06/20/95

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Making sense of the changes facing U.S. manufacturers

STANFORD -- The introduction reads almost like a thriller.

The Perpetual Enterprise Machine begins in a Boston hotel room on a fall evening in the late 1980s. The winds that rattle the windows provide a metaphor for the winds of change blowing through U.S. manufacturing.

But this is no suspense novel with the requisite tidy ending. It is an unusual set of case studies undertaken by an ad hoc group of academic and industry leaders, motivated in part by a widely perceived threat to U.S. competitiveness.

The people who met that evening included Charles A. Holloway of Stanford Business School and Steven C. Wheelwright of Harvard. The group that grew out of that meeting -- colleagues from MIT and Purdue, and senior executives from Chaparral Steel, Digital Equipment Corp., Ford Motor Co., Hewlett- Packard and Eastman Kodak -- dubbed itself the Manufacturing Vision Group (MVG).

The group's mission was to make sense of the changes taking place in U.S. manufacturing, and its members charged themselves with discovering how U.S. manufacturing companies can "[meet] customers' latent needs, maintain a competitive advantage and sustain profitability while achieving a constant state of evolution and self- renewal." They wanted to find out how to create a manufacturer's equivalent of a perpetual motion machine -- what they called "a perpetual enterprise machine."

In manufacturing, "development projects are the building blocks of renewal and change," say The Perpetual Enterprise Machine's authors, and so the MVG selected 20 projects to study, four from each of the five participating companies. Products ranged from an electric arc saw to a high-density disk drive, from antistatic film coating to the 1989 Lincoln Continental.

To ensure that the research teams would look at the projects from many perspectives, each team was made up of a management person and an engineer from industry, and a management person and an engineer from academia. They evaluated the projects for their degree of success in meeting schedules and technical and business objectives and winning marketplace acceptance.

Out of the 20 case studies, the teams found seven key elements that influenced the success of development projects. Each is expanded into a chapter in the book. They are stated briefly below.

• New development projects should be conducted with full recognition of their interaction with strategically important core capabilities. They also can be used to change core rigidities in an organization.
• Guiding visions -- product concept, project vision and business unit vision -- provide the link between strategic design decisions and the growth of strategic capabilities within the firm.
• The proper role of management and the mechanisms and needs for "pushing the envelope" are different for product, process and a firm's other internal capabilities. Success or failure in pushing the various envelopes will influence the likelihood of project success.
• Innovative and appropriate project leadership and management is essential to high- performance projects. The firm gains experience from systematic learning across projects.
• Challenging development projects require strong ownership and commitment from three levels: individual project team members, the project team as an organizing unit, and central management.
• Prototyping facilitates structuring and systematic learning throughout the project and builds integrity into the product or process. Testing early and often reduces the risk of failure.
• Integration of people and visions within a development project is a process -- not an event or a state -- and formal, bureaucratic or procedure-driven systems alone won't guarantee integration. Integration requires new skills for people and organizations, and requires changing the way work gets done.

If there is a single lesson that stands out, says Holloway, it is that "above everything else, you can't concentrate on a single part of the spectrum and improve things very much. It's important to realize that the manufacturing function includes everything from understanding the customer's needs to servicing and recycling equipment -- and everything in between.

"Manufacturing in the United States has made great strides in the last 10 years," he says, "and we have become more competitive. But we're still, in many industries, not the leading manufacturing nation, and we still have quite a way to go. While the car companies have made enormous strides, for example, if they don't continue to try to improve the system, in two years they could fall apart again in terms of their ability to compete in the world market. You've got a tremendous set of competitors out there who are working very hard at honing their system and making it more effective. You don't ever want to fall into the trap of saying, 'Well, we've fixed that one. We've got the problem solved.' "

-jz-

H. Kent Bowen, Kim B. Clark, Charles A. Holloway, and Steven C. Wheelwright, The Perpetual Enterprise Machine: Seven Keys to Corporate Renewal Through Successful Product and Process Development, New York: Oxford University Press, 1994

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