Evolving Excellence

Sloan Tackles Lean Accounting

After spending much of the past several years deriding most business schools, I've become increasingly favorable toward MIT's Sloan school and their publication, Sloan Management Review.  In fact, it's the only such publication I currently subscribe to, primarily because they actually attempt to investigate the real world.  Or at least the world I seem to live in.  I'm sure our fellow lean blog buddy Mark Graban will be happy to hear that.

This latest issue is no exception, and includes a top-notch article by my friend Brian Maskell of BMA, one of the leading proponents of lean accounting.  The article, titled How to Manage Through Worse-Before-Better, tackles that well-know lean conundrum: the financial results as reported by traditional P&L and balance statements trail the operational results of lean, which can create a conflict between CFO's and operations leaders.  Unfortunately Sloan makes a big deal about the double-knot top secret copyright, so I need to be careful how much I quote.

Maskell describes the lean journey of a manufacturer of industrial sensors, and the conflicts created between operations and accounting.

During the first six months, Caspian, whose total revenues were about $225 million, achieved significant operating improvements.  Product lead times to customers and on-time delivery performance were up sharply.  Over the next six months, operational performance continued to show impressive gains, and the vice president of operations was pleased.  Meanwhile, customer service was making significant strides as well, and with greater efficiences the company was able to reduce the number of direct labor employees involved in production.  Payroll savings in a single value stream alone amounted to more than $40,000 per month - around 20%.

However, the CFO saw a radically different picture.  During the same initial months, she saw no financial improvement at all: Sales were flat, and costs didn't decline.  During the second half of the year, Caspian's revenues actually fell by 17%, and profits declined by an even bigger percentage.

Now where have we heard that story before?  Anyone that has attended the Lean Accounting Summit knows what is going on.  Maskell then dives into how lean accounting can augment traditional cost accounting.

Our approach involves replacing (or, at a minimum, augmenting) the traditional cost-accounting system with a new, transparent accounting system that tracks the company's value streams, which incorporate all of the value-adding and non-value-adding activities required to bring a product or service from start to finish.

He notes how the beginning stages of a lean transformation can affect customer behavior, thereby impacting financial results.

Consider what happened at Caspian during the first three years of lean transformation.  The company eliminated most of the queues in the production processes.  This led to a reduction in lead time from 12 weeks to around one week.  At the same time, because of improved reliability and quality, the on-time delivery percentage to customers went from the low 70s to the high 90s.

As customers come to rely on improved lead times and on-time performance, they begin to alter their buying habits, shrinking their on-site inventories.  Cutting back on inventory can have a significant impact on sales.  Although suppliers might see only a modest drop in revenue, their profits can drop by more.

And of course the internal factors.

Internally, there is dramatic improvement in operating performance as well.  In particular, the cycle time for taking a product from raw material to finished goods shrinks.  As cycle time drops, so does the need for in-process inventory.  In response [to a shift from push to pull production] the need for finished goods inventory drops from months of production to days of production.

As both types of inventories drop, the "good news" is that operating cash flow improves dramatically as unneeded inventory is sold.  The "bad news" is that most cost systems allocate fixed costs to products that are manufactured during the financial reporting period.  When [inventory is declining], fixed costs that were previously capitalized on the balance sheet must be added back, thereby reducing profits.

The authors go on to describe value stream costing, and especially the "plain English" financial statement that clarifies profit at the value stream level.  They also delve into nuances such as adjusting for productivity and right-sizing.  For more on the subject, I highly recommend attending the Lean Accounting Summit; this year's event will be held in Las Vegas this September.  I hope to see you there!

Southwest's Colleen Barrett, Servant

Much has been written about Southwest Airlines and co-founder Herb Kelleher, particularly with regards to the people-centric style of leadership.  But in many respects it was Colleen Barrett who created that culture.

There aren't too many major airline executives quite like Southwest Airlines' Colleen Barrett, 63, who rose from legal secretary to the front of the corporate suite over a span of 23 years. It was Barrett, working closely with mentor and company co-founder Herb Kelleher, who pioneered Southwest's unusual and now legendary approach to customer service, which aims to treat the company's 35,000 employees like family, to make the workplace fun -- and then to carry that upbeat attitude to consumers. It's a strategy that has made an upstart discount carrier into America's busiest airline by passenger volume.

Let's dive into that a bit.

