall”

…“Even so, a staged framework of how the mighty fall did emerge from the data. It’s not the definitive framework of corporate decline –companies clearly can fall without following this framework exactly (from factors like fraud, catastrophic bad luck, scandal, and so forth)—but it is an accurate description of the cases we studied for this effort…”

…”The model consists of five stages that proceed in sequence. Let me summarize the five stages here and then provide a more detailed description of each stage in the following pages.”

…“Stage 1: Hubris born of success. Great enterprises can become insulated by success; accumulated momentum can carry an enterprise forward, for a while, even if its leaders make poor decisions or lose discipline. Stage 1 kicks in when people become arrogant, regarding success virtually as an entitlement, and they lose sight of the true underlying factors that created success in the first place. When the rhetoric of success (“We’re successful because we do these specific things”) replaces penetrating understanding and insight (“We’re successful because we understand why we do these specific things and under what conditions they would no longer work”), decline will follow…”

…“Stage 2: Undisciplined pursuit of more. Hubris from Stage 1 (“We’re so great, we can do anything”) leads right into Stage 2, the Undisciplined Pursuit of More—more scale, more growth, more acclaim, more of whatever those in power see as “success”. Companies in Stage 2 stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence, or both. …”

…“Stage 3: Denial of risk and peril. As companies move into Stage 3, internal warning signs begin to mount, yet external results remain strong enough to “explain away” disturbing data or to suggest that the difficulties are “temporary” or “cyclic” or “not that bad”… In Stage 3, leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility…”

…“Stage 4: Grasping for salvation. The cumulative peril and/or risks-gone-bad of Stage 3 assert themselves, throwing the enterprise into a sharp decline visible to all. The critical question is, How does its leadership respond? By lurching for a quick salvation… Those who grasp for salvation have fallen into Stage 4. Common “saviors” include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a dramatic cultural revolution … or any number of other silverbullet solutions. Initial results from taking dramatic action may appear positive, but they do not last.”

…“Stage 5: Capitulation to irrelevance or death. The longer a company remains in Stage 4, repeatedly grasping for silver bullets, the more likely it will spiral downward. In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future … and in the most extreme cases, the enterprise simply dies outright”

Jim Collins (2009) HOW THE MIGHTY FALL and some companies never give in; Pp 19-23; Ed. The Random House Business Books; London; UK.

Check Jim Collins book page here. Buy the book from here.

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Posted by on January 20, 2011 in Management, Uncategorized

 

Good to Great (or why Good is the enemy of Great)

…“Here, then is an overview of the framework of concepts and a preview of what’s to come in the rest of the book…”

“Level 5 Leadership. We were surprised, shocked really, to discover the type of leadership required for turning a good company into a great one. Compared to high-profile leaders with big personalities who make headlines and become celebrities, the good-to-great leaders seem to have come from Mars. Self-effacing, quiet, reserved, even shy—these leaders are a paradoxical blend of personal humility and professional will. They are more like Lincoln and Socrates than Patton or Caesar.”

“First Who … Then What. We expected that good-to-great leaders would begin by setting a new vision and strategy. We found instead that they first got the right people on the bus, the wrong people off the bus, and the right people on the right seats—and then they figured out where to drive it. The old adage “People are your most important asset” turns out to be wrong. People are not your most important asset. The right people are.”

“Confront the Brutal Facts (Yet Never Lose Faith). We learned that a former prisoner of war had more to teach us about what it takes to find a path to greatness than most books on corporate strategy. Every good-to-great company embraced what we came to call the Stockdale Paradox: You must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, AND at the same time have the discipline to confront the brutal facts of your current reality, whatever they might be.”

The Hedgehog Concept (Simplicity within the Three Circles). To go from good to great requires transcending the curse of competence. Just because something is your core business—just because you’ve been doing it for years or perhaps even decades—does not necessarily mean you can be the best in the world at it. And if you cannot be the best in the world at your core business, then your core business absolutely cannot form the basis of a great company…”

A Culture of Discipline. All companies have a culture, some companies have discipline, but few companies have a culture of discipline. When you have disciplined people, you don’t need hierarchy. When you have disciplined thought, you don’t need bureaucracy. When you have disciplined action, you don’t need excessive controls. When you have disciplined action, you don’t need excessive controls. When you combine a culture of discipline with an ethic of entrepreneurship, you get the magical alchemy of great performance”

Technology Accelerators. Good-to-great companies think differently about the role of technology. They never use technology as the primary means of igniting a transformation. Yet, paradoxically, they are pioneers in the application of carefully selected technologies. We learned that technology by itself is never a primary, root cause of either greatness or decline.”

