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Concurrent engineering, global competitiveness, and staying alive: an industrial management roundtable.

Concurrent Engineering, Global Competitiveness, and Staying Alive: An Industrial Management Roundtable, Part II

Charlie Cotton: I would say that our issues are maybe at least 60 percent functional and bureaucratic as opposed to technological. Because yes, we can do some technological things, but nothing on the scale that you all talked about. The issues that we are trying to address (stem from) a major reorganization. We went to basically four regional companies (from being) a very monolithic company that is probably the best army in the world--25,000 strong. Potatoes in the morning, on the shelf in Idaho in the afternoon. What we found was that (we looked) if the mirror and (found) we were the enemy.

The issue isn't what kind of potato you brought out there was better and gave you a competitive advantage. It wasn't even being first. We don't like to be first. What we have to do is be smarter and at least pick (a product) up in the first or second year--I mean, don't pick it up when the category is dying. The regionalization--and we're in the early phases of it--had, as I see it, two distinct purposes. One was to give us marketplace focus. I think America is very much like Europe, or like Africa--whatever. But in the consumer product business, I don't think the East Coast is like California, is like Des Moines, is like Atlanta. It's a very, very different market. So our problem was that we were all sitting in headquarters in Dallas trying to figure out if Cubans in Miami really deserve plantain chips or not. So we're working to change both the decision process and the functional structure.

Now you take the most profitable, successful snack food company in America, or any food company with very substantial return on assets or any financial measure you can get, (and you would usually think), "proceed with caution." And we have not been. We are moving very briskly toward trying to bring products to market about six to eight months sooner. And I think there are going to be some mistakes. What we're seeing early is tremendous insights from the general managers about what's going on the marketplace. We've been a very sophisticated company (and we've been) very heavily computer penetrated. What we lacked was common sense and eyes in the market--standing there and saying, "Why do they have twice the space when we've got four times the turn and ten times the profits." Then you tie that up with a technological tool that will give some information to the retailer. But you have to have a market presence. And it's causing great consternation to the functional people, because all of a sudden these people want something in the next trimester. And you're not going to get it in the next trimester by thinking traditionally. If you want plantain chips in Miami, I mean, that's a brand that we'd never look at. It may be a five market share in Miami, but who cares? The reason you do it is that if you want to sell in the Cuban part of Miami, you've got to have those products to get penetration on the route. So the change and revolution happening with us is (that) we are I think dismantling the very, very strong functional structure. The buzzword is how do you get functional leverage with marketplace focus.

Edmondson: What do you mean by functional, Charlie.

Cotton: The people who work for me in the field receive much more of their field direction in terms of what they're doing--service-wise, etc.--from the general manager than from me. I've become much more of a technical expert and collaborator. And making business happen as opposed to the traditional role of passing judgement.

Edmondson: The general manager being the person in charge of the geographic area for all products.

Cotton: Exactly. And bottom line profits. He only has marketing and sales reporting to him. And you're creating some tension there, but at year end, what I'm noticing is--look, I'm in the service business. You can do $2 service or $5 service. It doesn't make any difference, as long as the $5 service brings more incremental profits than the $2 service. On a functional basis, you have no way of making those trade-offs. That's the news that I see happening. I see a tremendous amount of tension around what that means. And I honestly think that we will lose, short-range, some functional excellence. But also short-range, we are gaining a tremendous amount of bottom-line emphasis, and we're starting to get very different questions--products we would not even have considered three years ago. It's going to force R&D to think very differently about it, maybe more like 3M. We tend to think of, let's say, $100 million as a benchmark level of a product that could survive in our system. But really it's not a $100 million dollar product, it's really so many million dollars in some sales district. And we built our manufacturing and logistics system on mass involvement. Now, how do you build it to be able to hand-craft?

Historically, we have trusted 100 percent of our sales to drivers in very expensive route vans. Now we're delivering promotional delivery straight with over-the-road trucks. And that's almost heresy in a company that's made all this money. What I see happening is that we're staring to learn the cost of bureaucracy, the cost of a national focus, and the cost of functionalism. I honestly think if you wanted to work on something productively in all your companies, it would be to cut the power of all your functional areas by at least 40 percent. Figure some way to cut the power of all your functional people. I think the way the goals and strategies are set in a traditional U.S. manufacturing company, you've got to cover your specialty. There's no way to reward you, mentally, for making a wonderful innovation in a side-by-side function. I don't know how this restructuring takes place.

