https://www.gm.com/heritage/collection/chevrolet/1976-chevrolet-chevette

The Chevy Chevette was the best product of the largest and most successful corporation in 1976. [WOWSER] It was marginally better than the Corvair or the Vega. Major US corporations had taken advantage of the post-WWII opportunity to produce for the world and perfected minor changes each year to further stimulate consumer demand. Functional roles in corporations were largely unchanged since the 1920’s. Japanese competition in the auto and consumer electronics industries in the 1970’s caused American corporations to eventually reinvent themselves and move into a world of perpetual change management.

It’s difficult to describe the size and impact of these changes. They were like a compounded series of paradigm shifts. I worked with many organizations from 1975-1989: Koppers, Avery Label, Sherwin-Williams, multiple S&L’s, United Telephone, AmeriTrust, E&Y, Tandy Radio Shack, EDS, IBM, Microsoft, GM, NASA, Zenith, Allison Transmission, City of Cleveland, McCormick Convention Center, Amway, US Navy, US Health & Human Services, Lorain Community College, Baldwin-Wallace University and the University of South Florida.

I completed a finance MBA at Case Western Reserve University in 1984. I joined Ernst & Young as a junior management consultant and learned from Dr. E. Leonard Arnoff, one of the founders of the discipline of operations research.

https://www.informs.org/Explore/History-of-O.R.-Excellence/Biographical-Profiles/Arnoff-E.-Leonard

FEW of the most important concepts and skills of my 35-year professional career existed or were rarely applied in 1984. The smartest academic and business leaders were aware of some of the changes that would shape the next 50 years, but the typical 1984 manager was still working from a 1930’s view of business.

I’ll group the more than 100 HUGE advances into 6 categories.

Strategy

1. Strategy really matters. A strategy function is needed.
2. Competitive advantage is critical (Michael Porter).
3. Companies cannot be all things to all people.
4. Strategy is a process to focus and facilitate thinking, not a mainly a means of control.
5. Market leaders have a better chance of winning. Better to be a leader in a small market segment than a follower in a large one. Long-tail opportunities.
6. In many markets, leading market share (1, 2 or 3) is essential.
7. Product differentiation is required to avoid commodity pricing.
8. Universal customer needs of quality, speed, flexibility, value (price and function), information/transaction costs and personal relations/risk management can all be used for product differentiation. A customer centric strategic view is necessary.
9. SWOT analysis is essential. Strengths, weaknesses, opportunities and threats.
10. Mission, vision and values must be articulated. Begin with the end in mind.
11. Firms must choose between equity alone and multiple stakeholder priorities.
12. Modelling and simulation tools can be used to identify, understand and prioritize the critical dimensions of every firm.
13. International and startup competition must always be considered.
14. Professional functions within each firm are increasingly essential.
15. A 3-way strategic choice must be considered: low cost, product differentiation or customer intimacy.
16. Successful firms clearly articulate abstract ends and flex the means of attainment (Collins).
17. The customer and retail interface may have more power than the manufacturer/service provider.
18. Smaller firms are available to be purchased in a roll-up strategy.
19. In the end, dynamic, sustainable [moats] strategies have the greatest value.
20. China matters.
21. As firms become more strategically driven, the fixed costs of SG&A rose, requiring firms to prioritize growth and market share.
22. Intangible assets may be more important than tangible assets.

Marketing

1. Market size is essential. Market share is next.
2. Marketing research of customer preferences matters.
3. Branding is vital.
4. Focus groups can provide separate insights and validate numbers.
5. The marketing function exists to create value, not just sell things.
6. Targeted marketing is essential. Products must match differentiated markets.
7. Some customers value quality and reliability.
8. Some customers value timely delivery.
9. Digital marketing channels supplement analog channels.
10. In the digital world, search engine optimization [SEO] matters.
11. E-commerce is a competitor to analog delivery.
12. Internet promotion is a competitor of traditional media.
13. Individuals’ identity and social interests can be targeted.
14. Some customers are better targeted by 2-way communications or influencers.
15. Politicians, regulators and courts increasingly matter, and firms must invest accordingly.
16. Tariffs matter. Firms must invest to manage them.

Finance

1. Access to debt, equity and start-up financing is much easier.
2. Access to global investors is possible.
3. More efficient markets through mutual funds, ETF’s, derivatives, and efficient trading markets matter.
4. Portfolio management applies to investments, projects, product lines, channels and new product development.
5. Marginal costs/benefits apply to every activity and project.
6. Cash and management accounting perspectives are best used for making decisions, separated from accrual and financial accounting measures.
7. Price discrimination is a major opportunity in every market.
8. The formal discounted cash flow analyses apply to many situations.
9. Activity based costing helps to identify necessary costs at 4 levels.
10. Corporate and product level costs are subject to cost reduction just like plant/facility and production costs.
11. The balanced scoreboard system ensures that all levels of economic activity are planned, measured and managed.