Jim Collins (2001) Good to Great; Pp 12-14; Ed. The Random House Business Books; London; UK. Jim Collins Book Page here. Buy it from here.

 
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Posted by on January 4, 2011 in Management

 

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The Beer Game as explained in Lean Thinking; How to promote flow

“The Beer Game or JIT Game is a simple exercise in which 5 people take roles in a four-stage production process folding and packing three colors of paper boxes. (See figure below)

Beer Game or JIT MIT game

The first person is asked to bundle up and deliver quantities of unfolded boxes in three colors to the two pre-assembly stations. The quantities are in response to a customer order. One pre-assembly station folds the large boxes while the other pre-assembly station folds the small boxes and both stations secure their boxes with a rubber band. The boxes are then passed ahead to the assembly station where the fourth player opens the large box and places the small box inside. The player writes out a ticket, folds it, places it on topof the small box, and then closes the large box and secures it with a rubber band. The box is then passed to quality control/dispatch where the fifth player opens the large box and checks to see that the ticket is present and properly written. This player signs and stamps the ticket before placing it back on top of the small box. The large box is then closed, secured with a rubber band, and delivered to the customer.

The players are told to work at their own pace to produce the three colors of box in response to the customer order. Soon every player is trying furiously to complete his tasks, first for one color of box, then for the next. However, a huge mountain of boxes quickly builds up in front of the fourth player, who has a bigger job than the others. In addition, the customer announces that he wants to change his order, to receive first whichever color of box the team has left till last. This quickly produces even more of a pile-up as the wrong color boxes are pushed to the side so the right color can get through.

The team of five is then asked what’s wrong and what could be done about it. The answer is always the same: “The fourth player is the bottleneck so we need to add another worker to the assembly step and build a storage area between steps two and three”.

The game coordinator then suggests that instead the five players should try a pull system by making only five boxes at a time and only when asked (pulled) by the next player downstream. To the player’s amazement, the whole activity proceeds smoothly, with oly a tiny buildup of boxes between steps two and three. They then play two more rounds, reducing the lot size to three and then to one, eventually achieving perfectly smooth flow and no buildup of boxes at all.

Next the game coordinator says the customer is going to vary his orders at random between the three colors of boxes and asks what will happen. The supplier executives recognize this situation as the key headache in their lives and predict chaos. But, of course, with no boxes piled up in inventory, it’s a simple matter to switch from one color to the next.

As the supplier’s managers are scratching their heads, the team moves from games to reality by suggesting that the exact same techniques should be introduced in the shop floor activities.”

Womack, James P. and Jones, Daniel T. Lean Thinking. Banish waste and create wealth in your corporation. Pp 208-209. Ed Simon & Schuster UK, Ltd. 2003. London, UK.

More resources on the beer game:

The Beer Distribution Game:    http://www.beergame.lim.ethz.ch/

The BeerGame Portal:    http://www.beergame.org

 

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This post is for Kike, my faithful university class mate

[Today] the challenges that so many companies are making are more than a response to “globalization”. They denote nothing less than the obsolence of the corporate model many of us have grown up with. For some pople it won’t be easy to let go of old concepts, old hierarchies, old sources of power-but it’s mandatory to think anew.

-Vernon R. Loucks, Jr. Chairman and CEO

Baxter International, in Review, 1990.

Taylorism and Professional Education.

“Objective observers are becoming increasingly aware of the need to consider the manufacturing process as a whole rather than as an object for piecewise suboptimizaition. This holistic, or system viewpoint must include manufacturer’s relations with subcontractors and suppliers as well as customers… If manufacturing engineers and manufacturing operations managers are to contribute effectively to the redesign of the workplace, it seems obvious that their professional training must include a recognition of the new integrated manufacturing system reality and how to deal with it effectively…

The American manufacturing environment is now in a rapid state of change. Yet, our business schools and engineering schools have not yet begun to provide the leadership that this restructuring of the American manufacturing environment demands. Some observers believe that American manufacturing managers have been late coming to the party, that they have been slow to recognize the advantages of Japanese and, to a lesser degree, European developments… As I see the situation, American business leaders are now well in advance of engineering and business schools in recognizing and practicing total quality principles, participative management, worker empowerment, and the like. If this perception is correct, why is it so? My answer will be that American professional school faculties have not abandoned Taylorism.”

Taylorism

Frederick Winston Taylor is high in the pantheon of American engineering heroes (Copley, 1923). In his obsessive optimization of individual rigid separation of thinking from doing, Taylor is the paradigmatic manufacturing engineer. Taylor is important, not merely because he made revolutionary contributions to the manufacturing canon, but also because the general style he set became the universal paradigm for American engineering practice and for engineering education, and remains so even today.

