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The Global Manufacturer: Is Your Business Ready to Be Bold?

May 2, 2014
Industries that were used to little or no change increasingly confront sudden, cataclysmic disruptions. A veteran Harvard Business School professor argues for a "dual operating system" to provide stable operations and pursuit of rapid innovation.

Manufacturers could be excused for being schizophrenic if they were to follow all the advice offered to them on how to run their businesses. On the one hand, they are urged to follow the dictates of continuous improvement and exalt the virtues of steady progress. On the other hand, they are told to be innovative and bold or face extinction.

Boldness is an attribute endorsed by many who examine the blistering rate of change in our society and the effects it can have on businesses, or even entire industries. In their book, "Big Bang Disruption: Strategy in the Age of Devastating Innovation," Larry Downes and Paul Nunes argue that sudden, cataclysmic change now "occurs with little warning in markets that may be accustomed to incremental and even predictable change for decades, right up until the disruptor suddenly appears."

Cloud computing, mobile technology and crowdfunding are all helping to fuel change that is faster and less predictable, Downes and Nunes say. Companies face a world in which product cycles are much shorter and market success can present a scary ride both on the way up and the way down. Companies need to know when to move in and out of a product line. For example, Corning's (IW 500/136) Gorilla Glass has been a huge success, generating sales that grew from $20 million in 2007 to $1 billion in 2012, and the company continues to look for new applications for the product. But while Corning has introduced improvements to the glass used in more than a billion smartphone screens and other products, it is also investing in alternative technologies, such as organic LED technologies. Corning is working with Samsung on an OLED display called Lotus Glass, say Downes and Nunes, because the company knows that "no matter how successful Gorilla Glass is today, it will someday be eclipsed -- at least in its current markets."
Philips Lighting (IW 1000/137), based in the Netherlands, is an even more extreme example cited in "Big Bang Disruption" of the need for companies not to rest on their laurels. Philips had been producing incandescent lightbulbs since 1891, and as late as 2009, those products were generating about $5 billion in sales. But in 2006, Downes and Nunes noted, Philips did the "unthinkable" by announcing, "Inefficient and costly-to-operate incandescent lighting has to be eliminated." Philips saw that growing pressure for energy efficiency and the rise of newer technologies such as LEDs and compact fluorescents spelled the end for incandescent bulbs. The company gave its customers plenty of notice about its intentions, invested in new lighting products and even worked with NGOs and other organizations to urge governments "to require manufacturers to end the sale of incandescent bulbs." Downes and Nunes wrote that the strategy to kill its highest-grossing product line "sounds dangerous, and it was," but they add that the greater danger would have been to wait for "sudden death" from new competitors. Change is happening so quickly, argues veteran Harvard Business School professor John P. Kotter, that companies should consider implementing a "dual operating system" framework. In "Accelerate: Building Strategic Agility for a Fast-Moving World," Kotter says traditional organizational hierarchies work fine for running an enterprise, but they simply react too slowly when firms face a new competitive threat or see a significant opportunity emerging.

New Structure Needed for Rapid Action

To act more nimbly, says Kotter, companies also need a network-like structure that takes volunteers in the company at every level and mobilizes them to take rapid action around a "Big Opportunity." This energized group of employees (Kotter says 5% to 10% of the employee population) works to generate new ideas and remove barriers to their implementation in order to meet this opportunity, be it increasing sales in a new market or bringing new products to market faster.

Kotter gives a number of examples of early adopters (no identities provided) who have made this dual operating system work -- who have melded together management's roles of ensuring stability and efficiency with leadership's need to create and capitalize on change.

So does a 21st century manufacturer need a group of Steady Eddies or an army of emboldened Road Runners? The answer -- and the challenge -- is "Both."

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