by Kent Romanoff, TFI Leadership Effectiveness Consultant
If you frequent TFI’s Friday Best of Blogs, then you know that we recommend changes to profitably streamline tech companies’ product design, supply chain, product movement, and other operational functions. Our clients know that change is necessary, otherwise they would not have engaged us. But often they need help in overcoming their teams’ or managers’ resistance to change. Organizations have an unfortunate habit of acquiring blockages that impede progress and stymie performance.
Managers can regularly embark on search-and-destroy missions to root out barriers and obliterate them. These barriers can be difficult to find, because they morph into familiar forms and hide in plain sight. If you look carefully, you can uncover these barriers to change:
1. EXCUSES — When you start hearing excuses for why things can’t change, you have encountered a blockage.
2. FEAR — When people get scared, they freeze and plug up everything they are involved in.
3. SECRETS – This is a sure sign of a dysfunctional organization.
4. INSECURITY — When people are in over their head, they know it and their main purpose in life becomes trying to make sure other people don’t figure it out.
5. POSTURING — When people fixate on their image, you are in the presence of a blockage.
6. ROUTINES — Doing things the same way for too long creates “comfort zones,” which are places where fearful, insecure, posturing people go to avoid detection.
By contrast, positive change thrives in healthy organizations, characterized by:
1. Strong, enlightened, progressive, free-thinking, open-minded LEADERSHIP.
2. An appreciation of the value and importance of SETTING AND ACHIEVING GOALS.
3. An atmosphere of HIGH-ACHIEVEMENT, where good enough is not good enough.
4. FULL DISCLOSURE and a willingness to share virtually all information.
5. Employees who understand WHAT IS EXPECTED and WHAT THEY WILL GAIN when they achieve it.
6. A sense of TEAMWORK where everyone believes they are working for the benefit of all, not enriching the few.
7. The ability to EMBRACE CHANGE and LEARN FROM MISTAKES.
8. The capacity to GET THINGS DONE.
How many organizations truly possess all of these attributes? Precious few. The first step to positive change is creating the right conditions for improvements to exist. Life on earth didn’t emerge until there was an oxygen-rich atmosphere. The Renaissance couldn’t happen until dogma gave way to enlightened thought. And an organization plugged with barriers cannot strategically progress.
We at TFI have succeeded in having upper and middle management and all employees understand the imperative of positive change. How? We gain enthusiastic buy-in through addressing key leaders’ business and budgetary goals, inspire people through real-life examples of other companies’ success, show how it’s good for business, educate about the cost of wasted materials/processes, and tie compensation to results. We use a host of approaches depending on the company’s culture. It’s very rewarding.
How have you removed barriers to change in your company? (Please reply below.)
By Pamela Wiseman, TFI Senior Operations and Supply Chain Consultant
Manufacturing out- and in-sourcing strategies are controversial and lively topics these days. Even people not directly involved in manufacturing discuss these themes in daily conversation, prompted in part by the media being quick to ensure that we all know that Whirlpool will move a portion of its manufacturing from Indiana to Mexico, and that Nokia , NCR, and LeCroy have all decided to reverse their outsourcing trends to bring some manufacturing back in house. The economic downturn has been a catalyst for change and adaptation, prompting executives to reassess and reposition manufacturing strategies.
A Google search for “Nokia outsourcing” yields a 5-year chronology of the company’s decisions. As the market forces ebb and flow, Nokia’s decisions have appeared to be frequent and seemingly fluid and reversible. This flexibility in manufacturing strategy has great value in volatile market environments, where demand — as well as energy and transportation costs — can fluctuate dramatically. Carbon footprint and protectionism are also becoming valid concerns when devising a manufacturing strategy. Both traditional and new variables must be considered, all of which seem to be more difficult to forecast than ever before.
The uncertainty in global economics and politics amplifies the fact that decisions made based on today’s lower demand for production volumes, current energy costs, and other influences will certainly need to be revisited — probably sooner than expected. The more flexible the manufacturing model, the more rapidly a company can respond to changing business dynamics. As global demand recovers it will be key to reassess our manufacturing strategies to build in more flexibility than ever.
Nokia appears to have skillfully devised a hybrid manufacturing strategy and capability that balances outsourcing with in-house manufacturing. Today’s volatile demand is presently associated with the downturn, but — in fact — this demand pattern is also true of products during a typical lifecycle. The hybrid model provides resiliency and options when business forces are changing.
Executives with the capability to outsource when economics are favorable while maintaining in-house proficiency are positioned to optimally respond to the varying cycles. This strategy also protects against the loss of leverage and skills resulting when giving up in-house manufacturing capability. Ultimately, executives will assess the changing forces and align capability to best meet customer demand.
