Throwing In The Towel

by BILL WADDELL

Just to prove I have not always been anti-intellectual I want to start by acknowledging a debt of gratitude to a guy named Bob Hayes, a Harvard professor, who has been fighting the good fight for manufacturing for a long, long time.  He and a couple of other guys wrote a book called Dynamic Manufacturing over twenty years ago that had a huge impact on my thinking - still does for that matter.  The book covered a lot of ground but their chapter on management infrastructure was profound.

To poorly paraphrase, the gist of it is that the organizational structure, accounting and financial systems, quality system, production and inventory control system, performance measurements and capital investment criteria all make up the management infrastructure of the company.  On the other hand, the structure of the business is the physical part - the 'bricks and mortar'.  The structure - including stuff like machines, buildings, material handling and so forth - can all be bought.  No one can get a competitive advantage over the other guy with structure - whatever machine you can buy they can buy too, whatever factory you can build they can build too.  No, the difference between companies is the infrastructure.  It is the 'management system' that the company is run by.

The management infrastructure is like a fingerprint.  No two companies are alike because the way all of those systems and processes are put together reflects the combined knowledge, experience and values of management.  Because no one can ever outdo the other guy with the physical, structural stuff, competitive advantage can be realized only through a superior infrastructure.  In other words, the company with the best management wins.

Remember those were the days before the word 'lean' was invented.  Hayes and his cronies correctly perceived way back then that Toyota was successful because they were better managed - not because of kanbans and the physical element of their factories.  They saw Motorola's huge successes back in those days when they spawned Six Sigma as the result of a better management system.  And that was in the midst of Roger Smith's 30 billion dollar+ investment in robots at GM, which these guys accurately predicted could not succeed.  He tried to buy better manufacturing than Toyota. But Toyota won because they had a superior management system than GM, and no machines could overcome that.

The idea that a company could devise a management infrastructure of its own making - that everyone didn't have to manage their business by the same old rules - opened my mind to ideas like lean accounting and value stream structures and tossing MRP overboard.  Hayes pointed out that it was not only OK to manage by different rules, it was the key to success. 

Dynamic Manufacturing came out a few years after another Harvard professor - Wickham Skinner - wrote a book called Manufacturing - The Formidable Competitive Weapon.  You gotta like Wickham Skinner for the title of his book alone.  Skinner was the real driver behind focused factories, which were in many ways the fore-runners of value streams, and I had the honor of learning an awful lot about manufacturing working for the Copeland Corporation, which was one of Skinner's focused factory showcases while he served on Copeland's board. Copeland was run by a guy named Dean Ruwe - who holds a PhD from Iowa State and was obsessed with ideas concerning manufacturing management.  That particular PhD taught me an enormous amount that has shaped my lean thinking.

In those days, the academic brainpower at places like Harvard was working in overdrive on ideas to improve manufacturing.  Most of their ideas weren't any good because that's the way ideas go; but they kept refining the theory and taking another run at it.  In 1990 Peter Drucker wrote an article for the Harvard Business Review called The Emerging Theory of Manufacturing that was nothing short of brilliant.  The point is that there was a generation of academic leadership that was bound and determined to figure out how manufacturing could be run better, and they came up with many of the ideas that evolved into the lean body of knowledge.

And then the next wave of academics came along and quit.  They don't give a moment's thought to how to manufacture better.  You see, that is the real disappointment of the current academic thought process.  It is not as though they are advocating a better theory of manufacturing - they are not studying and advocating some great Chinese approach.  They are advocates for China simply because China is cheap.  They really don't seem to care about how manufacturing is done, or waste a single brain cell contemplating a better way.  When China is no longer cheap they will urge the business world to go to Viet Nam, or somewhere in Africa - wherever it is cheap because to this generation manufacturing is a commodity that can be done anywhere by just about anyone.

The speed with which the thinking of guys like Bob Hayes and Wickham Skinner was tossed overboard was breathtaking - and disappointing - and very puzzling.  That generation just twenty years ago was in the thick of things, and pushing the body of knowledge two steps forward and one back, but moving manufacturing thinking in the right direction.  The possibilities and the 'what might have beens' are incredible had the modern day business thinkers been up to the task of building on what guys like Hayes and Skinner handed them.

We'll never know, however, and now Bob Hayes has given up the fight.  He is probably right - he usually is.  In an article over on the Harvard blog, Hayes wrote, "I am losing confidence that the solution lies in American companies overhauling, unaided, their management practices. A whole generation of managers has been imbued, over a period of more than 20 years, with the supposed virtues of global outsourcing, and has profited handsomely from its apparent success. They are unlikely to lead us out of our dilemma, and it will probably take the better part of another generation to replace them."

His academic peers are roundly slapped in the face when Hayes suggests, "So perhaps we should turn for leadership to the kind of foreign companies (such as Toyota, Honda, and Novartis) that understand the need to build and support the local industrial infrastructures wherever they locate. That is, rather than trying to keep our failing giants alive with continual transfusions and subsidies, why not seek ways to make the U.S. a more attractive place for such foreign-based internationals and their major suppliers to locate?"

