Driving a turbo-powered sports car is an exciting experience. Step on the gas pedal zero to sixty in a few seconds. Maneuvering through traffic…. downshift, accelerate past others, upshift….gone. Curves coming up?….downshift…corner….. accelerate. You notice the responsiveness of this finely engineered product. You expect this; this precision machine was designed for this, and it is performing to spec.
Wouldn’t it be great if you could do this with your business? That is…quickly respond to market demand by accelerating new product introduction, . . . .or quickly change your product mix,… …or maneuver orders through the organization quickly,…or move parts across the factory floor with velocity, ….or handling the unforeseen, the “curves,”..or quickly moving decisions through the organization? This is maneuverability and turbo power. This is enterprise agility. It can’t be done today because the organization wasn’t designed for this. The way we have organized ourselves over decades works against us.
Our current organizational structure is stifling. Functional departments result in colloquial thinking and narrow points of view. Natural and functional conflicts create internal adversarial relationships that prevent sharing of ideas. Classes in the business environment cause an “us and them” syndrome. Politics prevail.
Worse,..operations are physically separated from headquarters, component plants from assembly, assembly from the market. The factory floor is organized by process, creating poor product flow. In the office people are separated by departments and physical walls creating poor communications and information flow. What happens when we step on the gas? The engine floods.
The Grand Prix
Why is all this important? Competing has taken on new proportions. A global resegmentation of markets emerging is changing the world economy. U.S. manufacturers face stiff offshore competition in most markets. Companies failing to respond to the challenge will find themselves left behind in the dust.
The U.S. in Reverse
In 15 years, the U.S. lost significant world market share in key industries: wide-bodied aircraft, semi-conductors, automobiles, and steel. There is almost no production of VCR’s, camcorders, tape players and recorders, radios, phonographs, or compact disc players in the U.S. Imports in other industries continue to increase. Industries under intense foreign competition include farm machinery, lawn and garden equipment, machine tools, bicycles, and process controls. Foreign competitors deliver high quality products with one pass through the factory, while U.S. production is consumed in fixing mistakes.
Back to the Drawing Board
Organizations need to be fast and flexible to change with market dynamics. All physical and logical events must be enacted swiftly, accurately, and effectively to compete in the next century. The faster that parts, information, and decisions flow through an organization, the faster the response to customer needs. The keys are flow and time.
Every business has basic cycles that govern the way that paper is processed, parts are manufactured, and decisions are made: customer order, product development, production, procurement, etc. Examining the flow of documents within the cycles and the time consumed can be revealing. A customer order cycle begins with the placement of an order. It ends with the payment for goods or services rendered. There are activities in between the two events that consume time. Some add value, such as packing and shipping, and some are nonvalue- adding and delay time, such as moving the order around the building from mailbox to mailbox, or repeating motions.
When a cycle ends, a lot of nonvalue-adding time has been consumed that may constitute 40-50% of total time. Some of the time is lost in travel, some is lost in the processing backlog, and some may be lost diverting it to a credit department for release. If the nonvalue-added time in the cycle can be identified, ways to eliminate the causes can be devised.
An Engine Redesign
Most organizations today are designed to compensate for circumstances that could go wrong, particularly on the shop floor. The causes are found in the way parts are manufactured, with delays, queues, missing parts, pirated parts, bad parts, and part shortages.
Within the factory, velocity can be induced by physically clustering successive operations into cells and reducing operation cycles and set-up times. Deep organizational changes cannot be effective until key problems in factory flow and cycle times are removed
Adding Some Aerodynamics
Fostering innovation, among other things, requires good organization of information. Our current systems and procedures have been developed at length to control an unwieldy information channel. When we get past the stifling paper flow, disparate computer systems, and functional organizational walls, the homogeneity of ideas will begin to generate quickly.
Organizing for ease of sharing information for innovation is a first step. The information chain must be streamlined and electronically linked, so that the flow is direct. Removing useless and redundant data existing on screens and reports from the job stream increases the value of the information provided. Reducing business cycle times to the time it actually takes to efficiently process information supports fast movement of physical parts.
The Turbo Organization
Having the ability to produce spontaneously upon demand requires short lines of communication and velocity throughout the work chain. To reduce business cycle times, fast communications and decisions are required throughout the organization. This means reducing numbers of vertical and horizontal management layers. Physical walls have to come down. Organizing around business cycles, and physically clustering people in cells for fast, effective communications is one way to do it.
A Faster, Lighter Vehicle
Inducing velocity throughout a business has a profound effect on time and cost. The need for nonvalue-adding functions disappears, and the functions designed to accommodate exceptional circumstances fall out. The organization chart becomes flatter. Following this is a dramatic reduction of overhead.
The Winner’s Circle
You have to ask yourself what it could do for you if you could respond to a dynamic market with velocity in delivery and new product introduction, and manufacture high quality products at low cost. Chances are, when you’re able to do this, you will be in the winner’s circle, and the trophy will be the new results on the “bottom line.”