The current economic crisis is forcing companies to streamline their operations. It means high unemployment rate and the creation of a negative economic climate. The lack of commitment from investors to pour money into the economy helps explain why a financial crisis is also called a depression.
Nevertheless, it is imperative that government and business people must develop strategies to end the economic recession. It is therefore essential for companies to continually think about improvement, integration and innovation. These concepts would enable organisations to counteract the effect of recession.
Although it is important to focus on the core issues that plague a company. It is no longer enough to focus on internal problems and develop solutions that are designed to remedy only the challenges faced by the company. In the 21st century it is essential to think globally.
A company CEO with limited vision cannot survive in a business climate that is severely affected by outsourcing and price wars as a direct result of competitive forces.
Without a doubt the supply chain management strategies have been transformed dramatically in the past few decades. The rapid interconnections brought about by radical changes in telecommunication and transportation technology has increased interconnections between continents. As a result even Third World countries can greatly impact the economic climate of highly industrialised nations.
There is now a high level of interdependence never before seen since the advent of the modern era. Companies that were established in the UK, US and Europe can play the outsourcing game. These companies can also build factories in China or. But for companies that do not have the capital required to branch out overseas there is no other course of action except to find a way to improve, integrate and innovate.
An organisation that has aversion to change will soon find itself irrelevant and obsolete. Consider for instance the companies that sold typewriters, steam engines, beepers, and transistor radios.
There was a time when these gadgets were indispensable. There are still companies that still manufacture or sell these equipment but unless they have established a relationship with select group of customers then there is no way that they can make a profit.
In the age of computers and the Internet it is safe to say that this planet has become obsessed with technological breakthroughs on a regular basis. There is no sign that this trend can be reversed. It is a new way of doing things; an economic phenomenon that has to be understood by all. According to one commentary:
Just when managers think they have developed a strategy for future success, a new technology, process, competitor or customer behavioural pattern emerges. While a sharp focus and “sticking to the knitting” are sometimes the key to success in more stable conditions, the turbulent knowledge-driven markets of today require dynamic new strategic management approaches and tools (Leibold, Probst, & Gibbert, 2005, p. 14).
In other words it is crucial to embrace change and to seek ways on how to change the old way of doing things. If managers are afraid to take risks or unwilling to learn new things then their respective businesses will fail because these will become irrelevant in the 21st century. Continues improvement must therefore begin with continuous learning.
An organisation must improve on the basis of Information Technology. There must be continuous improvement when it comes to storage and retrieval of information. There must be continuous improvement when it comes to communication. An upgrade must also be expected from the Human Resources Department. Continuous improvement must also focus on resource allocation. Thus, it is crucial for an organisation to learn more about integration.
Integration can be understood as combination and amalgamation. This concept is nothing new. In the Industrial Revolution entrepreneurs learned how to build factories where the layout enables workers to be in close proximity with each other.
This feature was helpful when it comes to assembling a particular product. It shortens the communication time and therefore problems can be solved much faster as compared to a layout where work units are located in different parts of the building.
One good example of integration is a concept called Group Technology or GT. A significant feature of GT is the ability to perform similar activities together and “would result to avoidance of wasteful actions because there is no need to shift from one unrelated activity to the next” (Hyer & Wemmerlov, 1984, p.1).
It can also be understood as the efficient storage and retrieval of information with regards to a recurring problem in the workplace and as a result it greatly reduces the time wasted in searching for pertinent information and solving the problem over and over again (Hyer & Wemmerlov, 1984, p.1). GT can speed up the process of work and at the same time reduce the cost of production.
An application of this principle is the creation of the flexible manufacturing system or FMS. According to business leaders who benefited from using FMS it is a system wherein “different types of raw parts enter the system at discrete points of time and are executed simultaneously, sharing a limited number of resources, such as robot, AGVs, machine tools, and buffers … it can also be computer controlled configuration where different operations can be processed” (Apolloni, 2007, p.656). Managers needed to improve on the weakness of traditional assembly-line method of manufacturing and hence the emergence of GT and FMS.
The significance of GT and FMS can be greatly appreciated in the context of complicated manufacturing processes. Managers should analyze the supply chain management aspect of the operation and determine related activities. For example a cellular type of layout can be implemented wherein similar machine-types are placed in proximity to one another and therefore reduce throughput time.
An application of FMS on the other hand is the investment in a computer system that provides central control of all the manufacturing activities of the factory. The said computer system can also provide an information database that workers can access without having to contact different personnel for different types of data. In this particular system improvement the flow of communication has been streamlined.
Importance of Innovation
Innovation is the key to sustainable growth because every product is prone to obsolescence. A sleek and much improved iPhone of this generation will be viewed as a useless piece of junk 50 years from now. Innovation can spell the difference between bankruptcy and continuous growth. Companies that are unwilling to invest in innovation cannot expect to remain relevant for long. Most of the time corporate leaders in these organisations are not aware that their company are no longer competitive.