I intend in this paper to focus on how the elements of Taylorism are applied in the workplace and in the engineering classroom and why this environment is no longer right for modern America. I hold that Taylorism continues to be a major obstacle in our path to manufacturing efficiency and that it must be replaced as the central element of our engineering educational philosophy as well.”

The essential elements of Taylorism

“What are the essential elements of “Tayloristic” engineering practice that currently inhibit technical progress? I suggest that the following seven are critical:

  1. Analytic bottom-up approach, where analytic here is used in the classical sense of “breaking into components parts or elements.”
  2. The absence of goal-definition phase in normal engineering design practice.
  3. Engineering practice in a vacuum, without regard to human factors.
  4. The hierarchical, nonprofessional style of current American engineering practice.
  5. The fantasy of “value-free design”.
  6. The traditional Taylor practice of separating thinking from doing
  7. Strong emphasis on individual reward for individual effort.

Analogous to Taylor’s procedure of breaking down the manufacturing process into elemental steps, the first step in the engineering design process is the careful division of the overall task into simple sub elements and assigning these parts to individuals or teams for detailed design. This is so simple and obvious, and it works so well in certain practical design tasks and in engineering design education, that we may fail to understand the deeper implications of this step.

But these are only a few of the more obvious implications of the analytic “bottom-up” Tayloristic approach to engineering. One other implication may be somewhat less obvious. The classically trained engineering “bottom-upper” accepts the goals of a project as given. Such engineering goals are embodied in the “specification sheet”. How could it be otherwise? The classically trained engineer may ask. How can one design or manufacture something without a specification sheet or a blueprint? This question may be perfectly logical when applied to a conventional, well understood object but irrational when we face the unknown. By insisting on a well developed and complete set of specifications before one can begin the design and production of a new and untried object, the engineer removes himself from the most exciting, creative step; helping to set the specifications in the first place. But this is exactly the way we currently tech engineers to think and to design.

In engineering education, the Tayloristic approach seems so obvious that it is universal. We begin with the simplest mechanisms and equations, then proceed step-by-step to more complex devices and mathematics, in a bottom-up manner. Thus, the budding engineer is taught without words to accept engineering reality as susceptible to decomposition into simpler sub-units best handled in isolation, a hierarchical management approach with professors as “bosses” who “think” and students as “workers” who “do,” and an absence of discussion of goals, except for questions that are meant to elicit what the boss wants.

If engineering educators inculcate reverence for inviolate specifications, as we continue to do, we are also implying that goals are external to the design process and are to be set by someone else. This absence of the goal-definition phase is the second major distinguishing feature of conventional Tayloristic engineering practice that is crippling our national attempt to regain manufacturing leadership in world markets.

The third crippling attribute is the engineering practice in a mechanistic vacuum, without regard to human factors. Human factors must enter into the design, production, use, and especially product retirement. Yet, none of these essential steps is considered currently in engineering education. Humans will use the objects we design and build, but we engineers easily divorce ourselves from responsibility to these human users if we can.

A fourth debilitating attribute of current American engineering practice is its hierarchical, nonprofessional attitude. Conventionally trained engineers accept that they do not have a say in setting specifications for the design object, or in how the product may be manufactured, or in providing graceful retirement from service. They accept that they are not professionals with an overarching professional responsibility to society for their work. They accept the fact that they are employees and thus should be told what to do. And we engineering educators seem to agree. For the mots part, we are not registered professional engineers, and we do not encourage our students to look upon themselves as professionals in training, with professional registration as the confirmation of professional status.

The fifth element in current American engineering practice that gives me concern may grow out of the dehumanizing attitude mentioned as number three above. It is the fantasy that engineers are engaged in value-free design. This can lead to the belief that designers and builders have no responsibility for the use to which our products are put.

One of the primary features of Taylorism is insistence on a rigid separation of thinking from doing. Taylor prohibited participation by production workers in the organization, planning and direction of the manufacturing process. Taylor required his workers to do exactly as they were told to do and no more. This authoritarian stance is carried over into engineering education through its rigid exclusion of students from participation in the planning, organization, and direction of the education process. We all learn by example, and this is one of those debilitating attitudes engineers learn without being conscious of it.

