Archive for January 2010

The Michael Crichton Strain

January 29th, 2010 — 11:01am

Michael Crichton was the author who ensured that English speaking children know – and can perfectly pronounce – the names of at least ten dinosaurs. I read the first of his 26 novels, The Andromeda Strain, in 1976 and several others – including the ones about dinosaurs, Jurassic Park and The Lost World – in subsequent years. He also created the extremely popular TV show ER; I didn’t see even a single episode of the show. He passed away in November 2008.

I liked reading his books because many, if not all, of them dealt with the complexities of a world I knew well: the intersection of advanced technology and business. However, I am definitely not a “Crichton groupie;” I stopped reading him in the early 1990s, because I felt that his 1992 book, Rising Sun, had racist undertones. This decision means that Mr. Crichton may well have held positions about which I know absolutely nothing.

Mr. Crichton’s writings introduced me to an extraordinarily powerful idea: humans are creating ever more complex technological systems without truly understanding their implications. They think they can completely control these, but the reality is they can’t. For example, consider the following extract from a speech on environmentalism, as it is reported on “Michael Crichton, The Official Site”: “Most people assume linearity in environmental processes, but the world is largely non-linear: it’s a complex system. An important feature of complex systems is that we don’t know how they work. We don’t understand them except in a general way; we simply interact with them. Whenever we think we understand them, we learn we don’t. Sometimes spectacularly.”

I couldn’t help but be reminded of this idea when the news about Toyota’s ever-expanding recall came into the public spotlight. How could a company so admired and emulated falter so badly? One explanation is that the Company’s relentless pursuit of growth over the last decade caused it to take its eye off quality. Toyota’s new CEO, Akio Toyoda, shares this view; when he got the job in October 2009, he apologized profusely in public for the quality problems that Toyota had experienced. As time would tell, those were nothing compared to what’s happening right now. (I will return to this explanation in a future post.)

A second possible explanation drove me to introduce Michael Crichton here: we are building cars so complex that we really don’t understand how they function and why they do what they do. So far, no one knows what ails the Toyotas. Is it a mechanical problem with the accelerator pedal made by the US company CTS? These pedals are being replaced not just on Toyota but also on other cars. But even Toyota doesn’t think this is the key explanation. Mechanical problems are generally easy to diagnose because we can actually see what’s wrong. The “improper floormats” explanation is also, at best, a secondary one. Right now, the focus seems to be on the electronics that control acceleration – and possibly, even the embedded software. Yet no one has yet figured out what this problem is. So, unless the real story has not been made publicly available (which is always possible), this explanation is still speculation; perhaps informed speculation, but speculation nevertheless.

Many years ago, I had started writing – and then abandoned – a book on manufacturing. In that effort I had assailed the belief that some software companies popularized in the 1990s: “Get it 80% right and ship.” Customers will tell you what is wrong – and you can fix it then. An incredibly simplistic belief in the power of being first to market drove this view. I hope it gets buried soon, for Apple is only the latest company to show that first mover advantages are highly overrated.) Couple this view with Mr. Crichton’s lesson and the dangers of following it become immediately obvious.

In 2006/2007, I was writing The Spider’s Strategy. I pointed out that the holy grail of modern product development – “make it modular” – had major limits. Companies like modularity because it gives (1) the flexibility to use the same parts in different places and (2) the ability to outsource design and manufacturing work in discrete chunks. I cited examples of product failures that had afflicted some of the best known brands in the world, including Toyota and argued that the weakness of this thinking lay in the electronics and software. This limitation made it essential for companies to collaborate closely with their design and manufacturing partners.

Toyota understood this fact better than most other companies. This is why it focused on building strong partnerships with its suppliers. Those partnerships had helped it make the jump from a Lean company to a networked company. It is truly sad that along the way somehow its management unlearnt this critically important lesson.

Comment » | Company Performance, Corporate Culture, Leadership

A very happy new year?