"Customer service is really my passion," Barrett said, adding that she probably spends 85% of her time as president dealing with worker issues -- what she called "pro-active customer service to our employees" -- with the underlying idea that a happy and motivated workforce will essentially extend that goodwill to Southwest's customers. "When we have employees who have a problem -- or have employees who see a passenger having a problem -- we adopt them, and we really work hard to try to make something optimistic come out of whatever the situation is, to try to make people feel good whatever the dilemma is that they're dealing with," Barrett said.

On unusual aspect of her philosophy is that employees come before customers, although that's intentional in order to ultimately drive the most value to the customer.

It was Barrett who made the Golden Rule -- which was drilled into her by her mother when she was growing up -- into the company motto and model. She also developed the unusual pyramid that focuses on employee satisfaction and issues first and foremost, followed by the needs of the passengers, which in turn creates a profitable business that satisfies the shareholders below them. A typical move by Barrett, during an earlier economic slowdown, was to offer reservation clerks a chance to stay with the company rather than laying them off.

That philosophy, coupled with the brilliance to hedge fuel costs, is creating remarkable success even in today's floundering air industry.  Once again, it all comes down to people.

 

Lean Hospitals - Q&A with Mark Graban

Fellow lean blogger Mark Graban is the author of the just-published Lean Hospitals.  The following is a brief Q&A with him on lean in healthcare, although "brief" may be a bit of a misnomer.  Mark is obviously passionate about the subject, and therefore can be almost as verbose as I am.  In fact, in several places I'll link to the full Q&A on Superfactory for the rest of the discussion.

1.  From a lean perspective, how are hospitals and manufacturing the same and different?

There are many things that are similar about factories and hospitals. They both involve, at a real basic level, people doing work and people who manage the people doing their work. There is a lot of waste in hospital processes (the standard “8 Types of Waste” actually works pretty well in a hospital) and often times there isn’t “a process” to speak of. What you often have is individuals or departments (or even sub-department silos) each working hard independently while the handoffs across the “value stream” (or “patient pathway,” as many in healthcare have traditionally referred to it) are botched because nobody owns the overall process. Most delays and waiting time in hospitals is probably caused by poorly planned handoffs. So the value stream view of the world helps, bringing people from different areas together to actually map out the entire process -- it’s very eye-opening to people! They learn to identify waste and to, more importantly, drive improvement in their own workplace.

Read more...

2. What are examples of lean improvements in hospitals?

There are many examples of department, value stream, and hospital-wide improvements as a result of Lean. Lean improvements can benefit all stakeholders -- the patients, the staff (employees and contracted physicians), and the hospital itself.

First off, in the patient safety and quality area, Allegheny Hospital in Pittsburgh used Lean methods to reduce patient deaths related to central-line-associated blood stream infections by 95%. This is really powerful stuff. Focusing the Lean methods of standardized work and waste elimination can really have a life-saving impact. You see similar results in the use of the “checklists” methodology, leading to reductions in infections, bed sores, and other preventable “adverse events” that occur to patients far too frequently. These improvements obviously help patients, they help staff (who want a method to help prevent patient harm and unneeded stress), and the hospital’s costs.

Read more...

3.  What is the potential for lean in hospitals?  Can it change the healthcare policy dynamic?

Much of the public policy or political discussion of healthcare has been focused on “how do we pay for healthcare?” Since the cost of providing healthcare in the United States increases roughly 10% per year (and this doesn’t mean the cost of the providing the same care increases that much), there are pressures to control these increases. Unfortunately, when insurers and payers (public or private) focus on “cutting costs,” they are really just “cutting prices,” the way “non-Lean” companies pressure suppliers to unilaterally cut prices. The Toyota model is one of working with suppliers, in a long-term partnership, to reduce true costs and sharing the savings. Cutting the true costs of providing healthcare is a way for us to afford new technologies and treatments without increasing our total spending.

Read more...

4.  What hospitals (or networks, etc) have embraced lean?

I almost hesitate to name names, since so many hospitals are doing amazing things with Lean “under the radar.” I do think, though, it’s important for hospitals to promote what they’re working on to spread the word about Lean. A few of the noted and written about leaders in the U.S. include Virginia Mason Medical Center (Seattle) and ThedaCare (Wisconsin). Virginia Mason (which I’ve visited) and ThedaCare have had extremely strong leadership from the CEO level. At ThedaCare, John Toussaint is an MD and CEO, so that leadership played a major role in their Lean progress.

Read more...

