Management Myopia
RICHARD JOSEPH
GENERAL MANAGER,
CARIBBEAN BUSINESS SERVICES LIMITED
The announcement that an American supermarket chain will be
establishing outlets in Trinidad has generated considerable expressions of
alarm in the press.
What can this new entry do which is different and will give it an
advantage over the long established supermarkets here? Basically, all it
can do to compete effectively is to offer better value to its customer
base. This in itself should not cause a problem unless its competitors are
not continuously determining what its customers perceive as value, and
continually improving its customer offerings to meet those expectations.
Unfortunately, many actors in our economy do not do this and remain always
vulnerable to competition. In some industries, there is even a culture of
adversarial relationships with customers, and a lot of resources are
devoted to checking to make sure that the customer receives what he is
paying for. The classic example of this is the construction industry,
where the architect may be more concerned with the building as a
reflection of his ability more than the customers needs, and where there
is an infrastructure of quantity surveyors to ensure that the contractor
does not cheat on materials.
The pursuit of value is a concept that has become common in management
literature over the last few years. Even the accounting profession is in
the process of developing statements which attempt to reflect how value is
added. Essentially, value can be described as the customers assessment of
a product’s worth in comparison to its price. It is a complex concept to
unravel as it has in its mix perceptions about comparative quality,
suitability for use and the amount of satisfaction which will be gained
from owning and using it.
As with improving quality, adding value requires an organization to
undertake a process of continuous evaluation and improvement. More than
just understanding its customers needs, it has to build a chain of
partnerships with all of the entities it interacts with including
suppliers, employees and any regulatory agencies. To be effective, these
partnerships have to be real, and not just exercises performed by the
Public Relations or Human Resources Departments. It requires a commitment
from the entire organization, with everyone sharing in the responsibility
for achieving it, not just some short lived project implementation team.
Over the years, there has been a convergence of thinking both in Human
Resources and Marketing. The organisation is expected to treat both
customers and staff as valued partners, creating a climate of trust and
continual development of mutual benefits. An organisation which is not
grounded in these principles cannot consistently deliver high quality
products which will be demanded by its customers at mutually satisfactory
prices over the long term. In local parlance, “goat cyah make sheep.”
Another important element in the value creating matrix is that
decisions have to be based on facts. Since the objective is adding value,
the data gathering processes must be related to the identification and
measurement of the critical elements which reflect productivity, quality
and customer satisfaction. This has meant a departure from emphasis on the
traditional areas of financial and cost accounting into areas which have
more to do with statistics, and where generally accepted standards and
procedures are still to evolve and be codified.
In his book titled “World Class Manufacturing: The Next Decade,” author
Richard Schonberger states that sustained bottom-line success follows when
customers are well served, employees are fully involved, and actions are
based on systemic data about processes, customers, competitors, and best
practices. He goes on to outline sixteen principles of “Customer-Focused,
Employee-Driven, Data-Based Performance,” catch words which have become
very popular in corporate literature, if not in practice. Many of the
principles are rooted in common sense, and articulating them serves to
convert them into targets to be aimed at, and against which progress can
be measured. Some, such as “Team up with customers; organize by
customer/product family” and “Continually train everybody for their new
roles” appear relatively uncomplicated to introduce. Others, such as
“Operate close to customers’ rate of use or demand” and “Cut flow time and
distance, start-up/changeover times” require the application of
sophisticated techniques of industrial engineering and information
processing. The book is full of examples of companies, both large and
small, which are at varying stages of introducing the principles and which
are already seeing the benefits. They are drawn from different countries
and industries, which suggests that the principles are independent of
national cultures and economic circumstance.
Many of our entrepreneurs in Trinidad and Tobago have succeeded in the
past because of their ability to be flexible and responsive. These are
important qualities, and have been highlighted in a recent article in the
Economist magazine as among those underlying General Electric’s position
as the most admired company in the world. These qualities will however
only provide short term success unless they are underpinned by a strong
culture of delivering value to their customer base. Since the concept of
value goes beyond price, the ability to compete on value will overcome the
disadvantages of low economies of scale which place our manufacturers at a
disadvantage. It will require a broadening of perspective, as even though
the importance of state of the art equipment is clearly understood, little
importance is given to the softer, also state of the art technologies of
production and operations systems. For the time being we will be able to
stay in the game because of our advantages of relatively low energy and
skilled labor costs. With wider markets and increased competition however,
we will find that this is not enough and that superior value is the only
basis on which we can build continuing success. |