Human Resources

1. Human resources are productive assets; they are not simply “personnel”. They should be managed accordingly.
2. Required staff skills must be defined, measured and enhanced.
3. Clerical support skills must be cost-justified.
4. Analytical skills can be captured in separate positions.
5. The general concept of meritocracy matters. Exceptions must be justified.
6. COO’s and CFO’s are not alone. IT, marketing, risk, merchandise and people managers are equally important.
7. Legal compliance matters.
8. The role of “managers” is essential. Managing people, tasks and processes. Developing talents.
9. Highly skilled MBA’s have important roles to play.
10. Organizational development is a value added function.
11. Matrix (cross-functional) management is just as important as functional management.
12. Project teams play a critical role.
13. Firms cannot cost-justify employing thought leaders in every function. Management consultants can fill in.
14. Employees can be outsourced.
15. HR information systems (HRIS) are essential.
16. Centralized professional services functions are typically more cost effective.
17. Corporate culture is a strategic asset.
18. Clearly defining role requirements, recruiting, hiring and performance evaluation greatly improve performance.
19. Human beings have personalities, habits, talents and motivations that can be leveraged and improved.
20. Diversity, equity, and inclusion is a worthy investment today.
21. Workplace flexibility is highly valued by employees.

Information Technology

1. Basic financial and operations systems can be automated.
2. Detailed transactional processes can be automated, controlled and improved.
3. Processes can be documented, standardized and enforced.
4. Relational database logic can greatly reduce work and errors.
5. Detailed functional IT subsystems can be developed to improve operations and feed the financial systems. Warehouse Management Systems (WMS), as one example.
6. Enterprise Resource Planning (ERP) systems can be used to leverage the universal core processes of firms while customizing the details and integrating functional subsystems.
7. Critical data can be stored in data warehouses for analysis. Big Data comes later.
8. Reduced IT costs improve access to various tools and systems.
9. Staff can effectively use personal productivity tools: word processing, spreadsheets, graphs, graphics, email, databases, queries, report writing.
10. Personal computers allow local use.
11. The ongoing reduction of computer costs makes them more effective for more employees.
12. The internet provides access to information, teams, suppliers, customers, markets and others.
13. Internet search tools provide smart access to information.
14. Crowdsourced applications provide zero cost tools.
15. Social media apps provide the opportunity to connect with others effectively.
16. Smartphones further reduce the cost and limits of accessing all data, functionality and people.
17. Artificial intelligence provides tools to greatly leverage personal skills.

Operations

1. Forecasting and statistical techniques refined and easily applied using personal computers.
2. Complex, multi-level operations planning models widely used.
3. Supply chain management using daily or real-time information from suppliers, internal operations and customers optimized.
4. Long-term supplier partner strategies adopted, reducing sales, purchasing, legal and disruption costs.
5. Professional logistics profession developed, applying the best options for all types of cargo.
6. Manufacturing outsourced routinely to lowest total costs sources worldwide.
7. Distribution, logistics, IT, HR, R&D, product development and all functions outsourced (sometimes globally) to leverage specialized skills and focus internal operations.
8. Operations research tools routinely applied for optimization problems, especially critical paths.
9. All fixed-cost capacities set at lower percentages, with secondary capacity options, in order to optimize profits, especially in low and high demand situations.
10. All processes defined, standardized, refined and optimized in order to apply IT and process engineering.
11. Multiple feedback loops routinely used to improve processes through time.
12. Lower communications and transportation costs further increased outsourcing activities.
13. The value of time to customers was identified and turned into a competitive advantage, from 6-weeks mail order to same day to same hour delivery.
14. Just-in-time production philosophies implemented, and inventories slashed towards zero intentionally to force improvements.
15. Production processes re-engineered according to process and final goal needs, displacing functional and “like kind” groupings.
16. Continuous improvement, kaizen quick fixes and full process re-engineering take advantage of global best practices.
17. Project management discipline created and refined. Agile project management used. Project management offices created to manage portfolios of projects, project managers and subject matter experts from inside, suppliers, customers and consultants.
18. New product development managed as a portfolio of projects, each within a standard process framework. Firms adopt the “layer cake” view of value as the sum of annuity returns from a series of new products.
19. Basic insights of modern Total Quality Management or Lean Six Sigma adopted, focused on activity and process variability with unexpectedly large results. Relentless elimination of waste.
20. The Quality paradigm shift places the process view on par with the finance view.
21. The variability of actions within a sequence of events [Goldratt] is seen as the critical driver of final results. Processes, measurements, goals, investments, staffing, operations planning and outsourcing are adjusted for dynamic effectiveness.

Summary

Modern firms have cumulatively adopted and leveraged these interrelated capabilities to become strategically driven, self-aware, well-managed and improving through time. The marginal finance/portfolio view together with the process view allow firms to identify, deliver and monetize customer needs while outsourcing functions that are not deemed strategically essential. Firms generally invest more resources in planning, optimization, new product development and risk management today.

The application of these principles has varied by industry. Government, not-for-profit and health care have great improvement opportunities remaining.

Firms may invest in Joseph Schumpeter’s “creative destruction” or they may optimize within existing market structures if they see higher returns from internal process improvements, incremental product development, supplier squeezing, price discrimination, targeted marketing or regulatory capture. In other words, the capabilities for ongoing world-changing improvements exist but may not be applied for the greater good.