JACK MIXNER STRATEGY

Copyright Jack Mixner.     714 449 1040.     www.mixnerstrategy.com

Stars cost money, at least in baseball. Everyone wants to watch the stars play. Something has to give somewhere, as baseball teams don't have unlimited funds to spend. So where are expenses being cut?

The farm system is hurting, along with all the support staff that goes with it, including scouts (Kennedy, 32). Traditionally stringers, scouts are a rare breed today, as are trainers for each of the skills in baseball like pitching, hitting, catching, etc.

It is hard to say if overall play is being hurt at this instant, but it appears that ultimately, not providing a trained pool of new players will hurt baseball.

Training also includes strategizing about what to do when a ball is hit to a specific place in the in-field with someone on base. Decisions - the correct ones - have to be made instantly, almost by reflex, or perhaps by rote training before. 

Why bother, you say? Stars will make up for everything. Maybe not. Building a team takes time. They have to play together and share experiences. The best way to do that is not in a major league stadium but back in the minors at a near sandlot in the middle of nowhere. The experiences and maturity gained back in the minors has another effect: players don't burn out as fast, they become stronger, and have more utility because the are better prepared.

What's this got to do with modern management? There is something to be said for hiring team players and then training them over time. They'll stay with you longer, be more grateful, and help you grow your company over time.

How to start? Human resources is not just about hiring. Have a plan for training your team in the skills that matter most for your organization. In Orange County right now, it is very hard to hire medical device engineers, for instance. Successful companies are hiring engineers before they graduate, helping them complete school, then keeping them around. Do it right and their enthusiasm and willingness to stick around will help you grow your company. Do it wrong, and they'll leave quickly for the highest bidder.

Give it some thought.

Reference

Kennedy, Kevin with Bill Gutman. Twice Around the Bases. The Thinking Fan's Inside Look at Baseball. William Morrow. 2005.

Posted by jackmixner at 03:21 PM | Permalink

Copyright Jack Mixner.     714 449 1040.     www.mixnerstrategy.com

Recognize That You Have a Problem

Let's set the stage. Boeing had dominated the American, and later worldwide, commercial airframe market for a very long time. Deregulation in the 70s, however, was starting to effect profits, as airlines were irrationally competing on price, not value. Boeing felt their pain as suddenly price was very much a part of the discussion when it came time to buy new airplanes. Additionally, Boeing had a serious competitor in the form of Airbus.

By the early 90s, Boeing was experiencing huge cost over-runs (to the tune of $6 billion) in the creation of a new airplane, the 777 (Newhouse, 116 to 122). Boeing wasted money on the creation of not one, but two, production lines for the 777 when just one probably would have been just fine. Realizing their technologies were stuck in the late 40s, Boeing intended to upgrade processes, but they weren't doing a very good job of it.

Arrogantly, Boeing supposed that they were the best manufacturer in the world. They were contributing the biggest portion of exports to the American GDP, weren't they? At the same time, they realized that things weren't working as well as they could have. The Gulf War recession in the early 90s forced them to face facts. They began to search for a solution. Some even decided that, wishes aside, Boeing no longer was even world class.

Reinvention became the watchword of the day. A quick solution would be nice. Hiring a local consultant, Boeing senior management began an examination of the Japanese manufacturing system. They read books. They hired a consultant. They actually visited manufacturing plants in Japan, all in an effort that would take years to fulfill the promise of increased productivity and profits.

The first step was recognizing they had a problem. Yes, the fix took years and depended on ultimate missteps by Airbus a decade later. And, yes, Boeing would continue to make missteps - the factory floor melt-down in the late 90s comes to mind. But they took the first step, that of realizing that things weren't right.

Is Bigger Better?

When I used to make pharmaceuticals for a big manufacturer, some of the products were unprofitable, produced solely to "expand the catalog" and get us into the biggest hospitals with our myriad of items for every department. Boeing and Airbus were forced to think the same way. Airbus decided that in order to compete successfully with Boeing, it had to match every plane in the Boeing line-up, including a mega-airplane like the 747 but with new technologies allowing less expensive operation and longer flights. Boeing, Airbus and other manufacturers held discussions in the 90s that pointed to the need and tried to share the expense. Boeing pulled out, but Airbus continued in development of what ultimately would be called the A380. Essentially, Airbus bet that after a long and expensive development period, the market would applaud the big jet.

Boeing dithered under fierce management battles between the engineers who represented the past and "bean-counters" who represented profitability (Newhouse, 154). They announced a new plane, the Sonic Cruiser, that didn't really please anyone and would likely be unprofitable. Some said the announcement was made only to confuse the marketplace and to make Airbus hesitate midway through its investment in the A380.

After Airbus' commitment to the huge A380 was complete, Boeing recognized that the market might have changed and placed its bet on a new technology airplane made lighter and easier to construct by its largely composite construction. For years, Boeing had been following Airbus in technology. Now they leapfrogged them with an entirely new plane. Boeing also announced a "good-enough" upgrade to the 747 that might steal some of the steam from Airbus' A380 engine.

The battle is still going on. We will have to wait to see whose investment made the most sense.

Train, Train, Train

Jack Welch, during his management years at GE, capitalized on the expansion of the GE Crotonville training facility to train senior level executives who could not only follow, but lead while problem-solving and expanding the company.