Many questions remain (consider replying below). Do you think this degree of flexibility is practical, in light of possible trade offs for quality, supply chain, logistics? What additional costs come along with flexibility, and will they be offset by the value of potential market responsiveness? Has your company rapidly relocated manufacturing capability with minimal repercussions?
There is no understating the importance of a CEO’s vision to a company’s policy decisions and corporate culture. The choice about where to locate manufacturing, for example, has been driven by many a CEO. In the past decade, Wall Street analysts’ belief that manufacturing in China was the ticket to increasing shareholder value (regardless of product types or customer locations) propelled countless CEOs to declare that their companies, too, would manufacture products in China — often to the surprise of their Chief Operating Officers.
This week I had the pleasure of meeting a CEO whose vision is driving him to move manufacturing from Southeast Asia to Midwest USA. But this was no shock to his COO (sitting with us at the coffee house), because this company — Vista International — is founded on CEO Johan Smith’s bold vision to power a cleaner world and to “Reducing carbon footprint one step at a time” (trademarked). Vista, headquartered near Denver, Colorado, is a technology holding company in the renewable energy industry. During the past 20 years the company has acquired technologies as diverse as energy-efficient lighting for facilities, converting waste to high-octane fuels, high-efficiency wind and hydro turbines, and higher-BTU coal with less pollutants.
Though Smith has lived and worked in several countries and has advised government officials in China, Mexico, St. Lucia (Caribbean), Bulgaria, and Israel, he wants to build the company’s largest-yet production facility in the Midwest USA, serving both domestic and international customers. He mentioned tactfully that he is not entirely comfortable with manufacturing in China. It’s likely also that the energy-efficiency investment portion of the American Recovery and Reinvestment Act of 2009 strengthens his decision.
The return to regional manufacturing — making products close to customers — is a strategy TFI has been recommending to clients brave enough to counter a trend. The benefits include meeting regional customers’ requirements more quickly and precisely, mitigating risk compounded across multiple national borders, and reducing carbon footprint — the latter being more visible these days to investors and corporate customers. The CEO must share this vision because an operational shift this far-reaching is rarely championed by a singular manager outside the executive suite.
The electronics contract manufacturing industry is full of CEO visionaries who dictated manufacturing locations: former Flextronics CEO Michael Marks envisioned complete supply-chain campuses in Mexico and Eastern Europe to serve customers on those continents. Former Sparton Electronics CEO David Hockenbrocht foresaw that keeping manufacturing in North America would appeal best to his regulated-industry customers; then in the last years of his tenure he pioneered (amongst his EMS peers) the building of a facility in Vietnam (when I asked why, he spoke about the comparatively high education and low labor rates there; I always wondered if his reasons came from his values as well).
I invite you to comment (below): Has your company’s CEO been instrumental in determining manufacturing locations? Does your company’s manufacturing-location strategy prioritize cheap labor rates or a regional strategy emphasizing customer responsiveness, risk mitigation, and smaller carbon footprint?
Several mid-sized tech companies have had us create business-travel-reduction programs, for significant Lean (money savings in the millions annually) and Green (carbon reduction in the hundreds or thousands metric tons annually) benefits. In every case, we’ve reduced travel — sometimes more than projected. Yet in the process of customizing travel-reduction programs we run across five myths that we must bust to give clients’ profitability and environmental benefit a full shake.
Myth #1: Employees will resent travel reduction. If because of business travel you have ever (1) missed your kid’s graduation or performance, (2) not registered for an evening course that requires steady attendance, or (3) felt reluctant to book vacation in a fabulous distant place because flying has worn you down, then you know to question this myth. We begin customizing a client’s travel-reduction program by interviewing frequent travelers; these interviews quickly reveal that most travelers would like to curb non-essential travel.
Myth #2: The Sales Department must be insulated from travel-reduction programs, to prevent sales erosion. We used to go along with this view: after all, no consultant wants a client to experience lower sales based on a cost-savings recommendation. But then the evidence starting flowing in, such as from Oracle’s Green Sales program, which has the sales force reduce travel via web-based demos and reduce the number of demos needed based on consultative insights. For example, instead of sending about 5 sales-related people to a customer’s site, they’ll send 1-2 and have the others participate by the web. And what was the affect on company performance? –Profits up and sales decline (owing to the economy) lower than anticipated. For effective travel reduction in the Sales function, conduct objective interviews with Sales as well as customers to uncover non-essential travel, and provide easy-to-use travel-avoidance tools.