International executives are much broader-based than the American executive. Much broader based. I've worked (in), let's say, industrial engineering, manufacturing logistics, and in purchasing, which is pretty broad for an operations person in the United States. But people I've run into in other countries have worked marketing, have worked customer service-- they have a much broader point of view, and I think a better perspective. For example, if I'm a functional manager and I want to be progressive or creative, and I say, "Let's try this." Someone's going to say, "Hold it. From a functional perspective, that doesn't make any sense for you." But I'm really giving (the suggestion) as kind of a corporate, general business person. It's very, very difficult for people to accept a role. So in essence you're almost typecast, like some movie actor. Once you start playing a dramatic role, you cannot break out. I think we have all these things going on in American corporations that are very, very difficult (to change). The things that I see us trying to work on are creating some very very interesting tension. Now, if you're a shareholder in Pepsico, we say, "I hope to hell that business strategy sells more chips and delivers more satisfaction to consumers." I don't think the issues for us are mistakes in technology. We can overcome all that. We're not in a very complicated business. I really think it's the mindset of... nobody wants to make a mistake.

Edmondson: We've experimented a little with the same sort of thing at the entry level in manufacturing. We used to have, and still do in most cases, a line leader and about 8 or 10 people. So we've done this--I guess the buzzword today is an organizational redesign--so now we have several instances where we have a sort of facilitator and 20 people. And the concern is a little bit along the lines of, "OK, what does that management structure do?" Well, half of them you don't need anymore, and that works out fine ultimately. But the other half, sort of the functional manager in your situation, ought to get to do some things that are more fun, more strategic, more thoughtful, more broadening, so that they do have an understanding of all these things so that they can kind of guide their activity. Taking away all the day-to-day decisions they used to make is really not that bad of a deal for them. It is very threatening to start with. I think this phenomenon for us is going to repeat itself all the way up and down the chain of the company. In having 55 divisions we have always had an example of that because our divisions are--the company is an island, certainly, organizationally--but we have empowered the divisions. We've said, "You folks decide whatever you want to do on your product line." And so we had these 55 autonomous organizations. And we've tried it there. But for some reason we've never thought that organizational philosophy was good enough for...if I were in a hotel in New York, I would say "the little people." But we have just never expanded it. We are beginning to now and we're finding exactly the same sort of thing is true everywhere in the company. Just look at every layer of the company and think about what they do. Is that necessarily the best place to make a decision and in your (Charlie Cotton's) case, you are saying, "No it really isn't." It seems like you are absolutely right. I think the functional folks, if they can get over their cultural shock, will ultimately find that they can make much more of a contribution in some of the stuff that they ought to be doing anyway--thinking about the longer term, and thinking about moving together as teams.

Cotton: It's going to be tricky because in many corporations we've rewarded people who make it to the top functionally who tend to be a fair amount more control (oriented) and risk-averse. So on the human side it is a lot more scary to someone who maybe has made fewer mistakes, controlled a little more, etc. And all of the sudden you say, "That is not important anymore," and quickly sent them off to a 13-week Harvard course to get reborn.

My concern is that I think that is a much more threatening situation to the average function head and is not very openly talked about because we have grown to not let mistakes happen and grown people to protect things from coming across the wall and we have grown people to behave a certain way with the government at all levels. To change that is going to take some will and some risk. The companies that are seemingly doing better at that are those that have less to loose.

Wilson: You've just said it. You make potato chips and we make picture tubes and it's really not very similar. We are part of a multinational corporation of 310,000 people over all continents of this world. But we--in the United States--are a new entity to Philips because we were acquired nine or ten years ago.

What we are bring to Philips is some of the American way of looking at things the way you (Charlie) do. You have to give people the comfort that a mistake is OK; that the only people who never make mistakes are those who never try. And that's very difficult to punch into an organization that has been very structured, both hierarchically and functionally. Crossing across the functional responsibilities is not a comfortable feeling because if you were an engineer all your life, what do you know about marketing? And especially with a high-tech product where these kinds of things are extremely important, you are concerned, and then you take a long time to make decisions. But I just made myself a note to tell my bosses in Europe that you can't sit in Dallas and make decisions whether the Cubans in Miami are going to want to have plantains because you don't even know what a plantain is. And I think that stays in a lot of places where you have a strong structural hierarchical organization that's functionally directed where people are uncomfortable letting those decisions go sideways and down in the organization.

Everett: There have been several articles lately on the "functional silo syndrome." I don't know if you have seen those or not...

Mackenzie: (We're going to take) our division and break it into eight or nine pieces. They are going to be cost and profit centers, but lined up pretty much with a product--machine parts, whatever it might be--and the guys that are heading those up are really enthusiastic about moving out and doing it. There are some functional managers that are nervous because (they believe these sections) want to break the organization apart and take their piece and go do their thing. And we're pretty much going to let them do that.