5.  Although presumably manufacturers are further along on the lean curve than hospitals, I'm betting that there are still things that lean manufacturers could learn from lean hospitals.  Anything come to mind?

I think many hospitals are doing a great job of remembering BOTH pillars of the Toyota Production System -- continuous improvement and “respect for humanity.” Many hospitals are taking a very people-centered view of Lean, making sure that Lean benefits all stakeholders, including patients, employees, and physicians. I break out physicians into a separate group because it’s a different (and more complicated) dynamic than “employee/manager.”

I encourage my friends in manufacturing to tour a hospital that is working on Lean because it will really force them to think about the basics of Lean. I think that will spur creativity that will help them back in their own process. I always cringe when I see a question like, “I am looking for a cement company that has implemented Lean” because that means someone is looking for shortcuts and to copy. If hospitals (especially the early ones who had nobody to copy) can figure it out, so can you, in your own industry.

Read more...

6.  What is the best way for a hospital (or medical group, or clinic?) to begin the lean journey?

I think hospitals need to learn the lessons from failed Lean efforts in manufacturing and other industries. You have to “start from need” as Ohno said. What are you trying to improve and why? One failure mode is the approach of using a tool, or a set of Lean tools, without tying it to the mission of the organization and existing measures. Lean can improve safety, quality, waiting times, costs, employee satisfaction -- hospitals are typically already measuring these things, Lean needs to support that.

Secondly, you can’t rely on isolated “kaizen events” to make you Lean. Kaizen events (or “rapid improvement events” or “rapid process improvement workshops”) are as appealing to healthcare leaders as they are to factory leaders. Just one week and your process will be “Lean” is often the appeal. Well, changes happen, but in the rush, tools might be implemented and improvements might be made, but without changing the underlying management system. Even Virginia Mason Medical Center, seen as a leader in the use of Lean, admits in their own publication that they had significant backsliding in 60% of their kaizen events. Many hospitals are being successful by taking a more systemic approach to Lean improvements -- training employees and managers, planning for how they are going to make Lean a management system and a part of the culture rather than a one-time event.

Read more...

Again, the full Q&A is here, and you can learn more about his Lean Hospitals book here.  Until Amazon catches up with shipping delays, it can be ordered for immediate ship here.  Thanks to Mark for the very detailed answers to my questions!

The Sense of Manufacturing

I live a couple blocks off a nice wide stretch of beach that's about five miles long with an extinct volcano sitting right at my end of it.   Two or three days each week I try to run to the other end and back, although I'll readily admit "run" is a bit of a stretch.  A big stretch.  Usually it ends up being a leisurely stroll, taking in the sounds and sights while clearing the brain and remembering that life definitely does not suck.  Now you probably understand why so many of my posts are just a little out of the box... after all, salt air can be corrosive...

A few weeks ago I tried something a friend of mine suggested: see how far I can walk with my eyes shut and still hit a distant spot in the sand.  Morro Bay has a population of only 10,000 so there are very few people on the beach, and most of them are surfing, so the prospect of walking into someone isn't exactly a worry.  Wandering into the water or stepping on a seagull are.  The purpose of my friend's "blind" challenge is two-fold: get more in touch with your other senses and then trusting those senses as much as you do your eyes.

My first attempt lasted about five seconds before opening my eyes in panic.  Eventually I went thirty seconds, then a minute, then two minutes.  That's currently my limit, and it took quite a while to achieve.  But a funny thing happened: I became very attuned to the direction of the sun on my face, the sound of the waves, the wind on my arms, and the angle of the sand as it slopes toward the sea.  I could aim for a spot on the sand far in front of me, even right on the water's edge, and nail it.  In many respects it was a cathartic experience.

This got me to thinking about how accustomed we've become to trusting our eyes.  Sure, each sense has a primary purpose and I wouldn't expect my eyes to tell me if a seared ahi salad was tasty.  But at what point due we rely on the primary purpose of a sense without even using the input of the others?

I'm guessing many of us are in our early 40's, or at least that's what I like to believe.  Like me, you probably remember your first calculator, that four-function monster.  Then by the time we went to college we had a multi-function.  But we were taught to first understand what the numbers meant by doing equations by hand.  We obtained a sense of proportion and of accuracy based on the inputs.  Does that still happen today?

