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In training.

LISTENING TO CUSTOMERS. LEARNING FROM EMPLOYEES. CONSTANTLY ADAPTING. WORKING WITH THE COMPETITION. JUST POPULAR NOTIONS? SIMPLY EMPTY SENTIMENTS? FOR THESE AGILE COMPANIES, THEY'RE A WAY OF LIFE.

EDS: "New White Space"

Back in the 1960s, EDS was founded on a novel idea: sell the excess computer time from one company's mainframe to another company that had data to crunch. It was a back-office kind of service, invisible and a little arcane to the vast majority of business people.

But before long, computers began to move out of the back office and into the heart of business, and EDS moved right along with them. Over the years, it kept transforming itself to provide increasingly sophisticated services, moving from time-sharing to insurance claims processing, outsourcing, and information technology services. And today, says John R. Harris, the $12 billion, Plano, TX-based company's vice president of corporate marketing and strategy, "we are transforming ourselves again - this time to provide services that help our customers improve their business performance."

The company's ability to adapt stems in part from its well-established entrepreneurial culture. But that's just one factor, says Harris. "That mindset is important. But I think agility has to be an integral part of how you operate. You don't get it by having once-a-year planning sessions. It has to be institutionalized." For example, he explains, EDS's business unit presidents are "tasked with having a continuous-by evolving business plan that is rooted in market intelligence, and always trying to find new opportunities, new white space out there. We don't want them to just do the same thing, year in and year out."

EDS has put in place a number of processes and techniques that let it leverage its two key assets, people and information, to drive innovation. "None of us individually has a monopoly on good ideas," says Harris. "But we have institutionalized a process to surface new ideas from employees at all levels within EDS. A lot of companies can identify market trends and new ideas, but too often they are unable to act on that information. That's because they lack a process for getting ideas to the surface. And I think that is something we have done well."

To tap employees' ideas, EDS set up a Value Creation Team, a group of executives that meets every six weeks to hear presentations on new ideas by people from around the company. "These may be ideas about going into new geographies or new ways to service existing customers better, or suggestions about going into an absolutely new market," says Harris. The group serves as both a filter and a sponsor, making sure that the high-potential concepts get the right attention and are directed to the right areas of the organization.

The company also takes care to ensure that new ideas and best practices are disseminated quickly among its 95,000 employees. "We're increasing our focus on learning and sharing best practices horizontally across the company," says Harris. "We think the ability to share knowledge is key. It makes us more agile because it saves us from having to reinvent the wheel every time we encounter a new situation."

Not surprisingly, EDS has an extensive network that allows employees to communicate freely, and Harris says that the role of technology will only increase as the company focuses more and more on sharing knowledge. "We've already become very aggressive users of intranet technology for sharing information, and we generally find that it is becoming easier and faster to use communications technology to link the various communities within the company."

In addition to technology, the company also relies on regular forums that bring together people from disparate parts of the company to swap ideas and insights. Also, a number of individuals are charged with "owning" certain knowledge areas. These employees learn all they can about a given subject, spread that information though the company, and gather feedback so that their store of knowledge evolves along with the company.

For EDS, the two assets of people and information come together in its relationships with customers. Typically, the company will have employees who work on site at the customer's facility. Indeed, in most outsourcing arrangements, in which EDS may run a client's data center, the EDS employees usually work side-by-side with client employees, sharing information and experience. To the casual observer, the two are indistinguishable. And in its business-performance improvement work, EDS offers what it calls Co-sourcing[SM], an arrangement in which its fees are based in part on the degree of business-performance improvement the client realizes from hiring EDS. "We are actually economically linked with the customer. We depend on their success," says Harris.

"It's very important for us to be as tightly integrated as possible with the customer," he continues. Through these close relationships, EDS essentially becomes part of the customers' process, and therefore better able to understand customers' needs, the issues they face, and the directions in which they - and consequently the marketplace - are headed.

By leveraging people and information to stay in close touch with a changing market, EDS is ultimately able to take the lead in that marketplace, Harris claims. "Being agile lets us redefine the competitive landscape to our advantage," he says. "We've been doing just that, as we moved from facilities management to outsourcing to information technology services. And we're now saying that in order to compete with us, you can't just position yourself as an information technology organization. You have to have much broader competencies in a lot of areas, so you can help the customer improve performance."

"To have that agility, you have to be willing to change based on a continuous learning process," Harris continues. "IT comes down to being able to identify opportunities, act on them, and modify what you're doing as you go forward. And you have to have a conscious, intellectual desire to be agile, because companies are not naturally agile. You have to make it part of your culture and process, and work at it."

Gateway 2000: HAVE IT YOUR WAY

In the world of personal computers, customers can be picky, product lifespans are measured in months, and prices are always dropping. To stay on top of that ever-shifting mix, PC manufacturer Gateway 2000 has taken a simple approach: Build the machines one at a time, each one tailored to a specific customer, and build some 1.4 million of them a year.

Gateway was founded in 1985 by CEO Ted Waitt, who saw an opportunity to challenge IBM by marketing PCs directly to customers and especially to the growing ranks of computer enthusiasts who knew exactly what they wanted. In a decade, he has built that idea into a $3.7 billion corporation and developed a customer base that's noted for its loyalty to the company's brand.