Edmondson: Our problem is exactly the opposite of what you all have talked about. We started out all broken up. There weren't fifty divisions in the first place, but for thirty years it's been as many divisions as we could possibly "fit on the head of a pin," so to speak. So we have grown with a high level of autonomy and (with) teams that were out there that were masters of their fate. So we have had a great deal of difficulty doing anything on a centralized basis. In a way that's probably a good deal. I think I'd rather come from where I'm coming from than some of the reverse because we do have a great deal of buy-in for the responsibility in the division. Divisions are fun places to work, there are a couple of thousand people at the most and everybody knows everybody else and it really works very, very well. But there are some things that you miss by being fiercely independent. For instance, your product charters tend to overlap a little bit if you are not careful. Almost as bad, I guess, is the fact that none of our manufacturing processes are the same in any of these. There are printed circuit boards in 45 of those 55 and we do it differently in every case. The machinery is different, the process in different. It's just not the macho thing to copy anybody. It just wouldn't do at all.

So why don't we have some standardization of our processes, at least. And maybe, just maybe, we ought to combine a couple of PC shops which happen to be below critical mass, but if they were together they would be in a nice part of the curve and everything would be great. (They would probably say) "Oh, we can't possibly do that. We couldn't supply each other." (But they are only) are only a hundred yards apart!

So we're having some of the sort of a reverse thing. And if you figure out a way to make that work I'd love to hear it because autonomy does die hard. I guarantee that your suspicions are right. It is a very, very powerful thing. You've just got to kind of make sure you don't get too carried away. We do have trouble wrenching some of that authority out of the divisions. We don't want to wrench very much. We sometimes worry a little, "Gee, are we going to kill off the divisional autonomy?" Well, we don't have a prayer of killing it off. It is alive and will stay well for years and years. But getting the functional folks even up the line--up to our executive committee and so forth--they're not used to making decisions. And when you have two warring factions, somebody's got to get in and do it.

Matson: (We're) discussing all these mutual concerns and mutual needs--what brings us together as an industrial engineering forum. What better challenge than to give the industrial engineering society--a group of people who may be only second to finance in crossing all theses functiona silos--why don't we give them the challenge of developing the protocol for a change because that is something that is desperately needed. We all share these same concerns but we don't have the protocol.

Wilson: But you have to empower them. Don't forget the industrial engineer is some guy that walks around with a stopwatch or lays out drawings. In most corporations that's how they're seen. And unfortunately, (they don't report to the chairman).

Matson: Organizationally they are uniquely positioned if we wanted to empower them to do that, and that would certainly help all of us to have that.

Balestrero: The question that begs to be asked: In all of this it requires people to have breakthrough thinking. Something you said earlier triggered that. There are certain parts of the process that are immovable. That is, by the laws of physics it requires x number of hours to do this. It's got to be done that way. You've got to have two days of kiln time in there. How do you foster, in industry, the process that allows somebody to think out of those bounds? In order to achieve the gains that you had mentioned John, where you reduce cycle time by one half or by three or by four, how do you get people to sit down and say that that is possible, instead of saying that it can't be done.

Matson: Well, to me, what Charlie is saying; what he's suggesting, is very common-sensical. But why don't people adopt common sense? You have a new paradigm here; you have a new pattern, and therefore it is going to take a new measurement and then it's going to take a new protocol to support that. I think we've got to look to professionals to come up with some ways to do that.

Edmondson: It's really all of our jobs.

Matson: You will all be idiosyncratic in how we match it to our markets, but there ought to be some general patterns, and paradigms, and a protocol that could be identified.

Cotton: Any simple fool can take a strategy that has to be improved by twice and send a letter to everybody. They say, "Oh, yeah, so what?" There's a lot of that (going on) in American business. The objective with creative problem-solving is to teach people how to let loose and start solving problems. We used a model from the Buffalo Creative, which is a very satisfactory model. I thought that if I just trained people in the skill it would be fine. We got 13,000 people kind of learning it, but we found we didn't make a breakthrough until we started teaching people at our level to become facilitators--actually start teaching creative problem solving and our methods program. You have to let loose. You have to take the financial people and knock them in the head dead. Because the financial people will say, "You can't turn this thing in unless it's triple-ot-squat done to where I can verify the savings." Well that is the complete opposite of what you want in terms of creativity. So ours started to work--I told the chairman that if a third of the dollars fall to the bottom line, be happy. Just get close. We're about change and making money: we're not about being accountants. We benchmarked our program against the Japanese and we're now using our methods by our employees as a combination methods and suggestion. We're actually trying to get the number of methods/suggestions up maybe to 20 per employee per year. We feel very, very good, because the Japanese, who brag about the suggestion system, have a much lower implementation percentage than we've been able to get. We do our methods across safety, quality, service, as well as cost. And we have some employees that will turn a method in every day, and we have a card that can be an idea or an implementation, and we have, by decree, tried to keep an 80-20 mix between implemented and non-implemented. The purpose of both those programs is to somehow provide training to get people involved, and I think it's worked better than I thought it would. We make a big deal of recognition. How much of that goes to the bottom line, I don't know, but I think you start getting a way to account for what participative management might do for you.