Individual reward for individual effort in the marketplace implies an emphasis on piecework, separate post production quality inspection, and a resistance to the team concept. For example, auto factory line foremen long waged war on any sort of worker interaction on the line. Even talking was forbidden in the early days, and this clash with the traditional American value of mutual support no doubt hastened unionization. IN engineering education, this attribute causes us currently to focus excessively on individual student performance and active discouragement of student team formation. As a result engineering graduates have little or no experience in team building or cooperative effort. Thus, when they do run into the need for team effort, many engineers exhibit resistance, discomfort, and clumsiness at interpersonal professional relationships. Engineers feel the “need” to know who is the boss and for a strong management structure. The “leaderless group” leaves them distinctly uncomfortable (Gibson, 1981). Engineering faculty members often carry this individualism even further. I have been present at a number of faculty promotion and tenure committee meetings at which it was seriously proposed to discount publications according to the number of authors on the paper. Under this concept a two author paper would find each author awarded half a publication, and so on. Unconscious Taylorism in engineer is, I believe, responsible for the sabotage of many participative management programs”

This text has been extracted from John E. Gibson (1992) Manufacturing Systems; foundations of world-class practice. Pp 149-157.  National Academy Press; Washinton, 1992.

 
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Posted by on February 25, 2010 in efficiency, Management, Manufacturing

 

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The machine that changed the world…… 20 years ago!!

“ So far we’ve talked about innovations that involve the introduction in production vehicles of ideas already fairly well understood on the technical level. We’ve listed a number of advances of this type in the 1980s, and many more will be available in the 1990s -in particular, the application of electronics to mechanical vehicle systems such as vehicle suspension and the availability of mobile communications at lower cost in a much wider variety of vehicles. But what about epochal innovations– really big leaps in technological know-how such as would be entailed in workable fuel-cell power units or all-plastic body structures or sophisticated navigation and congestion-avoidance systems? As we will see, the 1990s may prove a time for such innovations. Can lean producers respond to these much more daunting challenges?

In fact, the world auto industry has lived during its first century in a benign environment -demand for its products has increased continually, even in the most developed countries; space has been available in most areas to expand road networks greatly; and the earth’s atmosphere has been able to tolerate ever-growing use of motor vehicles, with minor technical fixes in the 1970s and 1980s designed to solve smog problems in congested urban areas. Shortly, the environment for operating motor vehicles may become much more demanding.

Demand for cars is now close so saturation in North America, Japan, and the western half of Europe. A small amount of incremental growth will be possible in the 1990s, but by the end of the century producers in these markets will need to provide consumers with something new if they want to increase theirs sales volume (measured in dollars or marks or yen rather than units). Moreover, the growth of vehicle use and increasing resistance to road building have made the road systems of these regions steadily more congested, gradually stripping motor-vehicle use of its pleasure…” Pp135-137

Lexus Hybrid Drive Car

The Luxury Hybrid machine from Toyota

“ …Our goal is to specify the ideal enterprise in much the way buyers of such a craft-built cars as the Aston Martin used to specify the car of their dreams. Unfortunately, no such dream machine currently exists, so we will create it: Multiregional Motors (MRM).

The management challenge, we believe, is simple in concept: to devise a form of enterprise that functions smoothly on a multiregional basis and gains the advantage of close contact with local markets and the presence as an insider in each of the major regios. At the same time, it must benefit from access to systems for global production, supply, product development, technology acquisition, finance, and distribution…

…The key features of what we call Multiregional Motors are as follows:

An integrated, global personnel system that promotes personnel from any country in the company as if nationality did not exist. Achieving this goal obviously will require great attention to learning languages and socialization and a willingness on the part of younger personnel to work for much of their career outside their home country. However, we already see evidence that younger managers find career paths of this type attractive….

A set of mechanisms for continuous, horizontal information flow among manufacturing, supply systems, product development, technology acquisition, and distribution. The best way to put these mechanisms in place is to develop strong shusa-led teams for product development, which brings these skills together with a clear objective…

Teams would stay together for the life of the product, and team members would then be rotated to other product-development teams, quite possibly in other regions and even in different specialties (for example, product planning, supplier coordination, marketing). In this way the key mechanism of information flow would be employees themselves as they travel among technical specialties and across the regions of the company. Everyone would stay fresh and a broad network of horizontal information channels would develop across the company…

A mechanism for coordinating the development of new products in each region and facilitating their sale as niche products in other regions -without producing lowest-common denominator products. The logical way to accomplish this goal is to authorize each region to develop a full set of products for its regional market. Other regions may order these products for cross shipment as niche products wherever demand warrants…” Pp 223 – 227

Womack P. James,  T. Jones Daniel &  Roos Daniel (1990) The machine that changed the world. How Lean Production revolutionized the Global Car Wars. Ed. Simon & Schuster UK, Ltd. UK.

 

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