Corporate Models of the Future (with bonus Ohno Circle exercise!)

Flextronincs Hungary NY Times.PNGHow Crisis Shapes the Corporate Model is an interesting article in the March 28, 2009 New York Times. It gives some history of how past economic shifts have affect the structure and nature of corporations and speculates on what may be to come. Many interesting historical examples are given.
John Hagel III, the co-director of the Deloitte Center for Edge Innovation, is quote as saying that we may see “an unbundling of the corporation” to achieve greater efficiency and profitability. It sounds like another word for outsourcing and offshoring, if examples given in logistics (Federal Express and U.P.S), call centers (Convergy) and contract manufacturing (Flextronics) are indicators of “unbundling”. Disconnecting processes and stretching out the value stream doesn’t seem like a smart thing to do, even in the name of cost savings.
The article also makes a passing reference to lean manufacturing and just in time strategies, and then a contrary view that high fuel prices may in fact bring more manufacturing sourcing decisions closer to the point of consumption instead of in what are currently low cost countries overseas. Out of altruism or the need for survival, manufacturing corporations are presenting themselves as “social organizations, whose obligations extend well beyond Wall Street” according to Rakesh Khurana, a professor at Harvard Business School. As an example, the embattled U.S. automakers are portraying themselves as “pillars of their communities and pillars of American manufacturing, not purely economic entities” according to the article.
The article’s author may also be confusing correlation with causation when he talks of how technology made it more possible to monitor and manage large, complex corporations – something that doesn’t seem to have direct line to the Depression or other economic shifts highlighted in the article. It may have been an enabler of change in the corporate model, but only one of many. Whether technology is a greater catalyst of chance in the corporate model or whether economic factors are a greater catalyst is an interesting though hardly testable question.
And do you agree or disagree with the emphasized portion of this quote from the article?

Innovation in management, after all, is adaptive. Management is not a science, like physics, with immutable laws and testable theories. Instead, management, at its best, is an intelligent response to outside forces, often disruptive ones.

Can management not be a science and also be adaptive, and yet possess immutable laws, testable theories, and respond intelligently to outside forces?
Bonus feature:
The photograph of the Flextronix factory in Hungary (photo credit Bela Doka/Anzenberger, for The New York Times) is a good one for practicing the “stand in the circle” exercise. Pretend you are in the factory, standing in the Ohno circle. Your task is to identify 30 small problems or improvement ideas in the next 30 minutes. As a company Flextronics is known for having some fairly lean sites, and this factory appears to be clean and organized. In addition, the fact that you cannot see people moving makes it slightly more challenging. On the other hand it allows you to observe a single moment in time more deeply. I found 18 possible improvement areas in 12 minutes before it got really hard. What will you find? Add your observations in the comments below.
Click here to open or download a document of my 18 observations: Observations from Ohno Circle Exercise – Flextronics Hungary.doc

11 Comments

  1. Alex Hutton

    March 29, 2009 - 5:50 am

    “Management is not a science, like physics, with immutable laws and testable theories.”
    Um, what?

  2. JSA

    March 29, 2009 - 5:57 pm

    Mr. Hagel has been running the same unbundling “schtick” for a while now – yet another morass of buzzwords created by a consultant looking to keep the gravy train rolling…obviously not written by someone who ever actually ran a business.

  3. Harish

    March 30, 2009 - 5:29 am

    Hi Jon,
    To add to what you had written:
    1) The reject (red) bin and trash cans are located further away from operators.
    2) The lady on left bottom has to do a 180 degree turn to do her job, and she is provided with a chair for that???
    3) The same lady has to reach over or get up and walk over and put the casting on the conveyor after her inspection(?). I am assuming this because the aisle way is not wide enough for forklifts. And the I do not think, they want forklifts in their environment (clean room and lot of people).
    4) The same operator is standing up while she has a chair. Something is not right.
    5) For the same operator, the parts in the blue shelf are in a closed box, and this is a waste.
    6) All the bins are in a flat surface and not in an angle for ease of use and ergonomics.
    Thanks Jon for this exercise.
    -Harish