I think you're going to have setbacks and breakthroughs. The problem we're currently having in operations regionalization is that we became better and better than the other functions. And no functional group can get substantially better than another functional group without being changed. There's a pace (at which) all groups have to move in a company. You just can't get too far ahead. All of a sudden it's identified with operations people.

How do you get companies to do this before they have to do it? When you're in Chapter 11 it's very difficult to convince someone to spend $200,000 to put in a methods and participation program. And I'm not sure I know the answer. But I think you've got enough technology (to tailor) a system to do that. I think it's down to will.

How do you make it so it's a strategic plank? That's the toughest thing. Your point on technology? You're talking to people who are in marketing and who are not oriented toward that. How do you get them to understand that? And maybe it's not really important. The problem is that as you get a more sophisticated in operations, you may get these visions of grandeur. Maybe we really are a marketing and sales company and you need a strong and aggressive operations, industrial engineering, and productivity group, but you don't want to get so strong that you're out of balance with what your true mission is as a marketing and sales delivery corporation. I don't know what the answer is.

Matson: Maybe you should never have the designation that you are a marketing person or you're an operations person. Because that's the point that we made very early, that the Japanese look at it in a more holistic way.

Edmondson: I think you're beginning to get to the crux of the matter. You need to reorganize the whole thing; redefine the organization so that people--so that all the people that impact a particular thing get to be on the same team and they all get the same grade, if you can do that. They contribute to the team differently, but a big part of their evaluation has to be, I think, how well the total team did. And once everybody on the team realizes that half their grade is going to be the team grade, and if it's an A we all get an A--oddly enough, they'd work a little more closely together and figure out, "What do I need to do to make your job better?"

Cotton: I agree with that in philosophy. The problem with that is that we're in America, with the pioneer spirit and the superstar stats, and the most yards on this. I think the blend is how to reward people on a team basis yet still provide the recognition on an independent, individual basis. We've tried several salary schemes on how to do this.

Let me tell you--I will never make the pass like Magic Johnson does. You can send me to 19,000 training courses, and I won't be able to do it like Magic Johnson. There will be Magic Johnson-type peple in your organization that are just going to do better than anybody else on the team. They're going to shine. I've seen them in business too. How do you pay that person differently, how do you reward them differently?

Balestrero: The Lakers are successful not only because of Magic Johnson, but because of the team concept.

Mackenzie: I just wanted to agree with (Charlie). We really have to look at the reward system because we really don't reward people that way today in most cases. People perform in the fashion in which they think they're going to be rewarded.

Voller: One of the advantages of being last is that you get an opportunity to listen to everyone else. Incidentally, I'm one of those functional heads just like you were some time ago. Before I start, I'd like to say something to Iva (regarding her earlier comment on industrial engineers).

There's been a tremendous paradigm shift in the industrial engineering profession. I don't think any of the IEs in our company even know how to use a stopwatch anymore. In fact, I don't think we even have stopwatches in our company anymore. We do still go out in the field and we gather information and time it, but it's done with a little computer. I just wanted you to be aware of that. If the people at Philips don't do it that way, maybe you ought to look into it. And you're right - IEs do not report to the chairman of the board, typically. But I think that's really true because they were traditionally manufacturing types of people, and manufacturing managers do not report to the chairman of the board either. The new paradigm is that IEs are in a high-tech world, and they do process modelling. In our company, they do work with the sales dept. We have IEs out in the field and we're providing the sales people with a technical arm that they never had before. So There's been a tremendous shift, and I think of the executives in this country are probably not aware of that. Because when you were working at the shop floor, the IE of 20-25 years ago in fact, was the guy with the stopwatch, and that's how he gathered his data. In the meantime, you've moved ahead, and you're away from the shop floor, and you don't know what the guy does any more, but he's changed dramatically.

Wilson: I want to respond to you, because I feel I didn't make my point. I was being facetious. I haven't seen an IE with a stopwatch on the floor during my career, and I've been in this for 20 years. So I guess they've been gone for 20 years. The point I was trying to make is that in order to give people the opportunity to influence the process, you have to empower them. But power in our society comes with level. If you have a guy responsible for something who reports to three or four levels below you, the influence he can have on your decision-making process as a CEO is considerably less. Power comes from position, and (so does) the ability to influence and the opportunity that one individual has to influence time and time again. That's really the point I was trying to make.

