Disillusionment with Naos

In the past three decades or so, Western manufacturers have pursued world-class manufacturing status through a shotgun blast of three-letter acronyms: TQM (total quality management), JIT (just-in-time production), DFM (design for manufacturability), QFD (quality function deployment), QPD (quick product/process development), CIM (computer integrated manufacturing), ERP (enterprise resource planning), SCM (supply chain management), CRM (customer relationship management), and so on.

The power of these NAOs (new approaches to operations) in improving quality, production scheduling, product development, supplier management, etc. has been forcefully demonstrated in a number of leading companies such as AT&T, Hewlett-Packard, Motorola, Xerox, etc. leading thousands of others to strive to emulate them and their Japanese role models. Despite many remarkable successes, depicted in glowing accounts in the business media, a number of subsequent studies revealed a disturbing pattern of failure.

Even efforts initially labeled as “successes” often turned out to so only up to a point – after which, improvements stagnated or even regressed. For example, the Big Three automakers as a whole had quality records that were below the average, and they were losing market share in all vehicle categories. The conclusion of most large studies has been that only a third of the companies that attempted to implement the most popular NAOs achieved the results expected – by the companies’ own admissions.

In the few studies that asked customers and suppliers, rather than the companies themselves, to evaluate the overall effectiveness of such programs, the success rate was even lower. For example, an extensive study of 584 companies in Canada, Europe, Japan, and the US conducted jointly by Ernst & Young and the American Quality Foundation found that most TQM programs had achieved “shoddy” results. Other studies suggested that only a third or less of those same programs had had a very significant effect on their companies’ market success.

Similarly, a Bain & Co. survey of managers’ evaluations of NAOs found that 81 % of the respondents felt that “the NAOs promise more then they deliver. ” As a result of (and possibly contributing to) such dissatisfaction, the survey found that the average company had tried ten different management tools across different NAOs. A number of attempts to link TQM activities with corporate financial success have also produced troublingly ambiguous results.

For example, although one might reasonably assume that a company that successfully implemented NAOs faster than its competitors would achieve superior financial results, it would be difficult to measure any individual economic benefit if all the companies in its industry were making similar improvements. As a result, it is difficult to find evidence that the widespread adoption of NAOs has been somehow superior to the steady operating improvements that US companies have been making ever since aggregate productivity first began to be measured more than fifty years ago.

Such findings have resulted in a growing cynicism among top managers such that it has been called “the steady coming and going of popular NAOs ….. is another sign of an underperforming CEO. ” There is deep cynicism in the ranks too as employees feel that they have been fragmenting their time trying to implement a “blizzard of buzzwords,” expanded each time one of their top managers attended a conference, read the latest “secrets of success” management book, or hired a consultant. Why has the success rate of programs to implement these NAOs, despite their great promise, been so low?

Looking beyond the NAOs, the adherents of lean manufacturing, process reengineering benchmarking, etc. , in fact, must also confront the problem as to whether, if their “new dominant design” is correct, the strategic role that operations can play is much reduced. In effect, these programs force managers to restrict their strategic thinking to deciding which currently fashionable improvement technique to adopt next, and abandon strategic analysis in favor of say benchmarking (I am picking benchmarking as an example) – identifying and adopting the “best practices” of other companies.

US operations managers are not alone in their surrender to such faddishness. Many Japanese companies similarly fell into the trap of “…following the same strategy; so like passengers on a ferry, they have swamped the vessel by all simultaneously running to the same side of the boat for the best view. ” Striving to be “lean” (have uploaded an article on Toyota - whether leanest is the best) or even “world class” seems insufficient, and in fact, maybe

somewhat simplistic. At best, you end up only as good as (and no better than) your toughest competitors, and find yourself playing catch-up with them. How can one reconcile all the above with the anecdotes about companies that became “lean and mean,” through right-sizing, delayering, and reengineering; and “closer to their customers” through attention to quality, response time, and faster product development?

Stepping back to take a more holistic look: Operations managers, confronted with difficulties imposed by unstable economic conditions, an increased sense of personal and organizational insecurity, and a recognition that the NAOs and other improvement programs for which they had such high expectations have failed to deliver, also find themselves forced to address a host of operating issues associated with increased globalization, advances in information technology, and new forms of corporate organization in ways that have redefined the role of operations management.

The newest forms of all the three above have collided and intertwined in complex ways to create whole new industries and approaches to business. The challenges facing operations managers today, therefore, are greater than ever before. How can operations managers face such challenges without losing sight of the fundamental principles of operations management that has made the US economy an industrial powerhouse – the principles, that, in fact, have underpinned the success of every industrial nation?

Coping with Complexity The fundamental concern of operations management is efficiency and how a firm converts materials and labor into goods & services while reducing costs and creating the highest profit. The challenges to this as outlined in the essay are many. They are often ambiguous in nature and change frequently, and they can become overwhelming and confusing very quickly.

I think one way operations managers can face these challenges is by building a strong and competent workforce that is flexible and adaptable to change, is willing to learn new things quickly, and can spot opportunities that may improve or grow the firm. When I think of firms I’ve worked for I can easily spot the managers who were agile and not afraid of a rapidly changing landscape. They often presented change to us as something to expect if the success of the firm was to continue. It

was evolution, and innovation was part of everyone’s job description. In contrast, I recall managers that did restrict their strategic thinking and often lost sight of the fundamental principles of operations management. I recall confusion among staff, insecurity, and lack of direction. There is so much information out there on how we can better manage our business. The trick for managers is keeping focus on the big picture and deciding what will build the firm and carry it in the direction future or ongoing success.