  4. ps

    March 30, 2009 - 2:22 pm

    Outsourcing (and its subset offshoring) or as you describe it “Disconnecting processes and stretching out the value stream” may be a smart thing to do in some instances. Outsourcing call center work from one centralized facility to mutiple outside sites improves resiliency, outsourcing product assembly to locations closer to raw material supplies may reduce transportation muda, outsourcing a sub-process from a middle management process owner to an outside party owned and managed by an entrepreneur may improve quality, cycle time, and cost. Outsourcing is neither good nor bad, the decision is dependent on the situation and most importantly the interests of the decision-maker.
    The interests of the decision-maker is, I think, the key to understanding our current economic situation. The article quotes Rakesh Khurana, a professor at Harvard Business School: “corporations will be regarded more as social organizations, whose obligations extend well beyond Wall Street”. How do we define “Wall Street”? Defining Wall Street as the investment banks and their transactional counterparts in the executive officers of public companies with diverse shareholder bases is appropriate. Corporations should have no obligations to such a Wall Street. Corporations should carry their primary obligation to their shareholders. If corporate decision makers acted in the interest of ongoing shareholder value I expect the pundits would be praising the success of our capitalist system. The reality is that people who gain decision-making authority in large organizations find it increasingly difficult to act in any interest other than their own when the shareholders are not holding management accountable. In so many of today’s large public corporation this is the case.
    This takes me to the question of whether management is a science. Whether practiced in self-interest or in shareholder-interest, management contains a critical component of psychology. If you can call psychology a science you can call management a science. So what is lean management other than the combination of physics (muda elimination=energy conservation) and the psychology of employee engagement? Ultimately, understanding what motivates individual employees (whether they be the CEO or the line worker) is the key to successfully implementing the truly scientific elements of management.

  5. Jack

    March 30, 2009 - 10:47 pm

    Hi Jon,
    not much to add, but here are some things I noticed.
    1) Top of blue shelf seems to be dirty, at least I can see a colour difference. There is a dark blue spot on top;
    2) The card box on the ankle-height in this shelf seems to big to actually fit in it. It seems like its sticking out;
    3) In the background somebody is standing next to a empty chair. This may imply that something is wrong.

  6. mike

    March 31, 2009 - 5:08 am

    There is some kind of visual work instruction posted by the number 47 (center, right, behind gentlemen in aisle) that is much too small to actually use from the operator’s position.
    There is just too much “stuff” crammed into this workspace, leaving little room for work to be performed.

  7. Chris.Nicholls

    March 31, 2009 - 7:15 am

    Hi Jon
    Thanks for a great post and tricky observation task.
    Its almost impossible to understand the real situation by studying this photo. I’m sure we can guess a few areas that could be improved. For me it renforces the need to go to the actual place yourself and observe while the production process is working. That’s the only way to see the issues and the difficulties presented to the operators. A snap shot (photo or otherwise) can convey the wrong impression. I’m sure that’s why Mr Ohno insisted that his managers or supervisors stood in the circle for 30 mins or 1 hour and observed the facts
    Best Regards
    Chris

  8. Jon Miller

    April 12, 2009 - 6:24 pm

    Hi Harish,
    Nice article, and thanks for the link. And “gembatte” is a nice neologism. Was it on purpose? As you know “gemba” is “on-site” or “real place” in Japanese, and “gembatte” means “good luck” or “give it your best” so the combination of the two makes for a great new word meaning: go to the shop floor and do your best!

  9. Harish

    April 17, 2009 - 8:08 pm

    Miller San,
    Thank you for your kind words. I have been trying to learn Japanese. You have very sharp eyes and a sharp mind. 🙂
    Ja matte ne.
    Harish

  10. sharma

    June 24, 2009 - 2:50 am

    Dear Jon,
    Excellent example for scope for improvement!!! This is Kaizen! It seems that we are always “still scratching the surface”.
    I have following suggestions :
    1)The cardboard boxes should be replaced by transparent vinyl/plastic boxes.
    2)The Waste bins should be of transparent vinyl/plastic, showing markings when it needs to be disposed.
    3)There should be colour coding of the waste bins with the help of coloured rings or marks, to sort them as : metal waste, paper waste, plastic waste, precious waste, mix waste and so on(to avoid waste of time sorting it later).
    4)The corner edges of workstations(e.g. opposite position 47) should be smooth(curved) to avoid people getting hurt.
    5)There should be shadow boards for everything possible such as waste bins, red bins, blue bins, cardboard/vinyl/plastic boxes, chair locations.
    And lastly, to reduce my guilt, I first stood up in the ohno circle myself and quickly cleaned up my office before writing this mail.
    Thanks!