Voller: When I first read the question, I thought that concurrent and simultaneous was really bad because I think in building our facilities we've done that many many times--where we did not engineer properly; our engineering was done about simultaneously with our building and we ended up building facilities that upon startup...you're smiling because you've probably done that type of thing with airlines...

Selby: We had dirt on the floor when a 747 rolled out...

Voller: Exactly, we've done things like that. As we began dealing with the Japanese, they said, wait a minute, what you guys ought to be doing is spend 90 percent of your time planning and 10 percent actually starting a facility up. In the steel industry, which is a process industry, much different than the industries of manufacturing that you're in--we're somewhat similar to the paper industry. Actually, it could be done continuous stream, starting with coal and making it into coke--the black stuff, not the white stuff--and starting with iron ore and refining that into molten metal and making steel. That could all be one simultaneous process. However, over the years it has been batched. There is a quantum leap, however, in our finishing facility. As a matter of fact the Inland Steel Co. is about to start up a facility in this country. It's the first one in the entire world; there's nothing like it. We are taking something called a hot band, which is an intermediate product, in the middle of the process, that will be completed into a cold-finished piece of steel. In the normal processing today, it takes anywhere from three to six weeks to do that, and depending on how much time and effort you want to spend in the manufacturing process. (If a customer wants it badly enough, you may) upset all the schedules, and you end up spending ten times as much money getting that particular product to him. We can do it in three weeks, but six weeks is the normal time. How long do you think it will take us in this new facility?

Edmondson: Six hours...

Voller: Well, you're close. It's about 45 minutes. So that's a quantum leap, from six weeks to 45 minutes. That's because we have taken these processes and we've hooked them together. Now the Japanese have something almost that fancy, and we are risk-averse. You're saying we must not be risk-averse, and I see that management, at least in this country, is very risk averse. Yet I hear those words all the time. The only reason we built this facility is because we saw the Japanese already had something that was about half-completed. They took two processes and hooked them together, and we're hooking six processes together. And we're working with the Japanese. They're helping us put this facility together. Even though it was technically feasible for 20 years to do that--I just don't think our company would have ever done this on our own, because it would have been much too risky. And I don't see other companies copying us right now. I think after we start it up and it's a success, there will be other companies copying us.

Edmondson: Where is that?

Voller: It's right out of South Bend. We're located on the bottom of Lake Michigan in a little town called East Chicago. We have a single plant there. In the steel industry, the process and the product are very closely linked. We cannot make a product unless we have a proper process. We do change products all the time. Because there are so many specifications in the steel industry - in fact, the kinds of steel that you buy today, probably 90 percent of it you couldn't buy 20 years ago. Yet when you look at an automobile, you say, well that's steel, It's the same thing I bought 50 years ago, my grandfather bought. And yet that steel isn't like that at all. It's completely different because the processes of today have the capability to make a piece of steel that is much more sophisticated. It's thinner, it can be very deep drawn, and our customers demand that kind of steel. We're primarily in the flat products business, and what we end up doing is supplying the automotive industry, the people who make refrigerators, steel desks, things like that.

Edmondson: I visited NuCor and maybe one other mini-mill, I think they were called, where they have this very rapid cycle time. Are you going to something like than in a company as large as Inland? Are you probing that mini-mill concept?

Voller: Yes. In that facility I'm describing, we are going to that very quick cycle time. I'm not quite sure whether our customers will be able to take advantage of it. I think the technology is too advanced for the customer to appreciate it. What will end up happening is that he will continue to order six weeks or six months out, when in fact we can deliver it if he were to order it today, and we'll say we'll have it to you tomorrow. Which we'll be able to do.

Matson: I just came back from Japan Friday. On Thursday I visited Nippon-Seiko, a manufacturer of ball bearings, and saw the most phenomenal information system--management information system--that I think I will ever see. (To address) your point about response, and can the customer take advantage of it--they have real time-manufacturing, distribution, complete operations information, tied to real-time sales capability. They have 15 people who are matching customer requests to manufacturing process throughout all their plants in the world, all connected on a real-time basis. So I could envision a customer calling up and saying, "I'd like this." And then up on the screen comes, "We have manufactured this. We manufactured it at this time, at this plant; we did it against these specifications, we know our competitors' specifications--they all have this data on there--and we know what their costs are, and here's our response time, we can have it to you tomorrow (at this cost)." All in the same phone conversation. That to me is when we really take advantage of what we're doing with response time or speeding up the process--having the information system that supports it. So it really becomes a connection to the marketplace. It was phenomenal. You'll have to visit there. It's taken them 20 years to build it--it didn't happen overnight--but it was a vision that somebody had, and it's complete.

Voller: I hope their customers can take advantage of it. We're hoping, for example, that we would be able to charge more money for that piece of steel--which is a higher quality piece of steel--and we felt the quicker delivery would enable us to charge more money.

