Interview for Oman

The following was the transcript for an article I did for PEIE (the Oman Public Establishment for Industrial Estates) which was later modified and published in the Oman Economic Review (OER).

How long have you been involved in manufacturing?
Having spent a number of years in design engineering, I came into manufacturing in the early 1990’s and after having held a number of senior operational management roles, I then moved into consultancy.

How do you see manufacturing changing over the next 20 years?
Obviously, it is possible even now to theorise about the world-wide impact of the growth in the Chinese economy and the stress it will place on global competition. I would also anticipate the continuing rise in the importance of brands in high end manufacturing, both at the business and national level, and the consolidation of low end manufacturing into fewer, more specialised manufacturers who will offer flexibility and extremely high levels of productivity. I also predict that increasing globalisation will have the impact of increasing the number of SMEs who chase low costs around the world, but who are currently prohibited by the extreme costs involved. However, within a little more than 20 years I anticipate we will need to find new ‘emerging markets’ as the costs in China, India and even Eastern Europe will begin to reach a level where it is uneconomic to outsource to them. Throughout this period, niche businesses will continue to thrive by providing differentiated, flexible services at higher costs.

Which emerging technology do you think has the most potential to change manufacturing?
You cannot answer a question like this without first referring to the impact of the wireless communications, and the continuing growth in the Internet, on all aspects of manufacturing, from machine measurement through to supply chain planning. A secondary technology that will have an impact that will, I believe, be bigger than we can currently predict, will be RFID with its applications in everything from product tracking to national security.

In terms of the new sectors that will impact on manufacturing, these are unequivocally micro/nano technology and bio-processing, all of which will make a major impact on the world, although due to the investment barriers to entry in the market, will make it difficult for companies to break into in the medium term (that is until the technology is freely available) unless they consider their entry strategy in the very near future.

What are your thoughts on the issue of knowledge transfer from academia to industry?
The amount of research capability in academia far out-strips that available in industry and there is an urgent need in many economies to make this research more accessible to industry and also to significantly simplify the process of working with academia. I have been deeply impressed by the Fraunhofer Institutes that originated in Germany and how they are both accessible to industry and focused on the commercialisation of research.

There’s a lot in the press lately about how universities need to become more responsive to the needs of business ... what are your thoughts/experiences on this?
Having been involved in partnering with a number of universities in the UK over a number of years, I would agree that for many businesses the processes of accessing and then forming a relationship with universities has been very difficult, often caused by the different needs of the organisations concerned. There have been a number of attempts to simplify the process of getting access to universities and making them more responsive, including introducing layers of intermediaries, but there are still some major problems to overcome before universities are as responsive as they need to be to support industry effectively.

What type of involvement would you like to see business have with universities? What opportunities do you see?
Universities are fundamentally clusters of knowledge. Virtually no business could afford to have research capabilities as big as those held within even a single university. I would be delighted to see universities starting to become an integral, but out-sourced, part of the R&D functions of organisations, and I don’t just mean large companies. This may mean that different funding models need to be used including such things as deferred payments or universities taking a percentage of future sales without requiring funding up-front.

You’ve visited hundreds of plants around the world. While the industries, products, and equipment vary, what are the common principles that guide the best manufacturers?
Another interesting question. The most prevalent measures of success in manufacturers around the world appear to be having an appropriate culture that supports the aims of the business – whether that is to be the most innovative, lowest cost, fastest turn-round etc. For many manufacturers, relationships with customers and suppliers are also key and the formation of effective partnerships is going to be a major source of competitive advantage in the coming years. In addition to these internal factors and skills, governmental policy and regional trading conditions need to be monitored and reacted too accordingly and the best organisations are adept at keeping close to the external factors that affect the internal operations of their business.

Anybody can buy the latest, greatest equipment, but manufacturing isn’t a purely mechanical system. It's the "people systems" that determine a plant's productivity. Without clear processes to change parts, clean machines and report and fix problems, employees improvise, allowing inconsistency and inefficiency leaks in. How does a manufacturer build the necessary “people systems”?

For all but the most automated factories, people are the essential variable that will make every product, fix every problem and identify every improvement. Without ‘people engagement’ no business can hope to be a success, but how you engage them is recognised as one of the most difficult issues faced by senior management and changing culture one of the most difficult and time-consuming change processes. There is no general solution to how you build the necessary people systems, it is a function of where the businesses culture and systems are today and where the business managers want to business to move to (the Future State) and then planning the improvement Roadmap. However, wherever the organisation starts from the solution will include such things as: policies, procedures, management style, measurements, communication and reward/recognition systems.

We all think that the faster a plant can make a quality product, the less that product costs to produce. Those savings can be applied to new features (adding more leather upholstery, say). That's how you become more competitive, sell more products, increase profits and ultimately improve job security. Is this how manufacturing works in the real world?