Today, the South Dakota-based company has plants in the U.S., Ireland, and Malaysia. But it has no distributors; instead, customers call an 800 number (or, increasingly, look up Gateway's page on the World Wide Web), specify what they want, get a price, and provide their credit card number. That information goes into Gateway's central computer system, which links order entry, accounting, manufacturing, and customer service. By the end of the call, the process of building that customer's machine is set in motion.

"Every system is custom-built," says Dave Schroeder, Gateway's director of global material and logistics management. "There is no finished inventory here, just parts waiting to be assembled." While on the phone with Gateway, the customer picks from a menu of several dozen variables: hard drive, monitor, type of case, etc. Within five days, typically, a new computer is on its way.

One key to this agility: Gateway doesn't make computers, per se. Instead, it assembles them. Rather than manufacture the machines from scratch, it buys all components and coordinates the complex web of delivery, inventory, and assembly into one integrated, highly efficient operation. "We turn our entire inventory at least every couple weeks," says Schroeder.

That approach is based on close relationships with a network of suppliers, such as Microsoft and Intel, that provide Gateway with components that plug into the assembly process. "We have a global planning quality and procurement group, and its sole purpose is to go out and form long-term relationships with suppliers," says Schroeder. He estimates that the company's top 40 suppliers account for nearly all the material moving through Gateway's plants. "Our strategy is to have some really solid relationships with a few vendors, and then try to leverage those relationships."

Those relationships not only help the company run efficiently, they also give it rapid access to new technologies as they come along. That is, Gateway focuses on efficient order fulfillment, while suppliers focus on new chip designs, faster hard drives, and so forth. "We are always looking for the latest and greatest to put into our machines," says Schroeder. "But we're not the experts at doing a lot of things from a manufacturing standpoint, so we don't attempt it. We work with suppliers who are the experts." At times, Gateway and its suppliers even collaborate on new systems, such as the new Destination product, a combination of computer and television entertainment system, which involved suppliers throughout development.

The second leg of Gateway's agility is that the organization is, by nature, "customer-centric," in that the customer drives the design of the product, Schroeder says. "Because we are a direct marketer, we don't have to have people interpret what's going on for us. As we sell products, we have a direct link to our customer. So we get instant feedback about what they really want to buy, such as whether they like the three-gig hard drive or the two-gig hard drive. And that information all plays right back into our marketing and purchasing and sales process."

Over the long term, Gateway maintains those links through 24-hour-a-day telephone technical support. "There again, we're going straight to our customer. Nobody else is interpreting his needs," says Schroeder. "We are getting feedback without any middleman."

Finally, says Schroeder, the company's processes are complemented by a culture instilled by CEO Waitt. From the beginning, Waitt delineated eight core values for Gateway. Some are fairly typical - "caring" and "teamwork," for example. Others are less so, notably, "aggressiveness," "honesty," and "fun."

The result is an environment in which employees are "fired up" to move fast, says Schroeder. And that's critical, he adds. "In our business you have to be agile. It's just what separates you from the competition. When you look at some of our competitors who probably weren't as agile - well, some of them aren't in this business anymore."

[[TC].sub.2]: MADE IN AMERICA - AGAIN

Throughout the 1980s, the U.S. clothing industry was continuously buffeted by competitors from Taiwan, Hong Kong, China, and Indonesia who, with relatively low labor costs, gnawed away at U.S. firms market share. In the 1990s, things only got worse, as low-cost providers based in the Caribbean and Mexico entered the fray.

But in a facility in Cary, NC, the U.S. clothing industry is fighting back. There, the Textile/Clothing Technology Corp., a consortium of more than 200 firms, including DuPont, JCPenney, L.L. Bean, Monsanto, and Walt Disney World Creative Costuming, is sharing technologies and techniques across the industry. The goal: make U.S. companies more agile, and give them the speed and flexibility they need to stay on top of changing customer tastes.

"You can see a fashion disappear in a matter of days," says Joseph Off, managing director of the consortium, which goes by the initialism [[TC].sup.2]. So it s extremely important to be able to design something, put it on the market, and make the sale before people get tired of it."

In particular, [[TC].sup.2] is using computers, automated equipment, and communications technology to tie together manufacturers and retailers, and move the industry from mass production to mass customization. Traditionally, clothing orders have had to slowly snake their way from retailer to manufacturer and on to supplier; on the return trip, materials and finished goods retrace those steps, winding their way back to the stores and eventually to customers.

"In many cases today, from the time a garment is finished in manufacturing, it is handled anywhere from eight to 32 times," says Off. "And those are not value-added steps. They add cost and time."

The centerpiece of the consortium's efforts is a program called Apparel on Demand, which combines a number of agile manufacturing techniques and a software system that [[TC].sup.2] helped develop. The software automatically feeds data from the point of sale back to garment manufacturers and textile producers, creating a rapid electronic link up to the value chain.