Matson: They showed us a compounded growth rate of 15 percent on sales. The customers, I think, obviously have taken advantage of this thing. Because they're getting it in profits and sales dollars.

Edmondson: K&G men's wear used to order four times a year in lots of 1,000-plus. They now order twice a week in lots of six.

Balestrero: Lot, to have your company take that kind of risk--it was a big change in, at least, corporate thinking and strategy--what changed the environment? What allowed the company to make that kind of decision and invest that kind of money in technology and take that kind of risk?

Voller: I think it was basically just a vision of our chairman. He felt that it was worth that kind of risk.

Matson: Was it viewed as a survival issue?

Voller: No, it was not viewed as a survival issue. The entire steel industry in the early 80s began to wonder, "Should we continue to make steel in this country?" Everyone was saying, "Don't make steel anymore, you can't compete." The Japanese can land steel in this country for about 20 percent less and you're heavily unionized, and on, and on, and on. So we went through a gut-wrenching restructuring. We used to have 500,000 steel workers in this country in 1981, now we have about 180,000. And the capacity is not that much less. We used to produce about 100 million tons of steel in this country, now it's about 80 million. So it's been a big restructuring.

For us it basically said, "We want to continue to be in steel. We did not want to diversify into insurance like some other companies did. So we did no want to become portfolio managers." Our chairman basically said, "We are going to try to stick with steel."

Mackenzie: We've always looked at capital investments, the justification for capital investments, on an economic basis--a return on that investment. Specific hurdle rates that have to be achieved and all that sort of thing. We're shifting now to more investments on a strategic basis rather than on a purely financial basis, with which you can justify that investment on the potential return. We're looking at strategic reasons. There was a strategic reason to make that kind of investment that Inland Steel made.

Voller: This is a strategic investment.

Mackenzie: Right, that's why he did that.

Voller: And I hope he's right.

Mackenzie: Well, he may not be. But we're doing more of that same sort of thing. We're saying we've got to invest for specific strategic reasons and not for some economic return reason.

I believe it's become critical. That becomes the principal of the way we're going to make our investments in the future and we're getting some acceptance of that idea in the corporation.

Voller: In our industry the technology is changing very dramatically and we can see what the technology is going to be like 20 years from now. And huge sums of money are going to be required to do that. Coke plants will gone, blast furnaces will be gone, the steel-making part of the industry will be much different. It's just like going from open hearths to BOFs. It's going to be a completely different way of making the product and the steel industry has always been highly capital-intensive, so there'll be some tough decisions to make.

Mackenzie: That, incidentally is a shift in type of activity that industrial engineers are involved with in our company. There used to be a lot of involvement of industrial engineers in developing the facts and figures that would justify capital investments. Now those same people are starting to think strategically; starting to think about the manufacturing strategy of the company in order to make us competitive and investing for strategic reasons. And we've got industrial engineers now thinking that way as opposed to pure number crunching and economic justification.

Selby: What is the investment you're making?

Voller: In that particular one it is about $400 million. There is an ancillary one that we are just breaking ground on and that's a coating line that will take that product. It's a further process; that's another $400 million, and it's, again, a very strategic kind of investment. Incidentally, the industrial engineers were instrumental in developing process models.

Balestrero: I'd like to raise one more question that goes back to something you said, John (Matson), and that Bill (Selby) reinforced. About the government being cooperative. And what we're talking about is strategic change to the whole organization. How do you think the government could create a better environment to permit companies to focus on those things such as reducing cycle time by one-half or three-quarters.

Matson: I'm going to answer than in a little broader way than just the government. Because I think you have another major area of support that's needed for change--the academic community. What we have is a challenge for them to rethink the system by which we educate and by which we govern. On the educational side of it, we have been training people along these functional silos. We have been training on individual behavior. We don't train them in group behavior,

as Hal was suggesting we have to do. So therefore, there have to be new paradigms set for that community. Hal and I and Boeing are involved with a major effort at MIT to change the curriculum and change the faculty and how they approach the subject of manufacturing--it's called Leaders in Manufacturing--but that paradigm shift is having a greater impact on MIT than most programs that have been established over the last 10-20 years at MIT. They are extremely proud of it. It has turned into a proactive positioning of how they can get more efficient in the educational process. Right now research funds are disjointed, grant writings take a long time to do, professors don't talk to one another. The engineering school doesn't talk to the business school, and vice versa, and they've found, through this synergy now, that they're shortening the time of approval for research programs. They are getting greater cooperation from the government. The government says, "Gee whiz, we've got how many agencies that you have to go and ask for money from? And we don't have a centralized database on the environment? What if we put together a database on the environment (with information from) the government, academe, and our own industry? And then maybe we can produce things like plants that are environmentally neutral, products that are environmentally neutral. There are big issues here. It's a question not of more efficiency, it's a question of thinking differently about it; of bringing yourself to link with these other islands of excellence. I'm not going to suggest the government's bad, I'm just saying it is an island unto its own. Universities tend to be islands, and businesses tend to be islands. Bring them together.