Similarly, and my point (finally!), is the sense of "how to manufacture."  When your customer service people receive an order, do they simply key it into the almighty MRP?  Or are they conscious that an order is far larger than typical?  When your shop floor folks decide to run an order, do they simply look at the MRP screen or do they think about upcoming orders and the nuances involved in running them, and use some judgment to optimize the runs?  Have they developed the "sense" of manufacturing, or have they suboptimized that sense to automated tools?  Would they know that they are making a few million extra candy bars?

Sometimes you just have to touch it, feel it, and see it.  Upcoming orders on a white board, excessive scrap on the floor, a product that just doesn't look right.  Develop that competency and that awareness.  If you must use electronic tools, use them to augment the senses, not replace them.

In the meantime I might just try running on the beach on a moonless night, using the wind and sound to guide me.  Just call me Batman.  Or foolish waterboy, depending on the outcome.

Supply and Demand for Lawyers... and Doctors

A hat tip to David at Photon Courier for this story at Carpe Diem, comparing the supply and demand for lawyers and doctors.

In 1963, there were only 135 law schools in the U.S., so the increase to 200 today represents almost a 50% increase over the last 45 years in the number of U.S. law schools. Unfortunately, we've witnessed exactly the opposite trend in the number of medical schools. There are 129 medical schools in the U.S., which is less than the number of medical schools 100 years ago (166), even though the U.S. population has increased by 300%. Consider also that the number of medical students in the U.S. has remained constant at 67,000 for at least the period between 1994 and 2005, according to this report, and perhaps much longer. The number of applicants to medical school keeps going up, by almost 22% between 2003 (34,786) and 2007 (42,315), despite the fact that the number of students admitted has gone up by only about 7% (from 16,538 to 17,759) over that period.

Apparently law schools are responding to the demand by creating more supply, while medical schools aren't.  Mark Perry's analysis continues...

If we had 129 law schools (instead of 200) and 200 medical schools in the U.S. (instead of 129), it would probably go a long way to solving our "health care crisis." More MDs at much lower salaries along with fewer lawyers and lawsuits would be a good thing, no?

Probably.  Or as one person commented on his post,

Maybe we would have more medical schools if doctors could make a living suing lawyers for malpractice.

Touche!

SAP Gets Fat, You Get Thin

So you've taken the dive into SAP or Oracle instead of simply investing in a few whiteboards and some beer.  That's too bad, but it's not too late.  You could still try the simpler approach.  Or stick with SAP... and now realize you have to pay even more on top of the original software, licenses, maintenance fees, and implementation wizards. Yes, SAP wants more out of your wallet.

Two of the biggest makers of business software have raised prices, a sign that consolidation in the industry may be easing the competition over prices that has been a hallmark of the last decade.  SAP AG said Wednesday that it has raised prices for the ongoing support and customer-service fees, known as maintenance, that are part of large software purchases. The move comes one month after rival Oracle Corp. raised list prices for its software.

I'm sure there's a reason, right?  Nope.  It's just because they can.

Unlike price increases for food, fuel and many other commodities, the changes in software don't stem from a shortage of supply or a rise in demand.  They are attempts by software makers to increase their bottom lines, said Brendan Barnicle, an analyst at Pacific Crest Securities Inc.

And that increase can hurt other projects.  Projects that can directly impact competitiveness.

Owens-Illinois is in the middle of installing SAP's software, and Mr. Masney said he is compensating for the cost of the project by cutting spending in other areas.  Mr. Masney also buys database software from Oracle and said the new price models for both companies could have a "ripple effect" for tech departments.

So what was the cost-benefit analysis on SAP again?  And how does that compare with some investment in making the your operations lean and efficient, plus perhaps a couple whiteboards?

Creating an Internal Manufacturing Competency

At a time when most companies are fleeing manufacturing in fear, a handful are still seeing it as a way to create competitive advantage.

In an old seaport city near its Osaka headquarters, Sharp Corp. is building a $9 billion factory complex the size of 32 baseball stadiums to make liquid-crystal-display panels and solar panels. The complex, which Sharp broke ground last November, will be the world's largest LCD and next-generation solar panel plant when it is ready sometime in the next fiscal year, ending March 2010.

One of the unique attributes of Sharp's new factory, although similar to a concept that Toyota and some other auto companies embrace, is the co-location of suppliers.

It will house most of its major suppliers on the same premises. Designed for both LCD's and solar panels, which share a similar manufacturing process, it will include factories for its major suppliers including Asahi Glass Co. and Corning Inc., which makes the glass for the panels. 

