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Jeff Liker

Dan Jones: Never Waste a Good Crisis

By Jeff Liker, - Last updated: Friday, February 24, 2012 - Save & Share - Leave a comment

Falling sales always provokes deeper thinking about what it talks to survive. The starting point is to define the business problem behind these falling sales. Structural shifts often coincide with cyclical downturns of the economy. For instance in the USA health insurance companies are now switching their patients to local district hospitals charging much lower rates. Big expensive teaching hospitals are struggling to adjust to this structural change, which is happening much faster than expected and is unlikely to be reversed. In the UK big cuts in public sector budgets are having a dramatic and lasting effect on public procurement and investment, which will be felt way beyond this recession.

On the other hand the German government very successfully subsidised companies to retain workers during the recession rather than let them go. Workers in the private sector in the UK also accepted wage cuts and reductions in working time as this recession hit, and unemployment did not rise as fast as expected. A similar story is now playing out across the public sector in the UK. While this mitigated the effects of this recession it did little to prevent a collapse in investment and construction.

Lean organisations, from Toyota onwards have always struck a balance between investing in and holding on to their core employees and employing temporary staff, often in significant numbers for quite long periods, to cope with cyclical downturns and to respond to growth in demand until this is sustained. Good value creation processes depend on the cumulative capabilities of the staff running them and on matching these capabilities to the right segments of the market. Growing too fast, as Toyota has also done in recent years, leads to trouble when the going gets tougher.

Everyone responds to a crisis by trying to cut everyone else’s margins, squeeze is the name of the game. This is often a downward spiral, but can also be an opportunity to break resistance to new ways of thinking. Squeeze can only go so far. Going beyond this means not only looking again at your core internal value streams but also at how your organisation relates to its customers and suppliers. This is particularly critical in construction, where the design process has a huge impact on the build process, which in turn depends on suppliers delivering materials to the site on time.

Back in 1998 I was part of the UK government’s Construction Task Force whose Rethinking Construction report identified many such win-win-win opportunities for collaboration between all parties. This had a big impact at the time and led to many big projects being completed on time and on budget, for the first time. However in the good times that followed many of these lessons were forgotten.

It is time to go back to working with the design teams of core clients to fully specify the design up front, design standardised modules for ease of assembly in successive buildings, reduce life-cycle costs etc. It is also a good time to synchronise the work with subcontractors and suppliers hungry for work. Establishing these new ways of working is as important as building internal capabilities, particularly in such an interdependent value creation process. Sustaining them on through good times as well as bad is the mark of an industry leader.

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