Voller: You touched on something. Even though you didn't say it explicitly, you said something that struck me about leadership--(how business needs to work) with government and academe. The liberal arts people never talk to the engineers and vice versa. And yet if they got together, they have great things they can offer to each other. And the can influence each other. If you could only get the right-brained people to talk to the left-brained people, and vice versa--and listen to each other--that's probably more important...

Matson: You had suggested earlier, the industrial engineering principles and practices could be applied to the sales force. (Why are we not) educating the industrial engineers in the area of social issues? How do you apply that technology? I think these are kind of the core issues. Again, I don't have a direct response as to how the government should do it. But it should do it. I'm not arguing for a MITI situation, or any of that kind of trade barrier kind of stuff. This is the way they could work together.

Balestrero: Just taking that educational issue, the Leaders in Manufacturing program grants a dual degree...

Matson: At this point, yes, because we don't know what to call it.

Balestrero: That's the issue. That's where the functional silos come back to what you were saying. The ABET process for accreditation is an army of people that fights the breakdown of that paradigm. They want to protect their degree. Clearly what that program is trying to do is to bring them well beyond any one functional engineering degree and bring them to a new level. It must be a real exciting change for MIT, and Sloan, and the whole concept of thinking through that. It must be a big change.

Matson: Where else has industry put up $40 million?

Balestrero: Will they use that in some way to help them to go back and convince other universities...

Matson: A large proportion of the people who are teaching at other engineering schools were degreed at MIT or have a close association with MIT. So it's a cascading effect. We've already had I don't know how many requests from others.

Edmondson: The stated strategy--and I don't know how publicly they've stated it--their intention is not to grow the student body by great leaps and bounds, but more to keep it sort of small and to try to migrate this whole concept to other schools. That's what they'd like to do.

Balestrero: How do you compare that with, say, trends in some universities--Georgia Tech is one--where they're working on an interdisciplinary master's program in manufacturing? The business college there, industrial engineering, electrical, mechanical, they're trying to work together to come up with an interdisciplinary program. Is that the trend that you think should be taken, or do you think it should be more specific than that.

Selby: If they don't do that, industry's going to have to do it. We've all talked this evening about the fact that we need people who are better-rounded managers. We put a lot of emphasis now on cross-functional movement. We've been trying to do the right kinds of things, organizationally, and have people not feel threatened by moving out of their discipline. It's a learning experience. And we're plain telling them: Man, you managers, if you're not willing to make these moves early in your career, you're not likely to be a general manager. If the universities don't set up for that...

Balestrero: You think the thrust should then be in the cross-disciplinary or interdisciplinary approach. Break down the barriers; take the same concept that Charlie (Cotton) was talking about and destroying existing functional structures...

Selby: If you started in the academic world, it would be a lot easier for us.

Matson: Don't lose your focus on your center of excellence as a university. It's the same thing in business. You made the point you (Lot Voller) weren't going to go out and become a holding company. I think that's very important for universities as well. It isn't to mean that everyone loses the scope of their discipline, it just means that you broaden it because you are now cooperating.

Wilson: To address how government is going to help industry make some changes in the protocol, Lot said something earlier than I thought was important, and I wanted to second what he said. Business leaders in this country have to finally decide that they have to participate in this process. We all walk around saying "What's going on in Washington? Bureaucrats--they have no idea what's going on in the world, they're not trained properly, they're folks who couldn't make it in industry," and we ignore them, largely. But they make decisions for us every day in the process that they're involved with in the government.

One important difference between us and the Japanese is that the Japanese business leaders are very much involved in what's happening in the government, (because the government) influences the activities that they're involved in and the decision process that they have to support. We don't do that. I see that in my interfaces with Japanese executives. They know everything that's going on in Washington better than I do. They know everything that's going on in Tokyo. They pay great attention and spend a lot of money being involved and understanding. We sort of ignore it.

Matson: Just think if we had anticipated the peace dividend, what we might be doing with it if we had gotten ourselves involved.

Selby: MITI has a group of people--about 20 or 25--that travel throughout the world. All they're doing is finding out what's going on everywhere they can. What's happening to the market, what direction is it going in, what are the regulations. It's all they do.

They've got a pocket of research that we don't even pretend to have.

