Leadership & Business

A little perspective is in order

I’ll be the first to tell you that I think GM and Chrysler should be allowed to enter bankruptcy.  I’d do it in a well-ordered, prepackaged manner, but I would do it.  Even so, let’s be honest when we talk about these companies.  No company that size and that capital intensive should be expected to handle a 50% downturn in business.  And the downturn is NOT the fault of their mismanagement.  The auto industry is not responsible for the failings of the real estate and financial markets that have led us into this depression.  I’ve said this before, but now it’s time to write about it.

The Wall Street Journal reported that Toyota is seeking a loan from the Japanese government.  So too is Honda.  Their businesses are off more than 40%, too.  These are the companies that pundits keep holding up as the models that the big three should aspire to match.  While  Honda and Toyota are must better managed than the American car makers, the fact that they are also looking for bailouts speaks to just how bad things really are.  It’s become so easy for some to bash faltering companies—and others to jump on the bandwagon in agreement, that I hear fewer and fewer people taking a step back to try and be objective in their criticism.  I’d like to see us be more articulate, more data driven, and less glib when we talk about the failings of GM, Chrysler, and yes, even Ford.  They may run out of cash faster than their Japanese counterparts, but much of what they’re facing is not their fault.  Let’s let them go bankrupt anyway.

Coldhearted? Maybe...it's just reality!

Well, perhaps by now you’ve read my somewhat cold-hearted suggestion that companies should cut employee headcount fast—and cut deep.  In the Doomsday scenario I explain that there are few excuses for not making very deep labor reductions.  Unfortunately for many European companies, however, there is an excuse: their labor laws make it much harder.  Without question, this puts them at a significant disadvantage vis a vis competitors located elsewhere in the world.

For example, in Germany a number of large companies have made a deal with the government to hold off on layoffs for six months.  Employment contracts and the expectation of lengthy severance arrangements also make it difficult.  In cases where staff can be reduced, severance arrangements often mean that there’s no real financial benefit for months.  The need to downsize right now is not to reorganize a company for future profitability—it’s survival.  So if you’re going to be paying severance for the next six months, what have you really gained in the short term?

What this means is that many European companies (and my clients) need to consider a different approach than their leaner, more ruthless American counterparts.   Instead of reducing staff—they need to put their staff to work.  Think about it.  If business is down by 20 percent, then speaking at a very general level, there should be a lot of staff with 20 percent free time on their hands (of course there’s not a perfect correlation, but you get the point).  What can we do with that 20 percent of the time?  One thing is to actually start “InSourcing” work that was previously outsourced.  Outsourcing is usually seen as resulting in cost savings, but if you have idle staff, the opposite is often true.  Another is to turn them all to driving efficiency in other processes.

That’s where the tools of continuous improvement come in (such as lean and six sigma).  Idle time is a great time to train people, and those people should be put on cost savings projects immediately.  Focus on processes that produce savings in raw materials, consumables, contract labour and overtime. For example, BMGI recently guided Graphic Packaging’s Bristol, UK facility through a lean project that resulted in a substantial  reduction over time, and reduced scrap waste by ₤80,000

You may very well need help teaching employees new skills, but there are very cost effective ways of doing that today, such as with web-based training. Even coaching can be done by telephone and chat room as well as face-to-face to make it inexpensive relative to the cost savings associate with improvement projects.

What’s important is that you engage your entire workforce, from top to bottom, in an effort to identify cost-cutting opportunities. Taking Graphic Packaging as an example again, three Kaizen events were conducted with the company’s machine operators and uncovered immediate savings equivalent to in a 3:1 return on investment.  This was the first time that this group had been allowed to provide their perspectives on the production process in a formal environment which resulted a dramatic change in the culture of the workplace – employees felt involved and valued resulting in a willingness to move forward - GPI claim this to be more beneficial than anything they have done before because it means long term, sustainable results through understanding and involvement.