While it is still not clear whether Boeing's purchase of McDonnel Douglas made sense, one good thing came of the merger. The new CEO, Harry Stonecipher, installed a management institute at Boeing (Newhouse, 216) that mimicked Welch's at GE. Professors taught the courses. Only successful managers - or the ones earmarked for leadership -could attend.

Three Key Points for Strategy

1. Recognize that you have a problem.
2. Decide if bigger is really better.
3. Training is part of the mix.

References

Newhouse, John. Boeing versus Airbus The Inside Story of the Greatest International Competition in Business. Alfred A. Knopf. 2007.

Posted by jackmixner at 11:47 AM | Permalink

Copyright Jack Mixner.     714 449 1040.    www.mixnerstrategy.com

So much is happening regarding the effects of global warming, an infrastructure dependent company might want to include a dialog - perhaps even a debate - at the Board level to decide how the different possibilities might effect future growth. Many companies, from the highest tech to the mundane will probably profit from the dialog as well.

Which issues will effect your company, and in what order?

• Water
• State courts in California block water deliveries to Central Valley and Southern California (Lowe, M7).
• New communities put on hold when unable to prove availability of water supplies.
• Land use policy is shifting toward no growth from rapid growth.
• Power
• Heat waves (as much as eight degree jump in average temperatures projected) and power usage spikes - and brown-outs - become the norm. While residential locations will be first effected, industrial users will be quickly effected, as well.
• This relates to green issues, as much of the power generated in the US is sourced from coal and other carbon based supplies.
• It looks to me like the "protection" claimed from producing energy from natural gas will diminish over time.
• Greenhouse Gas Emissions
• New California laws will probably address water, transportation, greenhouse gas emissions, land use and economic development.
• Land Use
• Thirty-one inch rise in sea-level will change ocean-front development specifications, flood plains, insurance companies and zoning rules.
• Ambient Temperature
• Forecast eight degree rise in ambient temperature will effect productivity and livability of communities and businesses nation-wide.

References

Lowe, Cary. California steamin'. Los Angeles Times. 19 June 2007. M7. http://www.latimes.com/news/opinion/commentary/la-op-lowe10jun10,1,7400184.story

Raynor, Michael E. The Strategy Paradox: Why Committing to Success Leads to Failure (And What to Do About It). Currency/Doubleday. 2007.

Posted by jackmixner at 07:33 AM | Permalink

Copyright Jack Mixner.    714 449 1040.    www.mixnerstrategy.com

Four assumptions (perhaps, misassumptions) about profit centers and decentralization (Henderson, 282):

1. Implication that absolute level of profit is a measure of profit center management's current performance.
2. Profit can be the measure of divisional performance in a multiunit company.
3. Improving the profit center's profits optimizes the the corporation's profit.
4. Profit centers can be measured and evaluated as if they were separate companies.

This implies that of the two extremes for corporate management of divisions, centralization and decentralization, decentralization is better, when in reality it is better to balance the two.

The first step in solving the riddle is to carefully define an explicit corporate strategy. Corporate strategy, corporate policy, and corporate organization, including the profit centers/divisions, are inseparable (Henderson, 283). Devise a strategy. Then devise the corporate structure.

Each profit center maximizes its own value system. Corporate optimizes the combination of profit centers. This implies two approaches for corporate management: Corporate can closely supervise the operation and internal policy of the profit center, or allow the division to operate on its own. Corporate sometimes decreases the profitability in some centers to optimize the  overall profit of corporate.

Centralization or decentralization implies seven possible degrees of "freedom" (Henderson, 284):

1. Parent is investment portfolio custodian, signifying least local control.
2. Parent acts as Board of Directors for individual operations.
3. Parent additionally provides financial support.
4. Parent actively participates in strategy development.
5. Parent coordinates activity in some key activity like the sales organization.
6. Parent provides detailed policy direction of operations in all activities.
7. Parent makes key operating decisions, for total corporate control.

Decentralization commonalities (Henderson, 284):

• Centralized policy based upon strategy.
• Decentralized operation administration based on complex, not simple, standards.
• Mechanisms of review and communication keep strategy and operating objectives related.
• Quality leadership based upon consensus on strategy and operating standards.

Consensus on strategy and operation standards out in the divisions are seemingly the keys for decentralization to work. Key words: consensus and local standards go together.

One last consideration on decentralization is in order. If we assume traditional organizations determine structure from the top, we also assume that central management aggregates key decisions for senior officers to decide.

Of course, there are other models like the network organization (Hixon, 289). In the networked organization, teams form to solve particular problems, then move on when the problem is resolved. The organization doesn't control so much as empower people to get the job done. The problem here is that networks can't take advantage of scale or perform massive tasks.

The probable best solution is to combine the centralized/decentralized discussion with networks. This means corporate forms networks to solve problems while the decentralized organization continues to function under corporate strategy.

References

Henderson, Bruce D. Profit Centers and Decentralized Management. 1968. In Stern et al. 282.

Hixon, Todd L. Network Organizations. In Stern et al. 289.

Stern, Carl W. and Michael S. Deimler. The Boston Consulting Group on Strategy. John Wiley & Sons. 2006.

Posted by jackmixner at 02:15 PM | Permalink