From the boardroom to the stockroom there is a strong perception in this country that
The MIT Commission on Industrial Productivity was created to answer these questions. We embarked on an extraordinary two-and-a-half-year study, funded by the Alfred P. Sloan and William and Flora Hewlett Foundations, to determine whether there were inherent weaknesses in our industries and, if so, what weak nesses. Initiated in 1986, the MIT Commission was made up of 16 MIT faculty members who are economists, engineers, management experts, and political scientists.
The verdict of our commission is that the
To fix this problem, we must first understand it by identifying the major weaknesses that have led and are leading to it. Yet, when we collected what the scholarly literature and the press had said about these weaknesses, we were appalled: Over 100 causes, some in conflict with one another, were allegedly at the root of the problem. Disbelieving this information, we set out to identify the weaknesses ourselves. We formed teams and pursued eight industries, accounting for about one third of
SIX PATTERNS OF WEAKNESS
When the teams completed their investigations, we compared their results. To our surprise, six patterns of weakness emerged. They are not new, since they are contained in the very large number of weaknesses that have already been reported. What is new, and important, is that they are few in number and they represent the weaknesses that emerged from a bottom-up study, rather than the weaknesses that we, or anyone else, wish had emerged. These six patterns are described next.
Narrowing the vision of managers further are the blinders of parochialism. In the 1950s and 1960s, for example,
Meanwhile, the Japanese company, without showing any profits over a dozen years, slowly builds its knowledge and market share in consumer electronics. In time it assaults the higher-end products of the
Third, while very inventive,
Why billions of dollars in potential earnings were lost can be summed up by an executive we interviewed on the factory floor: “I don’t want intelligent people involved in manufacturing.”
Fourth, we neglect our human resources. First and foremost, at the kindergarten through grade 12 level,
When it comes to education, schools are not doing their job. Nor is industry. The American notion of job training is remedial reading or “following Joe around on the job.” By contrast, in
Fifth, our study showed a consistent pattern of failure to cooperate both within and across companies. There are failures of cooperation among different departments in a company, between employees and management, between industries and their suppliers, and among firms in the same industry (e.g., for setting standards). Failure to cooperate costs time, money, and quality. In many
The sixth and final weakness revealed by the commission’s work is that
These six weaknesses are real, and unpleasant as it is to dwell on such negatives, we must confront them and understand them well if we wish to recover from their grip. But we must also go beyond them to gauge changes in tomorrow’s world. The MIT commission believes that, in addition to repairing past and current weaknesses, the
FIVE STRATEGIES FOR RECAPTURING THE EDGE
The MIT commission blended the six weaknesses with these future trends and with the practices already being pursued by
First, we must learn to produce well the new way. The old, rigid system of production in which each person is an expendable cog no longer works. Companies must put production ahead of finance and must focus on the human and technological resources needed for production. The bottom-line measure of success must be augmented with measures of product quality, like the number of defects per thousand products, and user satisfaction.
Second, employees must be given greater responsibility and broader training in order to fully participate in developing and using the new flexible systems of production. We must insist on training and educating the work force more broadly on the job so they can better contribute to the performance of the corporation. And since so much more will be expected of them, we must reward employees with a greater participation in the firm’s profits. This new economic citizenship of the work force not only results in a greater bottom line for the firm but also in a more satisfied work force.
Third, companies that blend cooperation with individualism can improve their performance. Leaner and considerably flatter organizational structures within companies, along with rewards for individualism and for teamwork, can go a long way toward this goal.
Fourth, we must learn to live in the world economy by, for example, paying more attention to foreign languages, cultures, and practices. We must also shop internationally for the best technologies and compare our products against the best international standards, not the company next door. And although protectionism has no place in the world economy, we must insist that our products are treated abroad as fairly as foreign products are treated at home.
Fifth, we must provide for the future. This means establishing national policies that will help balance the budget, stimulate savings, and reduce the cost of capital. Investing for the future in the broadest sense also means better educating the young people that will form tomorrow’s work force. The budget gap can be closed virtually overnight, for example, by bringing the cost of gasoline in the U.S. closer to (not even up to) international levels. While people may furiously debate the wisdom of such a move, there is nothing anyone can do overnight to raise the average SAT scores of the nation’s high school graduates by, say, 150 points. This does not mean we should not begin. We need not reinvent the wheel; we need simply look at how it’s done elsewhere.
Best-practice companies worldwide go after these five imperatives simultaneously, because they are mutually reinforcing. That may be why our companies have not been able to emulate these practices. To make so many wrenching changes at once is very difficult. And to pick and choose one or two fads, like quality circles, without doing the rest, is inadequate. Yet, difficult though it may be, the change of attitude that we must undergo is mandatory.
If we want to live well, we must produce well. There are no shortcuts.
Michael Dertouzos served as chairman of the Commission on Industrial Productivity at the Massachusetts Institute of Technology. He is a professor of computer science and electrical engineering at MIT, as well as director of the MIT Laboratory for Computer Science.