Balestrero: Let's take that a step further, Iva. Each of you, looking at your bios, is very active either in your own community or in professional organizations. Bill, you are very active with AIA, which is the trade association more linked toward government. John, you've been very active with university boards and educational boards. If you had to recommend to a senior executive like yourself, how in retrospect over your careers, where should you place your time in that aspect--outside your own business, the community--to either learn of or foster a better environment through the government and education. Looking back over your shoulder, where would you place your time?

Wilson: That's an excellent question. We do not have an agency in the government that integrates those interests that we have in business--because we do not have an inter-agency activity that covers industry. We have defense, we have commerce, and each one acts in its own interest. And they never relate to each other. The only time people are really focused is when it comes to national security. And that's why the National Security Council has enormous power in the government. But (congress and most others in Washington) sort of either ignore each other or don't respect each other. Because there is no industrial policy. We're still worried about--I don't want to get into politics--the Russians attacking, while the Japanese are only worried about how they're going to get economically stronger every day. We worry about different things. Obviously you can't restructure overnight from defense into education. The people who make fighters don't know how to teach children to read and write overnight--but unless we speak to that issue, as people who are supposedly listened to, it will not come into focus.

It might not happen in the next twelve months, but if we ignore it, it will never happen.

Balestrero: The whole Japanese culture is based on a holistic approach. It is the greater good of Japan. It's not business, and government, and education, and industry. Our western culture is so far different from that. Is there realistically a way that we can cause change in the government?

Matson: Charlie said earlier, they may be that style, but we are pioneers. And what that means is we are capable of making change faster than anybody else is capable of making change because we do have that pioneering spirit.

Where do you get involved? For me it started on the local school board. That local school board has innovated to the point where our teachers are full-time throughout the year--full professionals. We're no longer an agrarian society, off for the summer, painting houses or digging ditches. They're doing research and development, curriculum development. They're being full-time professionals. Secondly, we're teaching probability and statistics in the fifth grade--in a very friendly way, but a concept that says, if you're going to be competitive, you're going to have to know this. So I think it starts with small steps, somewhere, wherever you get involved. The school board isn't a bad place. It helps you work your way up to the university. Then you find out they've got the same issue of ten-month professors who have to go out and write papers during the summer.

Wilson: If you have something to say, people listen. Not everyone's an idiot. And most people will listen if they can hear something. I go every so often to Washington, and I talk to the people in Congress inquiring about the issues that are germane to our industry. But I notice how poorly educated they are; how they really don't know what's going on. But they're making decisions.

Voller: For us.

Wilson: But when you give new inputs, there are certainly people that are willing to listen. So you have to take the time to do that. We, most of the time, think it's a waste of time. I felt that way, too. Why am I going to Washington when I have other more important things to do?

Voller: Many of the government bureaucrats finesse us in their decision-making, (and they do it) with less input than we would typically have. If their business is running the government, they don't have the same amount of input that we would have in our companies to make decisions. And yet they finesse our decision-making for us with input that's flawed.

Cotton: At the bottom of my list of favorite things is lobbying. If you're basically in good shape and you have a lot going on in your firm, get your briefcase and walk into the statehouse or congress, nobody's giving appointments, you do about 20 percent of what you set out to do. It is a very very inefficient process. But you have to do it. I think most of us tend to be more productivity and control oriented, and when you step over into there, which is much more political and influence-oriented, it is not efficient. I have to do a mind-set change (and tell myself) "I really am doing real work here, and even though I didn't see but three out of the ten people I wanted to see, three's better than none." And you're taught things like always sign in with the secretary--you get a letter back--but the concern I have is picking your spots for what to do as a leader in a corporation. And I think it's somehow tied into this discussion of who does what work and what's functional excellence, what should every level do if there are fewer levels. Because the work that's not getting done is the work that's different, not control-oriented, not highly productive. It's not response-stimulus. You do something this year, it comes out five years from now.

But there are so many issues, and you have to be careful as a business person--if you read Drucker's new book he says the same thing--pick those things that have direct salient interest in your business over some time frame. Be it a year, or a month. I can do anything from improving the theater to improving education. I can go back and work at Purdue. But really, as a paid professional, where do you put your biggest time, because there's a certain amount of contribution you have to make to the profession, and the world. But unfortunately you're doing it as a company representative. And you have to prove that this thing will make sense at some time to the stockholder of the company. And I don't know how you do that.

Wilson: Like you do anything else--you take risks...
COPYRIGHT 1990 Institute of Industrial Engineers, Inc. (IIE)
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Title Annotation:IM Management Roundtable; part 2
Author:Cotton, Charlie; Edmonson, Hal; Mackenzie, William F.; Matson, John M.; Balestrero, Greg; Everett, P
Publication:Industrial Management
Article Type:panel discussion
Date:Sep 1, 1990
Words:8889
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