January 6th, 2010 — 6:11pm

I spent a chunk of December in the UK, traveling from London to Edinburgh to Cambridge to Cardiff (It’s a Dr. Who/Captain Jack Harkness thing; if you know these names, you won’t ask, “Why Cardiff?” and if you don’t, don’t worry since the answer’s too long to give here!). There, as here, on the surface the economy seemed fine. Oxford Street, London’s equivalent of New York’s 5th avenue, was beautifully lit up and packed with people. The department stores were hard to walk through; Harrod’s had its security staff directing and controlling traffic inside. Our effort to get seating for a traditional afternoon tea – relatively easy, even near Christmas, on past trips – met polite refusals at multiple locations; we ultimately went to the British Museum, not to see the exhibits, but for tea!

I also saw a very different side of UK. In all the cities, many stores were boarded up or had “To Let” signs. Other than Harrod’s, department stores were discounting prices even though there were no posters and banners announcing sales; we paid less than sticker price for several items. The news was gloomy – Iceland was bankrupt, Greece almost so and Spain and Portugal were not far behind; failure to resolve these would undoubtedly hurt the Euro Zone. Perhaps most tellingly, endless pubs and small restaurants were inviting customers to party with them on Christmas, using price – “Only £16.95 a person” – as their primary solicitation tool. In contrast, a few years ago, we few restaurants were open and we had to pay £150 for 3 people (one a child) at one of the few open establishments.

Almost metaphorically, the elegant, comfortable and super-fast Eurostar trains that run through the tunnels beneath the English Channel broke down. On a bitterly cold day, not one or two, but five of these trains simply came to a halt within the tunnels. Why? No one knew. The trains had operated flawlessly for 17 years – and on occasion, in comparably cold weather. Chaos reigned for days: Thousands of people were stranded, unable to go on their planned ‘holidays.’ As the trains stopped, so did truck traffic between the UK and France. Thousands of truck drivers stood around on British highways, turning them into parking lots. And for good measure, the British Airways cabin crew union decided to go on an indefinite strike to protest a work rule change. The strike was ultimately avoided when a British court voided the strike vote on the basis of a technicality, but before the court ruled, more panic gripped the public. Uncharacteristically, huge amounts of snow and bitter cold stopped other trains and blocked roads all over the country. And a financial institution made news by announcing its plan to transfer its professionals abroad to help them avoid the newly announced taxes on bonuses – even though it was unclear whether the law applied to them.

Whenever there’s panic and chaos, humans almost cannot resist pointing fingers at others. And that’s exactly what was happening all around. The people and the press wanted black and white answers – somebody’s head should roll, shouldn’t it? Someone has to pay for my inconvenience, right? And far from black and white, no one nominally in charge even seemed to know whether the problems were on the grey scale – or were a garish shade of red and orange.

This situation is a microcosm of today’s US economy (and most likely, for many others). The old rules no longer work because of network effects. Experts disagree about what the new rules should be and “My model is better than your model, you imbecile!” types of arguments abound. Politics drains what little realism there is in these models and ideology is spewed, dressed up as science. Piecemeal solutions are offered as panaceas for all evils. People who don’t know the difference between “budget deficit” and “national debt” routinely pass judgment on what should or should not be done. And seeing them in this state, many of those who can distinguish such terms – but don’t understand terms like “empathy” and “conspicuous consumption” – tell themselves that this is the best time to pay themselves their biggest bonuses ever.

I couldn’t help wondering whether the US definitely – and Western Europe perhaps – are on glide paths to a two-tier economy. Certainly Warren Bennett, who could single-handedly finance some small countries for years without breaking a sweat, has expressed similar concerns about the US; he has flatly said that this trend does not bode well for a democracy.

So, here’s my hope for 2010: That of us who are brilliant or are among the top echelons of the society (in our minds anyway) and those of us who make major decisions on behalf of our companies, resolve to do whatever we can to help turn this gloomy picture around. We don’t need specialized training to do this; all we need is (1) to consider for our own, everyday choices, not just “What’s in it for me?” but also, “How will it affect the network within which I live?” and (2) to help others do the same. If our networked economies thrive, we’ll do even better than we are doing now; if they fail, sooner or later they will drag us down.

Governments alone can’t solve a problem that companies, consumers and governments jointly created. They will need the active help of companies and consumers. And if, as corporate executives and consumers, we do think of our networks, 2010 can truly be a happy new year.

Comment » | Business Environment

Back to top