This is a common misconception and the cause of many businesses going out of business. Doing things faster often implies throwing extra effort and resources at it and these carry extra costs. In addition, making things faster that you have not (or cannot) sell, means wasting money faster too. Going ‘faster’ often drives people to build bigger batches of products (to avoid costly set-up times which would slow things down) and this means producing things that cannot be sold immediately, which ties up significant cash and space. A better approach is to focus on shortening change-over times so you can run smaller batches, and remove non-value adding activities so the business is more responsive. The benefit is that your productivity and flexibility will increase making it easier to cope with what the world will throw at you.

Dell hit in excess of US$45 billion in annual revenue and is growing at nearly 20% yearly, and seems well on its way toward surpassing its goal of US$60 billion within the next few years. And it's not letting up. Still relentlessly striving to get better faster, Dell intends to slash US$2 billion in costs. CFO Jim Schneider has indicated that much of the cuts will come from manufacturing operations and the supply chain. In your opinion, is speed the ultimate competitive weapon?
Responsiveness is an effective weapon for many manufacturers, but not all. It is important for organisations to understand the key drivers in their markets – what are the market leaders doing? What do the customers value? The best weapon is to have a clear understanding of the competitive factors that drive the sector each company operates in – looking externally at what is required rather than internally at what is offered!

Do small manufacturers need big-name supporters?
Many small manufacturers have difficulty managing larger suppliers in their supply chain and I believe there will be a continuing move toward purchasing clusters to allow smaller companies to leverage cost savings and improvements in responsiveness from larger suppliers. In wider terms, many smaller companies can be highly successful without big name supporters, especially in niche markets or for markets where the customers are ‘brand insensitive’ (as in they are not bothered by brand value). Perhaps the best big name supporters of smaller companies will be banks and the media and for many these should be the ones to ensure you have a good relationship with.

Whether you're running a company with 3 people or 3,000 people, you have to hire the best engineers, the best marketers and the best production workers. The products you make, the programs you have, the mission you espouse should make people feel good about working for you. In your view, are corporate values a real motivator?

There are two parts to the answer to this question. In the first instance I would like to challenge the assumption that you always need to hire the best (implying the most expensive). Misquoting Toyota, we get; “we produce excellent results from average people with excellent processes. Our competitors get average results, with excellent people and broken processes.” This statement says that a well organised (and Lean) business will inherently be more effective than an organisation with any number of excellent people but with ineffective processes. Answering the second part of the question, in a competitive situation where companies are trying to attract talent and there are numerous options for the individual, then the decisions come down to which organisation best meets the personal needs of the individual. Some of these needs will be logistical (closeness to where they want to live, working hours that fit their lifestyle needs etc) and some will be emotional (values of the business, working environment, appropriate opportunities for advancement etc). The most effective organisations will aim to achieve the best fit between the needs of the business and the logistical and emotional fit of the individual.

We’re living in difficult times. Indeed, what do you do when the business world as you've always known it simply ceases to be? When new competitors and new technologies explode the industry economics? When everything that worked before won't work - and can't work ever again?

It is difficult for organisations to recover from a major fracture in the market and this is where there is a need to have good external scanning processes to try to predict major changes in the market in a timely manner. However, using a metaphor, whilst we have the technology to spot large asteroids that are likely to hit the Earth, there is a chance we will miss one, and one is all it takes! Therefore, in a market where the world has changed, the winners will be those who can evolve fastest, the most innovative organisations with the ability to quickly restructure their finances and operations to meet the new challenge.

If we don't have to own it, let's not own it. And if we do have to own it, let's reduce the risk by sharing it. How does this kind of thinking apply to today’s manufacturing sector?
There have been attempts to share resources and workforces (particularly in areas where the skills are difficult to access) and there are organisations who have recognised that one company’s waste is another’s raw material but these are in a minority at present. For many companies, forming trading partnerships to share resources will be an effective way of reducing risk, but the key issue is finding the right partner to link with. In the UK, this is being addressed by PSL (Partnership Sourcing Limited) who are a not for profit orgnisation originally established by the UK government and who are now leading the development of the new ISO standard (11000) which will cover how to effectively partner.

If we can't dominate a category, let's get out. Is this smart thinking?
The answer to this is to look at the BCG (Boston Consulting Group) matrix. If the market is low growth and you hold a low share (what is termed a ‘Dog’) then it may be best to plan an exit strategy, but if the market is growing and the company holds a low share (a ‘Question Mark’) then the organisation has options based on the competitive situation in the market. If the market looks likely to consolidate around one or two major players then it prompts one exit strategy (possibly holding out to be bought out?) whereas if the market looks like it will support numerous suppliers, it may be prudent to hold your nerve and stay with it. The answer therefore is not simple and will need to be thought through by the business.

Finally, future plans... anything our readers should be aware of?
In terms of the future plans for my business, we are focusing on WET (Whole Enterprise Transformation) by taking Lean out of the factory and applying it to the office and managerial systems. We are also moving outside of manufacturing and working with service businesses, including hospitals and banks as there is a lot of opportunity to re-group the organisation around better and more effective processes. Another exciting development is our new model for combining Lean with leadership development and cultural change to not only sustain but also to accelerate the benefits of improvement.