Last month, a story appeared in Forbes that so thoroughly describes the challenge of innovation that I must highlight it in Operations Management Now. When the March 10 article first appeared, I overlooked it; however, an astute member of the APICS instructor community posted the article’s link. In the piece, Forbes contributor Steve Denning explores US competitiveness on the world scale.
The author highlights “Competitiveness at a Crossroads,” the research of three well-known Harvard Business School professors, Michael Porter, Jan Rivkin, and Rosabeth Moss Kanter, who surveyed Harvard Business School MBA alumni. If the quality of management is one of the most important elements of competitiveness, how did these business leaders rate themselves? Here’s where the results appear skewed, and Denning starts to get skeptical. Business leaders rated management of American companies to be “strong and improving.”
“What sort of ‘management’ is it where the quality of management is strong and improving and yet firms can’t compete internationally?” Denning asks.
Denning admits that the report’s explanation is helpful. First, globalization made it possible for companies to do business in many more countries. Additionally, changes in corporate governance and compensation created managers who focused on stock prices and short-term performance. Then, companies invested less in shared resources, such as skilled labor, supplier networks, and infrastructure. These actions resulted in job loss and lower incomes; and, eventually, a decline in the public sector.
“The report thus accepts that the decline of the public sector and the failure to invest in shared resources are not root causes of the decline in competitiveness,” Denning writes. “They are the consequence of the focus on the short term and the stock price.”
Here’s an idea in the article that I think we all can relate to: “When a firm is focused on short-term profits and the stock price, it’s possible that managers are innovating, but with innovations related to efficiency and cost reductions. By contrast, value-adding innovations, particularly game-changing innovations, are likely to be viewed as too risky and expensive to invest in.”
Denning’s extensive article goes on to discuss the roots of this short-term, stock-market focused mentality. Then, he talks about what the Harvard competitiveness report is missing__the customer. In fact, Denning points out the word “customer” doesn’t appear on any of the report’s 28 pages.
All in all, with pages and pages of analysis, the answer to competitiveness may be quite simple. If businesses are going to succeed in the global marketplace, they need to make their customers happy.
Adding value for customers
In the APICS Operations Management Body of Knowledge (OMBOK) Framework, the words responsiveness, agility, and efficiency are defined together as follows: “Responsiveness is the ability of the supply chain to meet the changing and diverse needs of customers. Agility refers to the ability of the firm to manufacture and deliver a broad range of high-quality products and services with short lead times and varying volumes to provide enhanced value to customers. Efficiency refers to the ability to do this at a low cost.”
The fact that these terms are defined together suggests they are all equally important to the operations management health of a company. However, the Forbes article suggests that too much attention has been given to the efficiency part of this equation, thereby sacrificing competitiveness.
Through all of its products and services, APICS is dedicated to keeping your supply chain healthy and your business competitive. For example, the theme of APICS 2013 is “The Supply Chain Experience: Leveraging the Power of the Customer.” Conference attendees will get the opportunity to explore that theme in depth September 29–October 1, 2013, in Orlando, Florida. Visit apics.org/conference to learn more about this and other APICS events.