Non-headcount costs that companies are able uncover and eliminate can be huge.  Our European division is now offering firms a two day Performance Excellence diagnostic at no charge– conducting what is in effect a “mini” Kaizen workshop – during which we guarantee we will identify at least €250 000 in savings for any company with more than €300 million in revenues. For some, driving cost out of operations will prove a necessity for survival and we’re committed to ensuring our clients make it through these tough times.

The real point is that you need to PUSH people hard to use their free time effectively.  Look at any outsourced service:  janitorial services, transportation services (driving people to the airport, for example), maintenance services, etc.  If your people have 5 percent, 10 percent or 20 percent of their time free, you MUST focus on how to convert that time into money.

BMGI is offering to help businesses beat the recession with a two day Performance Excellence diagnostic at no charge. Click here to find out more.

The Convergence of Design and Innovation

Both of these disciplines must be adopted for success.

In my first article for Inc last year, I wrote about "convergence." I'd like to offer another example of convergence that's taking place these days: the convergence of design and innovation. Just as most approaches to process improvement (e.g., PDCA, Six Sigma) pretty much have the same roots in the scientific method which has been around for a hundred years, so too can most methodical approaches to design be seen as pretty much covering the same bases.

Structured approaches to innovation have been popping up over the last few years as well. Innovative "buzz" started some years ago, leveraging creative techniques that have been around for decades. But it's only in the last five or so years that a new element has been added to most definitions of innovation. Some say innovation is "bringing new ideas to life," or "the act of conceiving new ideas and bringing them to market," or "commercialization of differentiating technology."

The common approaches to design have always had a flaw, though. They focus on how to "design it right the first time," but they don't address the answer to this question: design what? Design methods assume you have a design in mind. Similarly, most approaches to innovation lack an answer to the question of how to bring the creative idea to life -- or to market. So as with most things -- they start discretely and ultimately converge. Today we are seeing the convergence of innovation and design. Innovation (or creative techniques) fills the gap of "what" to design, and design methods allow us to solve the problem of "how" to bring the creative idea to life.

The most popular approach to design in business over the past ten years has become known as "designing for six sigma." There are a few different variations of design for six sigma, but they're all fundamentally the same. On the other hand, there are no widely accepted methods for innovation yet. Some have tried, but nothing has really taken hold -- until now. For the past year my firm has been applying a methodology we call, D4. The four D's in D4 are: Define, Discover, Design and Demonstrate.

We bill D4 as a new methodology, but I have to share a little secret: only the first two D's are really new. The second two are just the old Design for Six Sigma methodologies condensed into two steps instead of a more common four or five. That's because, while it seems obvious to us now, it took quite a bit of time, research and testing with clients for us to realize that we didn't need to start from scratch, but rather just needed to combine design and innovation. The result is D4, and what we've come to learn is that neither design -- nor innovation -- as others know it can really stand on their own. Convergence was inevitable . . . and now you know, too.

Are You An Idea Killer?

My new Inc. column, entitled Beware of the Idea Killers is out and focuses on how new ideas are what will help your business remain competitive. However, be sure you aren't killing them before you consider bringing them to fruition.

As Innovation remains a hot topic in 2008 and as executive teams continue struggling to build effective, sustainable, and measurable innovation programs. The battleground becomes how to structure innovation departments, drive company-wide innovation initiatives, and sustain efforts over the long haul.

To help executives with these challenges my company, Breakthrough Management Group (BMG) is hosting a 2-day Executive Seminar February 25-26 in Denver, CO, entitled Chief Innovation Officer: Lead Your Company’s Growth and Innovation Efforts.

This is the third CIO course for BMG.  We hosted two similar events in 2007, each time heralding attendees from industries as diverse as healthcare, retail, manufacturing, and financial services into one room to discuss and learn about what they all have in common – the need to better drive growth and innovation in order to compete in the future. Past attendees include, Levi Strauss, AVNET, Circuit City, NYC Health and Hospitals Corporation and GE Energy to name a few.

If you are interested in Innovation and what it really takes to lead your company to the forefront, I highly recommend this course. More information can be found here.