Boggling Challenges for the ’90s and Beyond
During a recent seminar, I was asked to summarize the challenges facing companies in the '90s. Here's how I responded.
1. The end of hierarchy. At the half-billion dollar Wisconsin printing firm, Quad/Graphics, just two layers of management separate the chief executive and the new hire. Walmart, The Limited, and Benetton zapped traditional retailers for many reasons—but their very flat organizations top the list. The pyramidal organization is fast changing into a network without a clearly defined "top," or even center.
2. The corporation as a network of subcontractors. Kao, Japan's leading package goods company, induces $5 billion in sales from about 6,000 employees; a typical American counterpart, with only twice Kao's sales, has 100,000 people on its payroll The difference: subcontracting. It amounts to an overall re-conception of the corporation as a network of the best providers of services—plant watering, manufacturing, R&D—brought together to perform a marketplace mission. A whole new idea of equality in relationships with outsiders accompanies the change: The corporation shifts from the traditional "I-centered" (I call it pre-Copernican) approach to a partner-driven orientation.
3. A horizontal/project orientation. Routinely working across functional barriers becomes "the way we do business around here." Careers are a series of projects. Professional service firms (lawyers, accountants, consultants), which have traditionally used project teams, are emerging as the best organizational models.
4. Continuous improvement/continuous learning a way of life. Workers, ensconced in self-managed teams, will be expected to make things better each day, not just "show up." Smart leaders will re-conceive the corporation as a university, dedicated to worker learning from day one until retirement.
5. Information technology changes everything. "IT" is altering all products—from "smart" cars to "smart" buildings. And for the likes of retailers, sophisticated data bases are as important as the right location. Moreover, IT upends every organizational relationship: Inside the firm, it permits instantaneous communication between functions and demands the empowerment of people at the front line; outside, it fosters seamless connections with vendors, distributors, and customers.
6. Time-obsessed competition as the strategy for the '90s. In their book, Competing Against Time, the Boston Consulting Group's George Stalk and Tom Hout observe that 95 to 99.95 percent of the time that we spend "working on" something is wasted. "It takes 20 days to process an application around here," we say; but the real "action" amounts to more like 20 minutes. Motorola has dramatically slashed product development and manufacturing cycles—and even its patent approval process. The problem: Every aspect of the organization structure and all processes have to be upended to accomplish this extreme variety of time slashing.
7. Bold strategies to foster innovation. My unflinching vote is for what I call "violent market injection strategies": Insist that divisions cannibalize each others' most profitable products. Demand that in-house component producers sell their wares on the outside market to demonstrate their fitness to compete. Radically increase unit autonomy. Nurture a horde of disruptive mavericks bent upon destruction of conventional wisdom.
8. The quality, design, and service revolution. Most of our biggest firms still fall tragically short of the world-class mark here. Above all, they still haven't learned that quality stems from wholesale front-line empowerment. A major reorientation toward industrial design, product/service usability, and matchless service and responsiveness are also imperative.
9. Globalization for all. Going global is not related to firm size; small can be very beautiful. But "global," above all, is a state of mind—as much about the magazines you read and the places you go on vacation as the contents of your strategic plan.
10. Shape of the new leader. The new chief will excel at managing ambiguous networks rather than rigid hierarchies, managing "horizontally" via projects instead of "vertically" via functional experts. Value systems associated with network management, partnership, and empowerment are far different from those that marked yesterday's egocentric firm.
11. Learning to cherish change. New competitors, new uncertainties, new technologies, and the shrinking globe drive change per se to the top of corporate agenda. All workers at all levels will become fearless champions of change—or else.
12. Action! The number one problem haunting big and, sadly, not so big business today is the failure to act. Only a strategy of constant, fast-paced experimentation with everything stands a chance in today's turbulent marketplace.
I believe as fervently as ever in the primacy of customer issues. But they no longer top my agenda. It's increasingly clear that we won't achieve necessary customer-centered breakthroughs unless we first embrace dramatic organizational change. Radical improvement in the way we serve customers will only follow from radical improvement in the way we organize ourselves.
(C) 1990 TPG Communications.
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