On Management

Dec. 21, 2004
Four formulas for success.

The pundits say that we are in the information age -- or the knowledge era -- and that the days of the Industrial Revolution are fading into the past, much like the agrarian era that preceded it. In many respects they are right. The percentage of the U.S. labor force still engaged in the production of "things" is dropping steadily. The latest figures put it well below 15% and heading toward single digits. Technology and productivity have made it possible for fewer people in manufacturing to produce much more. Dell Computer Corp. has provided a model of the new demand-pull, mass-customization manufacturer. Auto companies such as Toyota and DaimlerChrysler, with their near-captive supplier partners, have provided a new model for modular production, relying on suppliers such as Dana Corp. for large portions of their vehicles and becoming, in effect, systems integrators. There are a few "secrets" to making and selling manufactured goods profitably -- and these secrets are based on four important formulas. They are nonmathematical formulas, but they are as valid as the equations in quantitative sciences. The critical terms in these formulas are: Data, Information, Insight, Knowledge, Wisdom, and Imagination. Here is how they work:

  • Data + Organization = Information Most of us are swimming in data, but unless we have a way to organize these data, they provide precious little useful information. The sheer amount of data often obscures the important information that will steer us to work on the right issues.
  • Information + Insight = Knowledge Even when a lot of information is available, human insight is required to transform it into useful knowledge. Insight provides the context and perspective necessary to understand what customers value, as well as the relationships that are so important.
  • Knowledge + Experience = Wisdom Only by factoring what we've learned from the successes and failures of the past into the knowledge of the present can we hope to gain any true perspective about the future. Downsizing has driven much of the experience out of companies, thus creating a great risk of repeating past mistakes.
  • Wisdom + Imagination = Genius Rarely do companies move to entirely new plateaus of excellence, because they are too invested in preserving and protecting their present successes. When they do achieve breakthroughs, however, they can be very profitable. This requires a special touch -- imagination -- a blending of logic and emotion, of science and art, with child-like curiosity and adult determination to weave an entirely new fabric for a business or an industry. Companies that achieve genius prosper only if they can commercialize their vision better and faster than competitors. And here the four equations come into play again -- in devising winning strategies and execution plans. Apple did it in computers, based on developments by Xerox Corp.'s Palo Alto Research Center, but Microsoft and IBM (as well as Compaq and Dell) usurped Apple's lead through better use of the four formulas in strategy and execution. Motorola invented and dominated such categories as car radios, walkie-talkies, and cell phones before losing its edge when Nokia and Ericsson applied the four formulas better. No one owns the rights to any of these formulas. They're available to everyone, but putting them to use is a challenge to the human mind. There is a final, fifth formula that underscores the ultimate irony: The very aspect of manufacturing that is being eliminated at a record pace is the most critical one -- people.
  • Good Technology + Great People + Sound Strategy and Execution = Market Dominance
The organization with the best-trained, most competent people -- and the ability to combine the first four formulas with the last -- will win in the end. John Mariotti, a former manufacturing CEO, is president of The Enterprise Group (www.shape-shifters.com ). He lives in Knoxville. His e-mail address is [email protected].

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