"We're using partnerships and information systems to enable companies to make purchasing and manufacturing decisions at the last possible moment in time, and using flexible systems and cross-trained employees to create garments," says Off. "Basically, we are trying to show people how to take orders from the consumer today, make the garments today or tomorrow, and ship them tomorrow."

Portions of that concept are already in place at [[TC].sup.2]'s headquarters, where a working system takes orders from customers' computers over the phone lines, and feeds that information to the shop floor, where customized garments are created using sophisticated machinery and flexible manufacturing concepts. "People can order a white-bodied shirt in three different sizes, with a choice of nine collar colors, nine colors on the sleeve trim, and their monogrammed initials in up to 10 different colors," says Off. The system can fill these customized orders within hours.

[[TC].sup.2] continues to refine its approach. For example, the group is planning to offer access to its systems via the Internet, which will make it easier for more retailers to participate in the project. And to speed up the front end of the process, [[TC].sup.2] is developing computerized scanning booths that take a person's measurements in seconds and feed the sizes to the automatic pattern alteration system.

"We're working to minimize inventory in process, and compressing the time between when the customer places an order and the time it's shipped. That's agility," says Off. The result, he says, will be not only reduced handling and inventory costs, but also the more strategically significant ability to provide customized clothing on demand, at the same price as off-the-rack items.

Not every company will be able to do all this right away, but Off says that the 40 to 45 weeks it typically takes the industry to process an order - from the weaving of cloth to retail sales - will be compressed into three or four weeks over the next few years.

And the industry will get there, Off adds, if for no other reason than because of the great opportunity that lies in mass customization and agility. "About 50 percent of all garments fit off the shelf," he says. "Another 25 percent could use alterations but don't get them, and 25 percent have to be altered or made from scratch. That's 50 percent of the market waiting out there. So anything we can do to make things more quickly, get them to the customer fast, and make them so they fit will help the industry be more competitive. And if we can eliminate all those extra costs and time, we can be competitive with foreign goods. We think we can recapture markets if we're fast enough."

RELATED ARTICLE: 1-800-FLOWERS: FLOWER POWER

When first watered in 1984, 1-800-FLOWERS had no inventory, no shops, and no product brands. Yet today the company fills 9 million orders and bills itself as the "world's largest florist." Until the recent addition of retail storefronts, 1-800-FLOWERS was, in essence, a virtual corporation - functioning without the traditional encumbrance of operating outlets and yet managing to ring up $250 million in sales in fiscal 1996. Founded on the concept of marketing flower arrangements exclusively through a toll-free number, the company took orders from around the U.S. at a telecenter in Dallas, TX, and filled them through "BloomNet," a network of independently owned "partner florists." To ensure quality and reliability, the company established a one-week customer satisfaction guarantee - unprecedented in the floral business - and a commitment to adding frequent new product offerings. More recently, taking further advantage of available technology, the company added a "gift reminder" program that contacts customers by e-mail or phone.

With success has come expansion - of both the tangible and the cyber varieties: In addition to its 1,700 independent "partner" shops, more than 100 company-owned or franchised units have sprouted since the early '90s. Riding with the times, the company has also established presences on the Internet, America Online, CompuServe, and Microsoft Network's Plaza, which now account for 10 percent of total revenues and target browsers with an interactive forum providing advice on floral care and handling, decorating with flowers, and floral and gift-giving trends.

Harley-Davidson: REVVING UP SUPPLIERS

In recent years, motorbike manufacturer Harley-Davidson has had a number of suppliers in York, PA, working as just-in-time suppliers for a variety of products bearing the company logo. Harley would routinely add or cancel product part orders with very little notice. The suppliers were happy because they had a relationship that was broader than a single part, while Harley was happy to have the JIT deliverables and a relationship that was more agile in terms of long-term commitments to individual parts. This sort of interactive relationship with shared information made feasible an worthwhile what would otherwise have been unacceptable behavior in the one-transaction-at-a-time, arm's length marketplace of mass production. In the process, teams of Harley engineers routinely met with supplier engineers and executives to discuss plans and opportunities. The suppliers also worked as teams, making it easier for Harley, which found it more efficient to interact with a team of suppliers than with each supplier individually.

Ross Operating Valves: BY DESIGN

While Ross Operating Valves, an old-line manufacturer of pneumatic valves headquartered in Madison Heights, MI, continues to make standard "catalog" valves in its Madison Heights plant, it has branched into customization through its Ross/Flex facility in Lavonia, GA. All valves produced by the Ross/Flex system are custom designed jointly by customers and Ross "integrators" - engineers and veteran machinists - using proprietary CAD software and Ross' valve design library. The integrators are responsible for transferring prototype design data to machine tools for fabrication, for testing the prototype valve, and for shipping the prototype to the customer. The customer, working directly with his engineer, can request modification of the prototype, which goes into production only after the customer approves it. By integrating the design, sales, and production processes, Ross has dramatically reduced both the cost and the time needed to develop prototype valves - from one year at more than $100,000 to five days at $3,000. Rather than charge extra for this service, the company has made Ross/Flex the cornerstone of its marketing strategy, the core of the value added for its customers.
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Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:case studies of agile companies
Publication:Chief Executive (U.S.)
Date:Dec 1, 1996
Words:3173
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