Myth #3: Travel reduction is only about reducing airfare. Corporate expenditures on airline tickets can be only 40% to 60% of total business-travel expenses, which include steep costs for rental cars, ground transportation, parking, lodging, and meals. When you capture all travel-related costs and carbon emissions, the significant savings may surprise you.
Myth #4: Travel is a long-term strategy for integrating combined business units. Travel can help bring acquired-companies’ employees into the parent-company culture, but frequent travel is not necessary for the long term. Our research has shown that “internal meetings” is the business-travel category that travelers report they can reduce most readily — even at companies that have grown recently through acquisition. Company culture is driven in large part by the CEO, who — along with other top executives — can regularly address employees using video recordings, video-conferencing, web-conferencing, conference calls, employee newsletters, monthly “What’s on my mind” emails, and other inspiring travel alternatives. This sends a strong message that employees can likewise work productively with off-site employees without traveling each time.
Myth #5: We’ve already reduced business travel as much as we can. Owing to the economic climate many companies have recently reduced business travel. By analyzing why employees travel — through interviewing frequent travelers and requiring all travelers to specify how the trip contributes to corporate objectives — we discover process changes that render classes of business travel unnecessary.
It is undeniable that sometimes face-to-face meetings are best. Having lived and worked a year in EMEA and now back in the San Francisco Bay Area, I can attest to the value and enjoyment of having met with TFI’s EMEA clients in-person during the past year, and now reuniting with my Silicon Valley clients and colleagues. But by using a green lens to re-look at conventional business processes, we find new ideas for savings. And instead of finger-wagging employees (”Don’t spend so much money!”), we inspire them to improve the quality of our lives and the environment.
What travel purposes are sacrosanct at your organization, and should they be? (Please leave a reply below.)
This week I had the pleasure of spending an hour with the CEO of a long-time supplier to the electronics manufacturing industry. Though it was our first meeting, we quickly got immersed in a conversation about the 5 or 6 largest electronics manufacturing services companies as if they were friends we each knew since high school. “Jabil and Flextronics made a go at becoming ODMs,” he said,” but it didn’t suit their strengths.” I heard myself say, “Celestica has always known who they are.”
What is it about EMS companies that has inspired investors to clamor over them despite the industry’s consistent, remarkably low profit margins? How did the “board-stuffing” suppliers – once only whispered about by the name-brand companies that outsourced to them — transform themselves into multibillion dollar international players with star-power executives such as Michael Marks and Tim Main?
From the perspective of having tracked and served the industry since 1985 (2 years before starting Technology Forecasters Inc.) when “board-stuffers” was actually an accurate and not pejorative moniker, I believe that it’s the personalities of the companies themselves that have won them fame (if not also fortune).
It was the people who loved building things who ran these companies originally – before visionaries and financial experts arrived on the scene. They had an earnest desire to build products better than the name-brand (former) product builders. They had the thrill of crossing the Atlantic then Pacific Oceans to open up facilities in Scotland and Ireland, then Singapore and Malaysia, then China and Eastern Europe, then Vietnam and Jordan (I’m projecting, now). Empire builders they were, and we all rooted for them, discussed them like favorite sports teams, and felt badly when they suffered.
So that’s why when we reflect today about these EMS giants and the challenges they face, it’s as if we are speaking about friends whom we wish well — even though mistakes were made (such as Solectron buying C-MAC), bubbles were burst (“I can be a product company if I want to be”), and profitability disappointed all (countless EMS executives dream to work for healthy-margin OEM companies).
Why do you think that the EMS industry has acquired such a high profile? It is sheer size, or something more? (Please leave a reply below.)
Post Note: I dedicate this blog entry to the memory of a real friend from the EMS industry, Scott L. Hudson, who this month while riding his motorcycle was killed by a drunk driver. Scott worked for EMS-company Sanmina-SCI and before then was a TFI Analyst. I will miss Scott as team member, client, and friend (remembering especially his love for sailing, international travel, and modern art). A memorial service will be held in Los Gatos, California, Sunday August 2nd from 4 to 7pm at the Los Gatos History Club.
This post’s title is borrowed from a chapter in Thomas L. Friedman’s book Hot, Flat, and Crowded. In the chapter, entitled “China for a Day (but Not for Two),” Friedman nearly wishes that the US Government would make as speedy and sweeping change as does China’s Central Government — that is when it’s for environmental and economic benefits. I thought of Friedman’s book chapter after a recent conversation with long-time China-based TFI Analyst Mark Natkin, who specializes in the telecom space in China and elsewhere in Asia.
