Jun 10, 2009 | Management, OE, Operations
Most efforts to improve Operational Efficiency (OE) have at their core the elimination of variation in a process. It starts by setting standards, measuring the variations, and then progressively eliminating the causes of the variations, until you have a repeatable process with minimum variation.
Terrific so far.
Change in an organisation, change of any sort, has at its core a dissatisfaction with the status quo, and a determination to change it, not necessarily by the CEO, or anybody with power, but by someone who is dissatisfied with the way things are.
How do these things sit together?
The value of process conformance leading to OE are undoubted, but in gaining the benefits, we eliminate, or at least minimise, the opportunity for change, which flourishes on diversity.
Change, or non conformance, brings risk and growth, high levels of conformance brings a death by boredom, but both are necessary for organisations to flourish.
This is another paradox that challenges the leadership of organisations, one not generally recognised by those who advocate “Lean” thinking, of which I am one, and its cousin “6 Sigma“, but something that leaders perhaps need to consider in the way they go about nurturing the culture of the organisations they run.
Jun 9, 2009 | Management, Operations
Further to the earlier post, “An agile demand chain” that drew the distinction between agility and flexibility, consider the differences between efficiency and agility.
In many plants, efficiency has been built at the expense of agility, as long runs of product dominate the thinking of many operational managements.
Agility without efficiency is a way to a quick commercial death, as competitors will be aggressive with prices once they realise their costs are lower than yours. The leading symptom is high unit costs driven by low machine availability.
Efficiency without agility will take far longer to impact, but ultimately is no less commercially lethal, as consumers will abandon an offering that becomes “stale” in a competitive environment. The symptom is high finished goods inventory to accommodate infrequent but long production runs .
Jun 4, 2009 | Management, Sales, Strategy
Great, the big presentation nailed it, the sale is made, the goal achieved.
When the cheering is over, and the empties from the celebration cleared away, perhaps a reflection on what really made the sale would be useful.
The presentation did not make the sale, it was just the last piece in the jigsaw.
The lead-up work that made the sale possible was made by the researcher who realised that the potential customer had a challenge your product could solve, or the truck driver who told you the competitive lead times were 6 weeks, and you can deliver in 3 days, or the operations guy who suggested that by adding an ingredient in your factory, you could eliminate a whole process in theirs, the sales people who nutted out the strategies in a Key Account Plan, and so on, you get the picture.
Industrial sales are usually made by a myriad of small things that together add up to something you can leverage, the presentation is only the end game, and is useless without the graft at the front end.
The graft is an organised process of gathering collating and prioritising market and customer intelligence, and matching that to the competitive advantages you can deliver, so the presentation can be produced, and sales gathered.
The font end is the hard bit, the presentation is the glory bit.
Jun 3, 2009 | Management, Strategy
The current debate in Australia about executive remuneration, kept alive recently by the departure of Sol Trujillo from Telstra, about who gets what, and how much is enough, is essentially a spurious debate about supply and demand for executive “talent” colored by individuals successfully marketing themselves as the new messiah.
However, it forgets that human beings are essentially herd animals, generally we want to belong to something that reflects our own values and views much more than we want another luxury car or boat, after the initial “need” is satisfied.
Belonging is a basic motivation that has largely been forgotten, and legislation will only serve to push it further into the background of peoples thinking, but it will not reduce the impact on peoples psychology.
Boards that set out to build an organisation to which people want to belong, will attract better talent at a much cheaper price than one that relies on just money.
Telstra paid Sol a pile, and got little back of the effort beyond a demoralized and “values free” enterprise.
Adios Sol, you took the dough, and added little, but whose fault is that?
Jun 2, 2009 | Management
The CEO of a significant business in an industry I know well was walked very recently after the collapse of profitability over the last 6 months.
From the outside, after looking at the public reports, a number of common misconceptions are evident:
- The expectation that the good times will continue to roll. This expectation affects the behavior of all stakeholders in all sorts of ways that are inconsistent with frugal management in tough times.
- They failed to plan for the “worst-case”, while taking all the benefits of the good times as they showed up.
- A scapegoat was necessary to demonstrate that those who were supposedly in charge, (in this case the board) really were in charge, and were prepared to take meaningful action.
- Forecasting has become an exercise in using spreadsheets to extrapolate the current trends at the expense of common sense.
Prudent management plans for the worst whilst hoping for the best.
Jun 2, 2009 | Management, Strategy
Did we ever need a better illustration of the hubris caused by a concreted in status quo than the sight of General Motors, the former pin up of American manufacturing might going into chapter 11 yesterday?
Ironically, over the past 25 years as GM struggled, it bought a number of other businesses, Hughes Aircraft for one, paying substantially more than the pundits believed they were worth, then turning them into cash bonanzas.
The question of why they could achieve this in their associated businesses, but not in their core should keep academics arguing for some time.
However, it will not stop the chain saw being applied over the next 6 months, and the probability that a new, improved GM, free of the hubris of the past, will emerge, but it will not be without pain.
Here’s hoping the now most influential shareholder, the US taxpayer, is being managed by someone with sufficient cahunas to inflict the pain now, so that the patient may live.