Sony’s Walkman comes to mind when it comes to the topic of obsolescence. Sony’s amazing colour TV sets of the 1980s and 1990s have to give way to flat screen TVs with LED technology. It was easy for Sony’s previous CEOs to rest on their laurels. It is a challenge to always consider continuous improvement that would lead to innovation.
After all, the company was reaping huge dividends from these products. But sooner than expected upstart companies are able to develop new products that revolutionised the way people use music and video.
The history of business is filled with great companies that used to be influential and profitable but left no trace of their former glory. Today, it is a matter of life and death to incorporate innovation strategies into the corporate mindset and according to experts in this field, “Put very simply, innovation is a survival imperative” (Seebode & Harkin, 2009, p.1).
The present success of the company cannot be relied upon to produce future success. A breakthrough product today can easily be copied in a few months or years and soon thereafter the novelty of the product wears off.
The present value of the company is also not a security against future challenges especially when confronted with a competitor with better products and services. Thus, managers must realise that even if there is enough assets to build structures and hire people, the true asset of the company is in the knowledge on how to deal with the future.
It is therefore unwise to play defence all the time and have the mindset of protecting the assets of the company. It is also imperative to invest in the creation of innovative products and services. However, managers must not only be armed with the motivation to succeed but also the needed skills on how to coach employees to work together to develop something significant in order to catapult the organisation to the next level.
Nevertheless, the path towards innovation is paved with great intentions but littered with poorly designed products. All business leaders would love to have the benefits of innovation but if they are not willing to pay the price then innovation is impossible. There is a steep price to pay for change. The first thing that has to be done is to develop the correct mindset that in turn would force the managers to take the road less travelled.
The next major step towards innovation is the need for a courageous and visionary leader able to enforce a culture of innovation within the company (Tidd & Bessant, 2009, p.100).
It is also important not to look the impact of an appropriate organisation design, because without it, creativity, learning, and interaction will never happen and these are key ingredients to innovation (Tidd & Bessant, 2009, p.100). In addition, corporate leaders and business managers must be able to identify key personnel that can be resource persons or delegate authorities who can rally a team to generate ideas and implement the same (Tidd & Bessant, 2009, p.100).
Furthermore, the work done towards innovation must not be sporadic, it must be continuous. This mindset can only be achieved if there is an appropriate climate that will support this kind of behaviour (Tidd & Bessant, 2009, p.100). Finally, the group must not only focus on the needs of the organisation but more importantly the needs of the customers.
If a manager will incorporate all the strategic management principles discussed earlier regarding the need for continuous improvement, integration and innovation, the end result is a system called Concurrent Engineering. In a traditional manufacturing scheme, managers adopt an assembly line approach where the designers are the first to make the first move then they pass on what they have completed to the manufacturing engineers.
Designers create a prototype and when it is approved the factory mass-produces the product. The marketing people are then tasked to sell the said product. It is a serial development process wherein “…people from different departments work one after the other on successive phases of development” (Stark, 1998).
The finished product reaches the target market and in many instances the product is returned for defects or the product is judge to be of poor design even before it comes out of the factory. In other words it takes a long time before managers and designers are aware of the problem.
Concurrent engineering enables business leaders to see a prototype at the earliest possible date and the designers are able to receive the needed feedback without delay. The customers are not the only people that can spot potential problems. Designers from other departments can provide feedback.
Members of the marketing department can inform the designers that there is a problem when it comes to the overall design. Other stakeholders can identify problematic issues when it comes to storage, packaging etc. Therefore, a full production cycle is not wasted from design, to prototype, manufacturing and marketing.
Companies can react in two different ways when it comes to an economic recession. Business leaders can outsource or build factories where labour is cheap. But for those who cannot afford to move their operations overseas and find it impractical to outsource, then there is no other option but to adapt continuous improvement strategies that would result in higher levels of integration.
In order to succeed in a globalised economy it is also imperative not only to seek improvement and integration, it is also crucial to produce innovative products and services. Combining all of these principles a workable model can be produced such as Concurrent Engineering.
Apolloni, B. (2007). Knowledge-based Intelligent Information and Engineering Systems. UK: Springer.
Hyer, N. & U. Wemmberlov. (1984). Group Technology and Productivity. Web.
Leibold, M., Probst, G. & Gibbert, M. (2005). Strategic Management in the Knowledge Economy: New Approaches and Business Applications. New York: Publicis Corporate Publishing.
Seebode, D. & G. Harkin. (2009). Radical Innovations at Philips Lighting. Web.
Stark, J. (1998). A few words about Concurrent Engineering. Web.
Tidd, J. & J. Bessant. (2009). Managing Innovation, Integrating Technological, Market & Organizational. New Jersey: John Wiley & Sons.