This month Mark wrote in his newsletter the Marbridge Daily about China’s “Old-for-New” recycling program. In short, residents and organizations can trade in old consumer electronics and receive a 10% subsidy on the selling price of new consumer electronics. The program makes sense to me, and yet in China fashion the regulation is different from those in all other global regions. In fact “Old-for-New” is an even greater departure from the European Union’s WEEE Directive (reuse/recycling) than was China’s substance-labeling program from the EU’s RoHS Directive (substance restriction).
I asked Mark about China’s bold new law, and Mark said, “China is gradually working to improve the environment, both through recycling programs like the ‘Old for New’ program for consumer-electronics recycling, and also through use of more energy-efficient products, like “green” mobile-telephone base stations.”
Then he proceeded to give one person’s view of the impact of these laws, from the streets of Beijing: “We’ve had one of the most hospitable summers in my 7 years here – neither too hot nor humid and more blue skies than I ever thought possible for Beijing. I thought the clearer skies might be due, at least in part, to some improvements in environmental policy, such as replanting of forests between here and the Gobi Desert in the north, and even-odd license plate regulations. But the other day someone reminded me that one potentially major contributing factor is the economic downturn, which has seen a lot of factories reduce output (and the accompanying pollution).”
By the way, Friedman’s chapter “China for a Day” also reminded me of my 2004 visit to China (meeting executives at EMS and ODM companies in Shanghai and Suzhou), when with no apparent warning the Central Government banned filter-less cigarettes — without years-long deliberation by politicians in tobacco states or investments by the tobacco lobby. I found it both impressive and scary.
What do you think about China’s environmental policies and the way they are created?
By Kim Allen, PhD, TFI Environment Consultant
At home, you likely have already experienced the benefits and fun of locating used items through online forums, rather than spending time and (too much) money shopping for them new. Freecycle, Zwaggle, and of course Craig’s List have saved people millions of dollars while simultaneously benefiting the environment through avoided production, shipping emissions, and landfill burden.
Smart companies are starting to realize that they can profit from the same concept within their four walls.
Why purchase a new stapler when an employee upstairs has ended up with three in his desk drawer? Why order new equipment for the test lab when the research lab has a spare one used last year that is no longer needed? A glance at the monthly spend of a typical company for office supplies, equipment, and research materials will convince any manager that this type of sharing and swapping is tremendously beneficial to the bottom line, not to mention conserving the Earth’s resources. The question is, how to set it up practically?
Luckily, most companies already have all the tools they need to create their own “swap meet.” The corporate intranet is a natural place to set up a forum for posting “offers” and “needs.” It can be done through most types of collaboration platforms, discussion boards, or common drive spaces that all employees can access and search.
One example is the Cisco® Resource Exchange and Disposal Online (CREDO) program. Program manager Gideon Schroeder explains that CREDO is “an in-house virtual equipment exchange” that also helps Cisco handle its scrap. “The ultimate goal is to prevent any Cisco equipment or parts from ending up in landfills.” The system – which is ISO 14001 certified – is saving company money and employees’ time, and diverting electronic waste from landfills.
CREDO is for equipment. Another tech company, a TFI client in the electronic hardware business, is setting up an online swap site that will include standard office supplies, monitors, printers, chairs, and other items that tend to accumulate in people’s cubes. It is one antidote to purchasing departments’ practice of blithely buying a fresh set for every new hire.
But how do you actually get employees to use the “swap meet” when they are accustomed to ordering something new, and how do you quantify the monetary and carbon-emission savings from the program? We recommend the following four steps (which we customize for each client according to their company culture and accounting systems):
(1) Generate interest and educate employees on how to use the system, emphasizing the time-saving benefit.
(2) Give employees incentives to track their swaps. To measure the monetary and environment-footprint savings, it is critical to know what swaps have been completed. If employees swap items by walking down the hall, they need a reason to record the transaction online. One way is to reward both the giver and the receiver with “points,” redeemable for rewards or recognition.
(3) Track transactions using categories that match purchasing or accounting conventions. In particular, it is critical to know when an asset item (as opposed to an expense) has been transferred between departments.
(4) Show progress: Create a graphic for the intranet and company newsletter that shows how much money or waste has been saved to date. Also, make it easy also for employees to suggest how to maximize the program’s utility.
Has your company benefited from an internal swapping system? Let’s make this an “information swap” — please send us your comments!
Yesterday’s EMSNow.com lead story was an electronics-industry recovery forecast for fourth quarter this year. The industry will recover — it always does — and analysts’ projections about the timing of recovery are interesting if not always accurate. But the more important question is, what will you sell when demand returns?
Using a down market as an opportune time to innovate is what some of the smartest companies in the tech industry have done. When customer orders return, they have a competitively superior product or service to sell. You might be thinking, “But who has the resources to innovate with the budget cuts we’ve experienced?”