After more than thirty years of battling for a better way to manage American manufacturing he has come to the conclusion that we are better off looking to other countries for management leadership than we are to the products of the current management school of thought in this country.

Sadly, like he has been with his other theories on manufacturing, he is probably right on this one as well.

I have not always been anti-intellectual, as my critics describe me.  Just anti the ones wasting trees to create the pages of the Harvard Business Review today.

Comments

[Jason Morin]

Bill,

The link to the HBR article by Waterman shows the author as Hayes.

Speaking of Hayes...as an undergrad in industrial management at Purdue 15 years ago, I took a course that focused heavily on a textbook called "Strategic Operations: Competing Through Capabilities". It was written by Hayes, Pisano, and Upton. I didn't keep a lot of textbooks from college, but I did keep this one because I recognized the value of their insights.

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Note - Since Jason submitted this comment I corrected the article. For reasons I can only attribute to the onset of old age, as I thought and wrote about Harvard professor Robert Hayes, my fingers typed Robert Waterman - also a great contributor to the evolution of manufacturing management. He came from Stanford and McKinsey and was Tom Peter's co-author in 'In Search of Excellence".

Thanks, Jason. Sorry for the lapse

[Chet Frame]

Excellent! Thank you.

[Paul Todd]

At your suggestion, Bill, I read "The Puritan Gift" and learned a lot from taking the long view of manufacturing history in the US. I am amazed at the amount of still-relevant expertise we causally tossed aside over the years, expertise that in part is now powering the Chinese economy.

To support your point here, we have a world-class logistics center at my university. If you sought help in outsourcing manufacturing, many very smart people would be set to the task. If you sought help in keepng your manufacturing here, you might well be talked out of it.

My only hope is that the current economic crisis will help us see that we cannot base our economy on financial engineerng and marketing. It is a slow process of education.

[Kuwabatake Sanjuro]

I really appreciate reading this post as I am one of those critics. It is good to hear book learning and being an egghead isn't bad in and of itself -which is the impression prior posts made on me.

The discussion on not being able to "buy" advantages struck me as a deeper lesson for continuous improvement programs. If the program is an initiative, bolted on to the organization it is doomed to fail.

A competitive advantage cannot be had simply by buying people to do the kaizens and DOEs or even training others to do kaizens and DOEs. Your competitor can buy talent too... In the near term it is great to be the talent but in the longer term it will fall to the leadership to change itself or the initiative will collapse. So should the focus be on training business leaders rather than engineers as most programs seem to do?

[Dan Markovitz]

Bill,

This is one of your most poignant and powerful posts. The waste (or misuse) of academic brainpower is something I've not thought about before. Thank you for writing this.

[Scott Dailey, C.P.M.]

Bill,

You state 'No one can get a competitive advantage over the other guy with structure'. Sure they can, through the location of their business and/or sales outlets. Location, as you are well aware, clearly defines success in retail, real estate, and in many other industries. McDonald's is a case study in this, as they do their homework before building a new location, and afterwards many other retailers follow on their coattails. This is not so much true for manufacturing, but location is still a prime factor in my sourcing decisions as it relates to OTD and logistics costs.

P.S. Many companies also have technological advantages in equipment and machinery, that are not necessarily patented, that give them advantages over the competition in terms of throughput, quality, and operating cost. I wouldn't be surprised if Copeland has a few of these in their factories.

[Bill Waddell]

Gotta differ with you, Scott. Wherever McDonalds puts up a restaurant, Burger King can and often does put one up right across the street. In the end it comes down to whoever runs a better burger joint. Same with factories. If you build one with good logistical proximity, I can build one across the street, and it comes down to which of us runs a better factory. Any physical advantage is temporary, at best.

You are right to a degree about proprietary machines, which is why Toyota focuses so much on that issue. Their mantra is the worst a machine should run is the day you buy it - as opposed to the conventional wisdom that machines start to degrade and depreciate as soon as they are bought. They start tinkering and modifying to gain an edge.

But Copeland is not a good example. When they revolutionized air conditioning compressors with the Compliant Scroll technology they built factories full of machines to make them from Cincinnati Milacron. The machines were built to Copeland's specs, of course, but anyone with the price of a Cincinnati Mill grinder could get one.

Copeland succeeds because they have truly world class manufacturing management.

[Agustin]

Bill,

I have to say that this is definitely one of your better posts. I follow you guys religiously and, like everyone, sometimes agree and sometimes I think you're banging the nail on the head.
This is banging the nail on the head. The holistic approach and transcendence of your post; summarizes very neatly what has happened to the manufacturing industry for the last few years.
The quick gain approach from Wall Street has sadly shadowed the intense brilliance of early manufacturing adepts. The amount of research and study that went into developing better manufacturing and managing practices has now been supplanted by 'how to get your cartloads from Asia on time' or 'how to plan for disasters on your shipments from China'.

I appreciate the thought that went into this post.