In early stages of industrialization, products were simpler, factories were smaller, most processes were manual, and process flows were shorter. Contact with customers was direct between production and customer. As manufacturing capabilities improved, designers could conceive more, customers would desire even more features, and thus the demand supply spiral started. The supply feeding to demand, and demand driving complexity led to the need for tools to manage processes and businesses.
In the late 19th century or early stages of industrialization, Fredrick Taylor addressed shop capacity, manufacturing costs, and industrial inefficiency. Taylor’s four principles included the need for scientific study instead of rule-of-thumb work methods, training and developing employees, providing detail work instructions, and division of work between planning and tasks.
As manufacturing increased and was divided into multiple steps, the early steps lost visibility of customer requirements. Walter Shewhart defined the process variation in terms of assignable and chance causes based on statistical analysis of manufacturing data. Then, he developed concepts of statistical controls and control charts in the 1920s. Shewhart observed that keeping process in statistical control is necessary to predict process performance and manage process economically.
Alfred Pritchard Sloan, Jr. transformed General Motors into the largest corporation on Earth. He is given credit for developing the system of disciplined and professional management. Peter Drucker once wrote about Sloan’s perspective of the job of a professional manager. Accordingly, “the job of a professional manager is not to like people. It is not to change people. It is to put their strengths to work. And whether one approves of people or the way they do work, their performance is the only thing that counts.”
As Sloan was interested in performance of an organization, Peter Drucker focused on human behavior for maximizing contribution. Drucker was influenced by Joseph Schumpeter, known for innovation and entrepreneurship. Drucker is recognized for his work on knowledge workers and also sowed the seeds of outsourcing by dividing an organization into ‘front room’ and ‘back room,’ and recommending that organizations must focus on ‘front room’ work only. We are living his vision today in terms of outsourcing of backend work, focus on innovation, and intellectual engagement of workers.
During the latter part of the 20th century, the number of management gurus multiplied who focused on various aspects of increasing management complexity. In 1987, ISO 9000 standards were established to define management architecture in an organization. Six Sigma was introduced by Motorola the same year to accelerate improvement. Malcolm Baldrige National Award Guidelines were published in 1988 to achieve best in class performance to fight global competition. In 1990 James Womack, Daniel Jones and Daniel Roos published “The Machine That Changed the World” based on research and advanced best practices, primarily Just-in-Time (JIT) or Lean principles, followed by successful companies in Japan.
The organizational framework, Lean, Six Sigma and MBNQA were created to reduce cost of poor quality and improve profit margin. Robert Kaplan and David Norton of Harvard Business School (HBS) published the “Balanced Scorecard” in 1996 to give corporations a framework to measure their performance across the organization. Then, Clayton Christensen (also from HBS) published “The Innovator’s Dilemma” in 1997 to get people’s attention for achieving revenue growth as companies were too focused on cost reduction. In 2002, Michael George published “Lean Six Sigma” by combining Lean and Six Sigma for optimizing throughput and quality, respectively. This period saw major progress in development of new management tools to achieve higher performance faster.
While the effort was going on to improve management of corporate resources and performance, another major initiative that started in the late eighties was Early Supplier Involvement (ESI) and reduction in number of suppliers. In the early growth of businesses, corporations were reducing risk of supply disruptions by having multiple suppliers. The automotive industry learned quickly that having multiple suppliers also added inherent variability in part dimensions, adversely affecting incoming quality of parts. To improve yields by reducing variability, businesses started reducing the number of suppliers almost by an order of magnitude. For example a division at Motorola reduced the number of suppliers from around 6,000 to around 600; this reduced the variability but increased the risk of disruption in supplies. To mitigate that risk, customers had no choice but to establish long term relationships with suppliers, committing a bigger piece of their growth. This resulted in lost competency in aspects of manufacturing and technology, and increased dependency on suppliers. This mandated partnership which now is termed SRM, Supplier Relationship Management. Similarly, in this business of relationships suppliers managed their few key customers for a major share of their business and that led to CRM, Customer Relationship Management.
As the business is evolving, technology evolves to support management needs. Stronger relationships require stronger bonds, frequent communication, and new methods. Internet became a norm to communicate in the 1990s, and has been growing rapidly since then. The Internet provided the needed equalizer increasing connectivity and affordable communication in the global economy. Before the Internet, computer technology and use of computers had been growing exponentially, thus creating more demand for transmission bandwidth and speed. This led to super hardware/software growth where hardware demanded more software, and software needed more processing speed, memory and storage. We saw growth in computing power, communication protocols, powerful operating systems, WiFi capabilities, storage needs, social networking platforms, and ability to collaborate virtually to solve complex problems faster. All of these components necessitated new management methods.