This week I conducted a seminar near Tel Aviv for 45 engineers whose companies’ innovations impressed me: from next-generation human-computer-interface to security products to even automated pool-cleaning units. And during the past year Israel experienced not only the global economic slowdown that affected everyone, but also economic challenges from missile defense, a continuing stream of immigrants, and providing among the best health care in the world. Even though Israel has capable global and local EMS companies, manufacturing is not as popular as innovation; many Israeli companies lean on Chinese manufacturing companies for (at least perceived) cost savings. Innovation is a strength to a fault, in that many foreign-based companies establish think tanks in Israel and manufacture the products elsewhere. But this reputation for in-house innovation is enviable.
Though outsourcing manufacturing is a near-ubiquitous strategy for companies around the globe, let’s take care not to outsource innovation completely. Electronic-product companies’ preference to use original design manufacturers (ODMs) to leverage other companies’ product designs continues to grow. Many mid- and large-sized electronics companies have a steady diet of acquiring companies with innovative solutions; notwithstanding “bargains,” these acquisitions can be tougher during lean economic times. Outsourcing and buying innovation are strategies that cannot stand alone.
Remember that innovation in our industry is not restricted to hardware design. This is an excellent time for innovations also in software (hint–more software than hardware is the way to go) and in organizational processes for the gamut: design, supply chain, manufacturing, fulfillment/logistics, distribution, facilities, human resources, and — yes — the process of innovation itself throughout the company.
What have you noticed about the world’s most innovative high-tech companies, in both rich and poor times?
One of the rewarding aspects of being consultants to electronics-company executives is the occasional opportunity to give away “freebies.” In this instance, I am pleased to report that this week one of our clients asked us to offer to TFI’s network a head start on enterprise-wide sustainability measurement, for free.
If you have not yet heard the term “enterprise carbon accounting” you can rest assured that — as with financial accounting — the smarter the tools and more automated the approach the easier it is to collect, analyze, and make decisions based on the data. Our client wants to work with sustainability champions at a handful of mid-sized-to-large electronics companies who aim to reduce environmental footprint in operations, facilities, product design, supply chain, and logistics.
If you work for an electronics contract manufacturer, electronic-product company, or component supplier (annual revenues of $500 million or more) and you are up to playing a sustainability-pioneer role, I look forward to hearing from you (PGordon@TFIenvironment.com).
Electronics contract manufacturers no longer have the exclusive privilege of operating with low margins;* this year many of their customers — electronic product companies — also are experiencing rare tightening. Not a minute too soon are two “less is more” strategies for adding margin to both types of companies: One has to do with your stuff, and the other with your time.
Corporations habitually buy IT equipment, furniture, supplies for offices and cafeterias, capital equipment, marketing collateral, and product-related materials. Managers fear that if they don’t buy enough stuff to consume this year’s budget, then next year’s budget will be smaller. So the process has been “Buy it, then Use it or Store it.” Employees are starting to get disgusted with how their companies are laying off people while offices and storage rooms brim with unused or underused investments.
Replace the old procurement habit with “Identify the need, then Find a solution” — whether that solution is borrowed, second hand, leased, a service, or a better process requiring no additional stuff whatsoever. CFOs need to start rewarding departments that use “Identify the need, then Find a solution” instead of those tactically following “use it or lose it.”
Cisco had it right when they created CREDO — an online inventory that matches surplus items to identified needs. Several years ago we consulted to a client trying to bring this buying-stuff alternative to other companies, but you can easily create one on your intranet. And expand your thinking to include strategic solutions that avoid opening new facilities and taking on other major expenses.
Secondly, imagine the time we’d free up if we halved the time we spent in meetings. Check out four smart tips to reducing hours (even minutes) from meetings that do not further corporate objectives. Executives can insist on dogged project-management practices, comprising milestones and accountability for accomplishing corporate objectives. Leverage priority-only meetings and on-line tools for collaboration and accountability.
Corporations will not overcome their addictions to buying stuff and holding unlimited meetings until a “less is more” culture is embraced by top management and frequently re-enforced through employee training, fun competitions, and rewards.
Before you run to your next meeting or fill out a purchase requisition, take a minute to share with the TFI network your successes with repairing margins, by leaving a reply.
*Watch for an upcoming post in which we’ll write about notable mid- and smaller-sized contract manufacturers whose margins have actually been good.
Contact TFI | 2000 Santa Clara Avenue, Alameda, CA 94501 USA. Phone 1-510-601-9107
Copyright © 2009 Technology Forecasters, Inc., all rights reserved. | 
RSS Feed | Friday Best of Blogs