Sharps' investment runs counter to the philosophy of many other electronics firms.

While Apple Inc. is leading a trend in the electronics industry to outsource hardware manufacturing and focus on design and software, Sharp is making a huge bet that keeping manufacturing of LCD and solar panels in-house will give it a big competitive advantage.

Still, if Sharp continues to be successful, the focused-manufacturing strategy could be a model for other Japanese electronics makers, which find Apple's outsourcing model a turnoff and are still trying to figure out a way to remain a manufacturer while growing its profit in an industry that is rapidly commoditizing.

That commoditizing is a concern, so CEO Katsuhiko Machida is betting on a change in market dynamics.

"There will eventually be no distinction between a parts manufacturer and an electronics maker," says Mr. Machida, adding that LCD panels have the potential to embed so much technology that a television in the future could consist of just a panel and a plastic frame.  When that happens, Mr. Machida figures that the parts makers will profit even if the finished goods become commoditized.

Good luck to Mr. Machida; it's great to see a CEO recognize the value of an internal manufacturing competency.

A United Pilot Remembers the Customer

Airlines have been cutting back on all kinds of services, ranging from removing pillows to charging for aisle seats and even peanuts.  Yes, rising fuel costs are creating a perfect storm that threatens their existence, but the ultimate success of the airlines, or any business or organization for that matter, still rests with the customer.  Luckily at least a couple people in that industry still remember that fundamental concept.  Coincidentally I was reading that article on a United flight from Chicago to San Francisco.

Gerrity, 46 and a pilot with United for 16 years, is one of several commercial pilots who have taken it upon themselves to make flying more enjoyable for passengers who often view air travel as a less-than-pleasant means of getting from here to there.

Gerrity credits United colleague Capt. Denny Flanagan for his inspiration. "I was a co-pilot with Denny 12 years ago, and he showed me some neat things to do for the passengers that just end up making everyone feel good. I jumped right on the bandwagon. It's a matter of treating people with the same kindness and respect that you would show guests coming to your home."

So just who is this Flanagan fellow?

Flanagan, 57 and with United for 22 years, said he treats every passenger as though the flight is his or her first. He has been known to buy McDonald's hamburgers for a planeload on long delays, call the parents of unaccompanied children who are on his flights and go into the cargo compartment of the aircraft and take photos of the pets there to show their anxious owners that the critters are fine. He's also taken in-cabin pets outside for a quick potty break before the flight boards.

On flight delays, Flanagan will make coffee in the airplane's galley and serve it to the passengers in the gate area, answering questions and taking a bit of the sting out of the situation. "I lead by example," said Flanagan. "I never ask the flight attendants to help me do this, but invariably, by the time I'm on the third pot of coffee, they'll be out serving with me," said Flanagan.

That example creates a similar response from his customers.

Flanagan's kindness and respect begets the same from his passengers. "Things just sort of snowball," he said. "If we have soldiers traveling, we'll move them up to first class if we have room. And if there isn't space, I'll get the gate agent's permission to address the passengers in the gate area and I'll let them know that if there's anyone who would like to increase their travel experience today, if you have a great seat and would like to exchange it with any of the members of our armed forces traveling with us in appreciation for their sacrifice and service, just walk over and change seats with them."  Flanagan reports 100 percent participation.

Do you think those customers even think about complaining about the lack of pillows?

"On Capt. Flanagan's flights, there is a 50 percent improvement in customer satisfaction scores that specifically look at how likely someone will fly United again," points out United spokeswoman Robin Urbanski.

All it takes is a little realization that the customers... are customers.  The ones that pay the bills.

Manitowoc Leads the "Revival"

The media, unfortunately driving popular perception, continues to insist that North American manufacturing is dying.

Sure, U.S. banking is in trouble, but the longer-term and possibly more damaging threat to the nation's prosperity is the decline of the manufacturing sector. Late last year, the number of U.S. manufacturing jobs dropped below 14 million for the first time since 1950.

We continue to try to correct this perception with the facts.

America's manufacturing output, as measured by the Federal Reserve, is up seven-fold since 1950, but manufacturing jobs as a share of all jobs have fallen to 10% from 30%.  The problem, if it really is one, is not foreign competition or evil financiers. It is technology and productivity. In the 10 years ending in 2007, durable goods manufacturing productivity averaged an annual growth rate of 4.8%.

And even our friend Jim Womack has tried to use his considerable stature to change the presumption of manufacturing decline.

