Almost every sector experienced incredible disruption during the last 18 months. Manufacturing was stretched on both ends by a collapse in demand for certain products at the start of the pandemic and a rapid increase in demand for others. Consequential supply chain challenges prompted a wide-scale shortage of materials, increased commodity costs and disrupted supply routes. Manufacturers have thus been plagued by long lead times and unpredictable demand for the last year and a half.
While the specific challenges faced by different manufacturers have varied greatly—from employee safety concerns to supply chain logistics—the pandemic has clearly highlighted the need for greater agility and flexibility. The push for greater efficiency through more reliable, consistent and repeatable processes like lean and Six Sigma has been a hallmark of good manufacturing practices for decades and resulted in tremendous gains in productivity, as well as quality.
In some cases, increased efficiency has come at the expense of flexibility. For example, purchasing all fasteners from one supplier might result in higher bulk discounts, but it will also reduce a company’s ability to turn to multiple suppliers in the event of a disruption.
As uncertainty and change increase, efficiency gains are being outstripped by the lack of an ability to pivot quickly as the external environment changes. Not all efficiency gains sacrifice flexibility, and in fact, most businesses have room to improve both. But in many situations, manufacturing companies tend to prioritize efficiency over agility.
So, how can manufacturers better balance efficiency and agility?
Add Leadership to Management
The primary function of management is to create stability, efficiency and reliability. Many established businesses become overly management-centric, and their desire for stability significantly reduces their ability to adapt or innovate.
By contrast, the primary function of leadership is change—setting direction, inspiring action from many more people and encouraging new ideas. Innovation is a leadership-driven function that relies on having aligned goals, a willingness to be wrong, and above all, a desire to challenge the status quo.
Over-indexing on management, as opposed to leadership, can sacrifice adaptability and innovation even if efficiency and productivity improve in the short-term.
Organizations must create an environment that encourages employees to lead—take initiative while acting with urgency and alignment to pursue business opportunities. This starts with focusing on opportunities, not just problems; delegating control and decision-making; articulating principles and guidelines; celebrating progress and reducing noise. Creating space for leadership may mean taking a hard look at the management processes within the organization and eliminating those that are more controlling than helpful.
Prioritize Purpose Over Process
When businesses apply specific improvement methodologies like lean or Six Sigma, they can take on a life of their own as they “scale” across the organization. The almost evangelical pursuit of process can, in many cases, undermine the original intent if a methodology stretches beyond its usefulness.
In a world where agility and adaptability are an important competitive advantage, it is increasingly dangerous to pursue efficiency without understanding its link to the business strategy, or what the implications will be of efficiency-driven change.
The primary question should never be, “How do we make it more efficient?” Greater efficiency may well be required for achieving a business objective, but it should never be a goal in and of itself.
Recognize Tradeoffs – Then Make Conscious Decisions
At a basic level, the tradeoff between efficiency and agility often comes down to optimizing resources While most people would dismiss the idea of optimizing costs by entirely doing away with R&D, they might also support having front-line customer service representatives spend all their time and effort on operational activities to maintain the status quo. The net effect for that department is usually the same—a highly productive operation possessing no capacity to innovate and develop new products/services or more effective practices.
The key is to make these tradeoffs consciously by carefully considering any potential negative impacts accompanying the quest for efficiency.
Focus on Problems and Opportunities
Traditional management practices effectively solve problems, but they are far less adept at identifying and capturing opportunities. Some of these differences are encoded into our human hardwiring. A two-channel model of human behavior that we call the Survive/Thrive system can partially explain why.
The Survive Channel is more suited to problem-solving and can be triggered by threats in our environment. It aligns more strongly with the managerial activities directed at eliminating problems and restoring smooth operations. The Thrive Channel, on the other hand, is triggered by opportunities and encourages curiosity and collaboration.
The Survive Channel is both more sensitive and more dominant. When over-activated, it can shut down the Thrive Channel. Organizations undergoing layoffs are a visible example of this dynamic. Cost reduction efforts can improve short-term profitability, but if not executed properly, may come at the expense of innovation and the ability to adapt when external environments change.
A consistent focus on opportunities as well as ever-present problems will ensure that an overactive Survive Channel does not squeeze out Thrive-activated innovation.
Running an efficient business that adopts best practices is necessary, but it is no longer sufficient for continued success. In a faster-moving world, well-established strategies can do more harm than good if efficiency comes at the expense of agility.
This has been especially pronounced during the pandemic. Some businesses that initially contained costs are now struggling to take advantage of the opportunities presented by rapid recovery. However, the challenge is not limited to large disruptions. Business leaders are faced with daily decisions and activities that, when approached correctly, can maintain or develop agility while managing for efficiency.
When the pendulum swings too far toward a management-centric viewpoint and focuses almost exclusively on efforts to make the most efficient use of resources, the corresponding loss of flexibility can prove very costly in the long run.
Gaurav Gupta is a Director at Kotter, and founder of Ka Partners, with global business experience translating strategy into successful implementation for clients in diverse industries. His new co-authored book, Change, details how leaders can leverage challenges and opportunities to make sustainable workplace changes in a rapidly accelerating world.