In the pre-Internet age, a large number of employee ideas were difficult to manage. However with new technology, there are solutions being developed continually. This global intellectual engagement has led to Open Innovation or Crowdsourcing of ideas for developing cost effective solutions rapidly.
Besides being a century of intelligence and innovation, the 21st century is becoming the century of experience. Today, developing a solution is not enough, instead corporations must provide customers with a unique experience using their products or services. The user experience better be ‘I love it’ in order to grow business. Just meeting customer requirements does not guarantee customer loyalty and growth.
If the experience is unpleasant, businesses can lose a lot, or if the experience is what customers love, business can grow rapidly. People share their experience using pictures, videos, graphics, data or messages thus creating a technological need for dealing with lots of structured and unstructured data. On the other hand, suppliers trying to deliver great experiences must learn to humanize or give meaning to their innovative solutions. This has led to growth in design innovations, and use of industrial design skills.
Social networking, growth in sharing user experience, connectivity, and global communication and collaboration have led to acceleration in innovations. New innovations tend to be ‘smart’ driven by intelligence extracted from huge data analysis. As a result, data center technologies are evolving, new data management methods (Big Data) including architecture, access, analytics and security have been developed and still continue to evolve.
Transmission of large data between peers or organizations has become a problem. Some applications or services have been developed to store data and make it available anywhere. Challenge of execution of a software command across network, speed of transmission of large data, and processing large data for analysis have led to a new platform, called Cloud, a new construct of web-based services, and related technologies. Data storage has become a specialization, and use of large data in real time in daily applications has become a norm.
Companies are relying on third party solutions and service providers to deal with Big Data. Some people still believe that the Cloud is nothing but a web-based service. This may be true for simple applications. However, large data driven capabilities and services that are replacing enterprise solutions for ease of management and maintenance are offered in the Cloud, which not only includes web-based services but using new architecture, and technologies necessary to offer desired services without unplanned interruptions. In some cases, instead of downloading data for processing with an application, the application itself is sent to data in Cloud for processing and sending results back to the user.
Privacy and Electronic Security
With data being in the Cloud, global access to services or applications, pervasive use of Internet, and continual electronic transactions, it’s a perfect playfield for hackers and security breaches. New encryption methods, algorithms, and protocols are being developed on one hand, new bugs, viruses and security breaches are also concurrently developed by the competing industry of hackers. Some hackers are paid to break security systems to identify gaps. Managing security in the Cloud and enterprises could become a new management function in the future.
Entrepreneurship is not a new phenomenon, however, its explosion in the 21st Century is something new. With Internet being an equalizer, and innovation becoming a continual global phenomenon, people are engaged in solving local and global problems. Corporations have already been loosening up their dependence for innovation on their R&D departments to beyond the four walls of the organization.
As people are succeeding in their entrepreneurship venture, leadership experience and age are also decreasing. Many successful startups and subsequent large organizations are headed by much younger leadership teams with a totally different style of leadership.
In an entrepreneurial work environment where each employee is self-driven and managed, held accountable for his or her contribution, monitored using technology, there is a minimal need for management, and a lot more dependency for individual and collective leadership.
Finally, as the ratio of women to men in the workforce increases, there are more women entrepreneurs and in leadership positions bringing diversity of approaches to the organization.
Quality Management in the end…
Efficiency and quality led the first wave of developing management principles. Eventually, the purpose of management is to deliver quality products or services to customers as contracted, and achieve business objectives. The worse the quality, the more management is required; the higher the quality, the less management is required. In conventional industries product life cycles were longer, and time to achieve return on investment (ROI) was longer. In today’s high tech industries where innovation is happening continually, product life cycles are shorter, and expectation for ROI are higher and faster. Entrepreneurial and high tech companies rush to market lacking quality because of the speed of innovation and competitive ROIs. We complete one cycle or one century of management. It began with quality problems. And the new high tech cycle also begins with quality problems.
Bob Galvin, former CEO and chairman of Motorola Inc., has told his executive team to take care of quality, business would take care of itself. I have frequently used quality management systems as a business management tool. Business management must be geared to address quality in all aspects of business. Of course, new approaches to management would be needed to optimize new constraints in different eras. In the 21st century due to shrinking product life cycles, quality management must focus on quality in research, product development and innovation. As we all understand that one dollar spent in design to improve quality can save hundreds of dollars in production, and many thousands in the field.