Manufacturing output has increased 11 percent in the last year. U.S. exports of manufactured goods are also up over 12 percent. Moreover, U.S. manufacturers consider the United States the most desirable country for expansion of their businesses over the next three years, according to a recent survey of 321 North American manufacturing executives released in mid-June by the National Association of Manufacturers, The Manufacturing Institute, the Canadian Manufacturers and Exporters and Deloitte Touche Tohmatsu. And 57 percent of U.S. manufacturers predicted they will become more globally competitive over the next five years.

But sometimes it takes a real story to really bring it home.

A rugged cadre of producers like these in Manitowoc have survived a decades-long shakeout of American manufacturing -- and are now leading a largely overlooked revival.  Many towns that have retained their factories -- and are adding manufacturing jobs in the face of a wider downturn -- share certain traits. They have a deep history of manufacturing and a pool of skilled laborers and entrepreneurs who still live there.

Another reason is that they understand the power of knowledge and speed.

Orion is the brainchild of an inveterate tinkerer, Neal Verfuerth, who was raised in a small town an hour south of Manitowoc. While looking for something to do during the long winters, when tuck-pointing halts, he started selling solar panels and developed an interest in alternative energy. He started Orion in 1996, initially distributing lights for other manufacturers, and by 2000, producing high-efficiency fixtures.

Mr. Verfuerth is convinced manufacturing needs to return to its vertical roots: A company should make most of its component parts itself. Outsourcing, he says, has diminished quality and service. Moreover, in the middle of the night, when he has an idea, he wants to be able to come to his factory and try to build it.

Sort of like our friend Dov Charney's short elevator trip.  Although I'm fairly sure Mr. Verfuerth doesn't share Dov's other "attributes."

Manufacturing is succeeding in North America.  Sometimes you just have to look past the bluster to find the facts.

Not Learning the First Time Around. Or the Second.

History is a funny thing; if you don't learn from it you're consigned to living it over and over again.  Who said that?  I don't know, but apparently the Detroit Three weren't listening.

For years, auto and energy industry watchers wondered how high the price of gas would have to climb before consumers in the U.S. -- still the world's biggest automobile market -- would change their driving habits. Now they know.

The change in consumer attitudes about fuel efficiency has been so swift and widespread that the American vehicle manufacturers have found themselves once again behind the curve relative to their Asian and European competitors, just as they did following the oil embargo of 1973.

Yes, it happened before.

Should Detroit have seen that "tipping point" coming? "Maybe, probably," says MacDuffie, admitting benefits of hindsight. "When gas prices spiked in 1980, the U.S. was making very big, gas-guzzling vehicles. So they were very vulnerable to competition from the Japanese and European manufacturers who were used to selling [fuel-efficient cars] in a market where gas prices were much higher. So you would think the U.S. automakers, having lived though that experience once, might be guarded about letting that happen again."

1973, 1980, 2008... history repeats over and over.  Why didn't they learn?

One reason they might have dropped their guard was the irresistible profit margin in light trucks. "The trucks and SUVs had fat profit margins. Even if [the automakers] saw it coming, it would have been hard to shift resources to build more hybrids. The U.S. auto industry has been struggling with a lot of problems for a long time," MacDuffie notes. "They felt that they could not move away from the SUVs and pickups because they needed the profits from those products to cope with the other difficulties they were having. ... Labor and benefits costs were one of the largest problems." Those costs also meant that Detroit "was slow to make their factories flexible," which in turn made it more difficult for them to shift quickly from one product to another, adds MacDuffie.

Of course hindsight is 20:20, or at least 20:40, even if it does give you multiple chances to learn.  So now what?

A question more important than whether Detroit should have seen the coming of the tipping point is what the U.S. Big Three and their competitors in Europe and Asia should do now, according to both MacDuffie and Guillen. "The long-term challenge is to develop truly competitive hybrid or hydrogen cars. We need to make the investments now, so that they become available in 15 or 20 years," Guillen suggests. "In the short run, we need to incrementally improve fuel efficiency and help people switch to more efficient cars." Late as they may be, MacDuffie says he is heartened by Detroit's aggressive investments in alternative engine technologies.

The first jolt created the rise of Toyota and Honda.  The next Kia and Hyundai.  Now...?  Perhaps Tata and Chery.  Pretty soon there won't be much left for the Detroit Three... if they don't learn from this latest reminder.