When The Neck Bone Isn't Connected To The Head Bone

by BILL WADDELL

James Weldon Johnson was quite the Renaissance man, if ever there was one.  A poet and a lawyer, a politician and a songwriter, and a first rate educator.  We would be a lot better off had his best known bit of songwriting found its way into the curriculum at the business schools.  At the start of every class at the Harvard Business School they should have all the students stand up and sing a rousing chorus of "Dry Bones":

The toe bone connected to the heel bone,
The heel bone connected to the foot bone,
The foot bone connected to the leg bone,
The leg bone connected to the knee bone,
The knee bone connected to the thigh bone,
The thigh bone connected to the back bone,
The back bone connected to the neck bone,
The neck bone connected to the head bone,
Oh, hear the word of the Lord!

The other day I wrote about the wholesale abandonment of manufacturing in the elite academic circles.  I think it was in large part an unintended consequence of the whole theory of Core Competence, first proposed by Michael Porter from Harvard, then picked up by a couple of guys named Prahalad and Hamel from Michigan and the London Business School, respectively.

Prahalad and Hamel don't seem to have anything against manufacturing - in fact a big part of their article is written around using manufacturing as a competitive weapon even without much of a brand.  But their basic premise is that the business is a bunch of chunks, and some are good and some are not, and that you ought to keep the good chunks and toss the bad ones aside.

Again, Porter, and the other two were not anti-manufacturing, but they created an easy out for managers in a tough business environment.  In the 1980's Toyota, Sony, NEC and a lot of other Japanese companies were running roughshod through America manufacturing and everyone was peddling as fast as they could to figure out how they were doing it and what to do about it.  There was a serious challenge to the American business community, then along came the notion of 'core competence' and there was the easy path out of the fire:  Simply decide that manufacturing was not a core competence and, voilà!, problem solved.

Just decide that what we are really good at is R&D and marketing, and finance and strategy of course, but that manufacturing is dirty, pedestrian stuff that is not really critical.  They could give up on solving the tough manufacturing challenge and couch quitting in a high-fallutin' explanation about focusing on core competencies - and that was cutting edge Harvard Business School stuff - no mere buzzword.  And it worked.

Now there is a bit of a problem.  If you go over and cruise the current writing from the big brain guys, they are wringing their hands over the loss of the 'industrial commons".  Says Gary Pisano from Harvard, "The culprit is the outsourcing of development and manufacturing work to specialists abroad. The result: a damaging deterioration in the collective capabilities that serve high tech. This industrial commons includes not just suppliers of advanced materials, production equipment, and components, but also R&D know-how, advanced process development and engineering skills, and manufacturing competencies."

"Industrial commons" is academicspeak for all the bones they disconnected from the head bone.

Oops!  You mean when we were quick to globalize manufacturing, all of that other stuff went with it and now it is really hard to innovate without any of the know how about whether those innovations can actually be made into products?  You mean that manufacturing engineering and supplier capabilities are important ingredients in new product development?  And you mean that when all of you guys were shoving manufacturing to China as fast as you could get rid of it you expected the suppliers to stay in business just in case one of the multi-nationals had a technical question for them?  And you thought they would keep all of their manufacturing and process engineers on the payroll even though manufacturing was gone?  And you thought all of the machine builders would go on in this country as if nothing had happened?

Or do you really mean that you had no idea that businesses can no more be carved up into chunks than Harvard professors?  C'mon - you guy's core competence is your brains, but that doesn't mean its a good idea to cut off your feet to save the price of shoes.

Said another Harvard boy by the name of Willy Shih, "Even though the Kindle's key innovation — its electronic ink — was invented and is being made, at least for now, in the U.S., Asian manufacturers are capturing the vast majority of the value added by manufacturing the e-reader itself. Even more worrisome, the U.S. is almost certain to lose control of the e-paper display technology and the future innovations that spring from it."

Yep, Willy.  The big thinkers thought they could keep the head bone here and declare the rest of 'dem bones' unimportant.  Now they are shocked to find that the head bone isn't much good without the rest of them.  Old James was right - all 'dem bones' are very much connected.

There's a reason why the best manufacturers tend to be pretty vertically integrated.  They take 'core competence' to mean everything in the chain of creating value for their customers - not everything that is easy or cheap.

 

Comments

[Kevin Carson]

Brilliant!

Of course vertical integration, and clustering a supplier network around a corporate core, aren't the only ways to connect the head bone to everything else.

Another is an industrial ecology of small networked manufacturing firms, like the job shops in Emilia-Romagna and Shenzhen. Even better, the emerging garage manufacturing/FabLab movement in the U.S., with communities of open source designers and small shops riffing off each other on the same pattern as the Linux community. A good example is the 100kGarages project, a joint effort of Ponoko and ShopBot:
http://www.100kGarages.com

[Jim Fernandez]

Great writing! I enjoy reading your stuff.

So now when they call me a "bonehead" I guess I should take it as a compliment.

[Bill Waddell]

From one bonehead to another, thanks for the compliment, Jim

[js]

Is it really right to blame this on a bunch of ideas out of Harvard though? Or is it driven by economics (the economics of cheaper in this case), which ideas merely justify? I guess I lean more toward economic determinism. Although I agree with your larger points.

[Bill Waddell]

I think it is short term economics, js. It looked like good economics at the time, only now they are realizing they ate their seed corn, so the long term economics of their decisions to declare manufacturng 'non-core' are starting to look pretty grim.

[Rick Bohan]

I don't think it was Porter that developed the idea of core competence. His thing was more strategic position and I've seen some of his writings that argued (to some degree) with the idea of core competence. As you say, Prahalad and Hamel pushed the idea pretty energetically but they aren't the "fathers" of the concept. They grabbed ahold of thinking around "Resource-based strategy" and went downfield with it. And, as you say, I don't think they were anti-manufacturing at all. I think they'd argue that manufacturing could very well be a core competency that provides sustained competitive advantage.

I'm a big fan of the Core Competence (or as I've referred to it when teaching my classes, Distinctive Competency) approach to strategy,in particular because I think it actually supports manufacturing. I don't thing the Core Competency folks "created an out" for managers any more than Fred Taylor created "an out" for managers who belittle and berate employees as an approach to productivity enhancement. I think managers have simply misapplied and misunderstood the academics' positions...when they didn't ignore them altogether. If a manager takes the Core Competence approach and egregiously misapplies it, that's not the theorists fault.

I don't have an interest in serving as an apologist for Harvard profs. They can take care of themselves pretty well, I'm guessing, and don't mind seeing them get their comeuppance when it's deserved. But I don't want to see anybody else get blamed for bone-headedness that comes directly from American managers. The fact that they might lay the blame for that bone-headedness at the feet of a good strategic approach doesn't make them any less boneheaded or the strategic approach wrong.